The R&D Tax Credit Aspects of Immunology



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Immunology
        For over three centuries, immunological research has lead to major health advances. From the development of modern vaccines to safe organ transplantation, the identification of blood types and the use of monoclonal antibodies, immunological innovation has revolutionized healthcare and saved countless lives. Nowadays, immunology continues to be one of the most important branches of medical research, including critical areas such as immunotherapy, autoimmune and immunodeficiency diseases as well as the development of new vaccines for emerging threats. The present article will give an overview of recent advancements and outstanding challenges in immunological research. It will also discuss how R&D tax credits can support companies engaged in expanding our understanding of the immune system as well as developing new clinical and commercial applications for immunology-related findings. 


The Research & Development Tax Credit

        Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:

  • New or improved products, processes, or software
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

        Eligible costs include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent.  On December 18, 2015, President Obama signed the bill making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax and startup businesses can utilize the credit against $250,000 per year in payroll taxes.


The Immune System

        The immune system is absolutely essential for human survival and wellbeing. It provides various lines of defense against infections, suppresses the growth of tumors, and initiates the repair of damaged tissues. Equipped with an army of B and T lymphocytes, the immune system is able to recognize different molecular patterns present in pathogens or expressed by injured or infected host cells. By differentiating such patterns from the ones present in healthy cells and tissues, the immune system provides biochemical and cellular first responders against various threats.

        The study of anatomy functions and malfunctions of the immune system is a highly promising way to advance the understanding of human health and disease, including many conditions that are not traditionally viewed as immunologic, such as metabolic, cardiovascular, neurodegenerative, and neoplastic diseases.

        Made up of a complex combination of processes and structures, the immune system consists of molecular and cellular components that specialize in either innate or adaptive immunity. Nonspecific, innate mechanisms work as the first line of defense, offering the same kind of response to all potential threats. Innate immunological barriers are both physical, such as the skin and saliva, and cellular, which include macrophages, neutrophils, basophils, mast cells, etc.

        When the first line of defense is not enough, the body resorts to adaptive immune functions, mainly through the action of antibodies and T-cells. Adaptive immunity allows for the creation of a memory of previously encountered infections that enable specific responses to pathogens and foreign substances to which the host has already been exposed.

        Understanding the complexities of the immune system remains a substantial challenge. There are major ongoing efforts to comprehend the genomic, epigenomic, transcriptional, and functional features mediating adaptive immunity as well as the many different subsets and functional states of the immune cells. Researchers at the Bar Harbor, Maine-based Jackson Laboratory (JAX) in collaboration with French Institut Curie have recently unveiled a key mechanism that can significantly contribute to immunology research advances. They demonstrated how dendritic cells (DCs) do their job while avoiding getting infected. DCs are crucial to promoting adaptive immunity, as they round up viral antigens and present them to T-cells, which then trigger immune responses. The research concluded that two subsets of DCs work together for antiviral response. One of them dies and produces the viral antigens, while the others take these proteins to the T-cells. This finding can help advance the goal of using DCs as the basis for new treatment options.

        In vivo confocal and multiphoton imaging of pathogen-host cell interactions are also an important area of research for advancing the understanding of immune mechanisms. Headquartered in Ann Arbor, Michigan, Essen Bioscience is the creator of IncuCyte, an innovative live-cell analysis system that is contained within an incubator and thus enables the monitoring of cells over time. By providing information-rich analysis of biological processes, it can be used to support the investigation of lymphocyte activation, autoimmune reactions, and vaccine response. 

        A better understanding of immunological functions can revolutionize various areas of healthcare, organ transplantation being one of them. Following a transplant, the immune system may consider the new organ as foreign, causing serious complications. Immunosuppressive drugs have played a crucial role in preventing organ rejection, however they also put patients at higher risks of infection. Researchers at the University of Virginia School of Medicine have recently received over $8.6 million in federal grants to increase the rate of successful lung transplant. Their efforts include creating a mechanism to induce tolerance to lung drafts. They are experimenting with cells and antibodies that can potentially kill harmful T-cells without the need for immunosuppression therapy. 

