By Kim Coghill

Washington Editor

WASHINGTON - The Biotechnology Industry Organization (BIO) lent its support to a bill introduced in the Senate that would reduce taxes on profits earned from investments in entrepreneurial businesses, including the biotechnology industry.

The legislation, introduced by Sen. Susan Collins (R-Maine), would reduce the current 20 percent capital gains tax to 5 percent for individuals who maintain their investment for a minimum of three years in entrepreneurial biotech companies with a market cap of less than $50 million. A similar measure is expected to be introduced in the House next week by Reps. Jennifer Dunn (R-Wash.) and Robert Matsui (D-Calif.). The House bill would eliminate the tax entirely, and expand the eligibility to companies up to $500 million in market capitalization.

Current development costs for new biotechnology drugs can average up to $500 million and take up to 10 or more years, a statement by BIO said.

"In 2000, the biotechnology industry experienced a record investment of $40 billion through public and private equity fundings," a prepared statement by BIO President Carl Feldbaum said. "This surge in capital was paralleled by an unprecedented number of approvals for new biotechnology drugs, vaccines and new indications for existing medicines from the FDA. BIO urges Congress to act to implement this legislation to continue such medical innovations."

Collins said the legislation is intended to stimulate long-term private investment in small and emerging businesses by providing tax incentives to individuals who risk investment in such firms.

Collins' bill was co-sponsored by Sens. John Breaux (D-La.), Max Cleland (D-Ga.), Wayne Allard (R-Colo.), Orrin Hatch (R-Utah), Mary Landrieu (D-La.), Tim Hutchinson (R-Ark.), Joseph Lieberman (D-Conn.) and Lincoln Chaffee (R-R.I.).

"If we want to remain the world's most entrepreneurial country, where small businesses generate the ideas and create the jobs that fuel our economy, we must continue to create an environment that nurtures and supports entrepreneurs," Collins said in a prepared statement. "This legislation helps create a supportive environment, not by establishing a new federal program or adding a complicated new section to our tax code, but by simplifying and improving a provision that is already there."

President Bush also has jumped on the bandwagon in support of entrepreneurs. During his comments Tuesday at the Chicago Mercantile Exchange, the president explained sections of his tax cut proposal, saying, "The harder you struggle, the . . . higher marginal rate you pay in America. And that's not right. Much of the capital that accumulates in the private sector ends up being managed by small business owners. Small business is the backbone of the country. Ninety-five percent of small business owners pay the highest marginal rate in our tax code."

Bush proposes dropping the top tax rate from 39.6 percent to 33 percent, sending the message that "the entrepreneurial spirit will be reinvigorated as we head into the 21st century. It's a way to pass capital formation in the small business sector in America. And it's the right thing to do."

Stem Cell Law Bothers Thompson

Tommy Thompson, Secretary of Health and Human Services, got his hand slapped by the White House following his statement before a Senate committee that he is bothered by a law that bans use of federal money for stem cell research using embryos.

Some speculate that the vague statement by Thompson means he supports the research, which the Bush administration is said to oppose.

The White House reportedly informed Thompson that he should not speak on the issue before the president does.

Speaking at a press conference last week at the National Institutes of Health in Bethesda, Md., Thompson said the Bush administration intends to review the embryonic stem cell issue in the next few months. (See BioWorld Today, March 1, 2001.)

The NIH finalized rules in August that prohibit use of federal money to pay for derivation of human pluripotent stem cells. For the first time, the rules allow money to be used to research cells after they have been collected. (See BioWorld Today, Aug. 24, 2000.)

The deadline for applications for research money on stem cells is March 15. n