        French biotechnology company TxCell has recently appointed Gaithersburg, Maryland-based Lentingen Technology to manufacture a lentiviral vector that will serve as the basis of a new product candidate for the prevention of transplant rejection. TxCell’s goal is to tackle one of the main causes of transplant rejection: incompatibility between the donor’s and the recipient’s human leukocyte antigen (HLA) systems. The vectors will be used to engineer regulatory T-cells (Tregs) with a Chimeric Antigen Receptor (CAR), which is specific for HLA-A2, one of the forms of the HLA histocompatibility system. HLAA2 CAR-Treg cells will be designed to specifically recognize an HLA-A2+ graft and trigger a reduction of inflammation as well as an induction of immune tolerance in a local and specific manner thus reducing graft rejection. 


Immunological Dysfunctions and Diseases

        There are several conditions that are related to defects in the immune system or that arise when immune responses damage host cells and tissues instead of targeting foreign molecules. Together, immunodeficiency and autoimmune diseases cause significant morbidity and mortality worldwide. While immunodeficiency diseases are caused by gene mutations, malnutrition as well as certain viruses and medications, autoimmune conditions are related to a combination of inherited genes and environmental factors.

        One in every fifteen Americans suffers from autoimmune diseases, which are among the ten greatest causes of death in women and cost the nation over $100 billion a year in medical care. An important example is lupus, a chronic inflammatory disease in which the immune system attacks host tissues and organs. Capable of affecting multiple body systems - including joints, skin, kidneys, and lungs – lupus is often hard to diagnose as its symptoms are similar to those of other ailments. Even though there is no known cure for lupus, the identification of biological pathways to be targeted promises to open the way for new, personalized treatments.

        A recently published study by an international consortium led by researchers at Wake Forest Baptist Medical Center, Oklahoma Medical Research Foundation, King's College of London, and biotech company Genentech Inc. has identified a large number of new genetic markers that predispose individuals to lupus. The study focused on the patterns of incidence of the disease, which is nine times more prevalent in women than men, particularly in African-American and Hispanic populations. The multi-ethnic effort analyzed data from over 27 thousand individuals. The results shed light on the genetic differences and similarities that can begin to explain varying rates and severity of lupus across ethnic groups.

        Ongoing immunology research also shows great promise in improving the lives of millions Americans who live with type 1 and type 2 diabetes. Type 1 diabetes is an autoimmune disease that occurs when the immune system prevents the body from synthesizing insulin by mistakenly destroying insulin-producing beta cells in the pancreas. Most common in children and young adults, this condition can be managed with insulin therapy or similar treatments that, however successful, represent a life-long dependency. In type 2 diabetes, the immune dysfunction takes a different form: there is chronic inflammation that causes insulin resistance, making the patient unable to use insulin to transform sugar from food into energy. 

        Researchers at the Hackensack University Medical Center in New Jersey are working on a groundbreaking treatment that can change the lives of diabetes patients. Initially developed in China, the “stem cell educator therapy” consists in exposing immune system cells (lymphocytes) from a person with diabetes to stem cells from the umbilical cord blood of a healthy infant. Surprisingly, after this exposure, when returned to the body, the previously errant lymphocytes behave normally and no longer attack beta cells. In the case of type 2 diabetes, there is hope that this treatment will decrease insulin resistance. Even though results are only preliminary, this innovative approach shows great promise for a wide variety of autoimmune diseases.

        Rheumatoid arthritis (RA) is yet another example of autoimmune disease. This chronic inflammatory condition occurs when the immune system attacks the body’s systems, especially the joints, causing painful swelling that can result in the erosion of bones as well as joint deformity.  There are major research efforts aimed at preventing the physical disabilities that ensue from RA. Researchers at Brigham and Women's Hospital in Boston have recently unveiled evidence that eating fish may reduce inflammation and joint pain in RA patients. In the study, participants who consumed two or more servings of baked, steamed, broiled, or raw fish per week had significantly lower disease activity scores.

        The development of effective RA medication remains a great challenge, particularly due to safety concerns. On August 2, 2016, an advisory panel to the FDA voted against the approval of Johnson & Johnson’s experimental drug Sirukumab, pointing out that its benefits did not outweigh its risks. Further R&D efforts are necessary to prevent concerns related to heart problems, infection, and malignancies surrounding RA drugs. The FDA panelists further stressed the need for groundbreaking, innovative therapies rather than new drugs using the same mechanisms that are already present in similar medications available on the market. 

        Other immune system-related diseases are caused by excessive or chronic responses, such as asthma, as well as hypersensitivity to non-pathogenic antigens, which can cause allergies. In allergic reactions, the immune system produces substances to attack the allergen, which is mistakenly believed to be dangerous. Researchers at the Seattle-based non-profit organization Benaroya Research Institute have recently identified the T-cells that indicate when a person has allergic responses. The Th2A only exists in those who have allergies and could thus potentially be the basis of a blood test for newborns or even a novel immunotherapy targeting allergy-inducing T-cells. 


Immunology and Microbiome Research

        The immense community of microbes residing in and on the human body is collectively known as the microbiome, or microbiota.  Besides bacteria, it includes archaea, viruses, and eukaryotic organisms that perform crucial tasks, such as contributing to metabolic functions. The microbial community in the body is key for the education of the immune system, which must learn to tolerate it while appropriately responding to pathogens. In fact, microbes play a crucial role in developing and guiding immune responses. Research has revealed that changes in our microbiome accompany various health conditions. 

        A growing number of studies have pointed to the possible influence of gut bacteria on immune activity, particularly in individuals suffering from autoimmune diseases. Researchers at the Mayo Clinic found that the microbiome of multiple sclerosis (MS) patients is different from those of healthy individuals, presenting decreased or increased levels of certain gut bacteria. In particular, they showed reduced levels of good bacteria responsible for the overall benefits of eating healthy foods. Similarly, Harvard researchers have found considerable distinctions between the gut bacteria of people with MS and without MS as well as between treated and untreated people with MS. 

        Innovative companies throughout the U.S. are developing microbiome-based treatments. Cambridge, Massachusetts-based Evelo Biosciences is working on so-called monoclonal microbials – isolated single strains of naturally occurring microbes that target certain gut cells and thus initiate specific immunological responses that can “modulate aspects of inflammation, neurodegeneration, and even cancer”. Founded in 2014, the startup has recently raised $50 million in venture financing, which will be used to advance various product candidates, including immuno-inflammatory conditions, such as psoriasis, rheumatoid arthritis, and certain allergies.

        Also located in Cambridge, Massachusetts, Seres Therapeutics is developing an oral microbiome therapeutic for the treatment of inflammatory bowel diseases, a group of autoimmune conditions that include Crohn’s disease and ulcerative colitis (UC). SER-287 is currently being evaluated in a trial with people suffering from mild to moderate UC. It aims to correct the dysbiosis found in the gut of UC patients, expecting that, by treating the imbalance in their microbiome, it will achieve meaningful clinical impact. Different from traditional treatments available, the microbiome-based drug wouldn’t work by suppressing the immune system, but rather reducing the triggers of immune activation.

        Vedanta Biosciences is another preeminent player in the emerging market for microbiome-based therapies. Also located in Cambridge, Massachusetts, the company was recently granted a U.S. patent broadly covering “methods of treatment with therapeutics based on bacterial spore fractions of microbiota obtained from human donors.” Vedanta’s innovative technology aims to modulate pathways interaction between the microbiome and the immune system. Ongoing work targets conditions such as IBD, food allergies, and cancer immunotherapy.


Immunology and Cancer Research

        One of the hallmarks of cancerous cells is their ability to avoid the body’s defense mechanisms. Aiming to overcome this barrier, immunotherapy research has shown remarkable promise in stimulating the immune system to find and defeat cancer. In fact, immunotherapy has been among the most promising and rapidly evolving alternatives for treating cancer.

        When compared to traditional cancer treatments, immunotherapy has often provided more durable control of tumor growth and fewer side effects. While chemotherapy, for instance, kills both healthy and diseased cells, immunotherapy enables the body to identify and target only cancerous ones. Recent advances are very encouraging, particularly when it comes to treatment-resistant and advanced-stage cancers. The effectiveness of immunotherapy for hard-to-treat cancers is increasingly evident, with positive results in a rapidly broadening range of diseases. 

        Even though the prospect is very promising, further research is necessary to understand why immunotherapy benefits have been restricted to certain subsets of patients and certain types of cancer. Cancer treatment vaccines are an important area of research that can help shed light on potential ways forward.

        Different from conventional vaccines, which focus on prevention, therapeutic vaccines target those who have already been diagnosed with the disease. Despite this difference, both types of vaccines are based on the same premise – teaching the body’s immune system to respond to a threat. In the case of cancer, this is particularly challenging, as cancerous cells are, in fact, host cells. For this reason, existing cancer vaccines have yielded varying results, which seem to be correlated with the number of mutations in the targeted tumor.

        A growing number of experts believe that, in order to be effective, cancer vaccines must be personalized. Recently reported results from two clinical trials have shown great promise: in one of them, eight out of thirteen melanoma patients were tumor free after two years of being treated with a personalized cancer vaccine; in the other, four out of six patients experienced similar results. Customized vaccines take into consideration the fact that each tumor is unique. They aim to maximize the chances of a strong and effective response to tumor-specific antigens, called neoantigens. 

        Various innovative companies and research institutes throughout the U.S. are involved in developing neoantigen-based therapies. This is the case of Princeton, New Jersey-based Advaxis, which recently received FDA approval for the first clinical trial of neoantigen cancer vaccine ADXS-NEO. Developed in partnership with biotech company Amgen, the innovative treatment uses a bacteria carrier to deliver multiple neoantigens to the immune system as a means to stimulate cell and antibody responses to the disease and hit multiple targets at once. 

        Neon Therapeutics is also engaged in neoantigen immunotherapy. The Cambridge, Massachusetts-based company recently raised $70 million in funding for its cancer vaccine NEO-PV-01. By sequencing a sample of a tumor, Neon identifies the mutations necessary to develop a personalized treatment designed to prompt the most robust immune response possible. The company has been making progress in a multi-center clinical trial that combines vaccination with the checkpoint blockade drug Nivolumab. This innovative strategy is expected to further enhance the effectiveness of T-cells that target specific neoantigens in advanced or metastatic melanoma, non-small cell lung carcinoma, and transitional cell carcinoma of the bladder.


New Frontiers for Immunology Research

        Ongoing initiatives are beginning to clarify the role of the immune system in a number of ailments that have not traditionally been explored from an immunological standpoint. Alzheimer’s disease, the leading cause of age-related dementia, is an interesting example.  Researchers at the University of California, Irvine have recently demonstrated an acceleration in the development of distinctive brain plaques associated with Alzheimer’s in mice that were genetically modified to lack three key immune cell types, namely, T-cells, B-cells, and NK-cells. When compared to a control group after a period of six months, the genetically modified mice had up to twice the level of beta-amyloid accumulation, which is a well-known hallmark of Alzheimer’s.

        UC Irvine neurobiologists believe that there is an important interplay between immune cells in the blood (T-, B-, and NK-cells) and those that reside in the brain, which are known as microglia. After transferring healthy bone marrow stem cells into the immune-deficient mice, they found that the reconstitution of the immune system was accompanied by a boost in microglia’s ability to degrade amyloid plaques. This finding could open the way for innovative techniques to identify and even treat people at risk. It could also clarify how the aging of the immune system contributes to the development of Alzheimer’s.

        Recent events have underlined the importance of immunology research dedicated to the prevention of global epidemics, such as Zika and Ebola.  Even though numerous pharmaceutical companies have engaged in the development of a Zika vaccine – the list of companies includes Inovio Pharma, Themis, and Sanofi - none of their ongoing efforts focuses on the immunization of pregnant women. Aiming to close this gap and prevent the incidence of severe birth defects, researchers at Washington University in St. Louis, the University of Texas Medical Branch, and the National Institute of Allergy and Infectious Diseases have successfully demonstrated the ability of two potential vaccines to protect mice fetuses from infection.  Researchers from the University of Arizona have also made progress in the development of a plant-based Zika vaccine that could represent a safer and cheaper solution, which would meet the needs of various underdeveloped countries. 


Conclusion

        Immunology is an extremely diverse field of research. Immunology-related R&D efforts are crucial to improving the lives of those suffering from a wide range of diseases, such as diabetes, lupus, RA, MS, etc. Particularly promising areas for innovation include immunotherapy, microbiome research, and the development of vaccines for emerging global threats. Innovative companies investing in immunology research should take advantage of R&D tax credits to increase their chances of success.

Article Citation List

   


Authors

Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Andressa Bonafé is a Tax Analyst with R&D Tax Savers.


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