The R&D Tax Aspects of CRISPR-CAS9

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        Imagine a world where cancer-causing genes can be screened for and eventually eradicated, crippling or deadly viruses can be rendered ineffective and congenital diseases can be cured. This is a world that, believe it or not, no longer seems so unimaginable thanks to a revolutionary gene editing technique called CRISPR-CAS9 (CRISPR).  The present article will discuss the origins, recent advancements and implications of this groundbreaking technology as well as the R&D Tax Credit opportunity available to those engaged in this promising area of biomedical research.   

The R&D Tax Credit

        Enacted in 1981, the Federal Research and Development (R&D) Tax Credit allows a credit of up to 13 percent 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 payroll taxes. 

Understanding the CRISPR-CAS9 System

        CRISPR represents a group of molecules that were first observed by scientists in E.Coli back in the 1980s. The acronym CRISPR, which stands for Clustered Regularly Interspaced Short Palindromic Repeats, refers to the unique arrangement of short, identical DNA sequences that are separated by short, non-identical, “spacer” DNA sequences found in the genomes of most types of bacteria . After prolonged study, scientists determined in 2012 that this unique pattern of DNA sequences, along with some accompanying proteins and RNA molecules, actually represented the robust immune system of bacteria. In aggregate, this entire configuration of DNA repeats, spacers, proteins and RNA molecules constitutes the CRISPR-CAS9 system, and is the source of considerable excitement (and angst) in the biomedical field today.

        Conceptually, CRISPR is not so difficult to comprehend. In fact, it is often explained to

non-biomedical professionals as being analogous to a pair of tiny gene-cutting “scissors” that are guided by a GPS system . Here’s how it works: when bacteria are penetrated by an unfamiliar and potentially harmful form of DNA, such as a virus, they copy and actually preserve fragments of the dangerous virus by adding a new “spacer” to their genome. In essence, these spacers serve as a repository from which RNA molecules can then recognize the genetic code of the same virus again in the future, should another infection occur. Once a familiar DNA sequence has been identified, associated proteins called CAS proteins are then able to cut and destroy the unwelcome gene.

Uses of CRISPR

        In the three plus years that CRISPR has been in existence, researchers have already used the technology to combat retinal disease, prevent cancerous cells from multiplying, and protect cells against the deleterious effects of HIV. While milestone advancements such as these in disease control naturally garner the most media attention, CRISPR technology has also been used to fortify crops against harmful fungi, and is even being deployed to modify the DNA of yeast in a way that allows yeast to emit ethanol, thereby reducing the need for petrochemicals . Interestingly enough, CRISPR is also increasingly being thought of as a way to genetically engineer the organs of pigs so as to enable swine-to-human organ transplants. Although they certainly don’t resemble humans, pigs actually have very similar hearts and kidneys, and researchers believe transplants from pigs could become a commonly practiced medical procedure in as early as ten years.

Ethical Concerns

        While the above applications of CRISPR have received near universal praise and support, other applications of the revolutionary gene-editing tool are not so unanimously appreciated.  Notably, the ethics of gene editing in human embryos, in particular, is the source of much consternation and debate.
At the center of this debate lie Chinese scientists who, after years of rampant rumors, confirmed that they recently had, in fact, edited the genomes of human embryos. The Chinese researchers purportedly used “non-viable” embryos in their experiments – no doubt to mollify any concerns over the ethical ramifications of their work. Ethical concerns aside, the researchers had attempted to correct the genetic mutation responsible for beta-thalassemia, a harsh blood disorder, but the results were uninspiring at best and revealed that several barriers remain before CRISPR can safely be used for human medical applications .

        Similarly controversial as human embryos, it was reported in December 2015 that researchers at the University of California-Irvine used CRISPR to genetically engineer mosquitoes that are resistant to malaria.  Combining CRISPR with a technique called gene drive, which enables the rapid dissemination of genetic mutations among animal populations; these researchers believe that they can effectively keep mosquito borne illnesses in-check. In a gene drive system, lab-engineered mosquitoes are released into the wild and begin to pass on their genetic traits to all of their descendants. Such traits can include sterility and immunity to viruses, such as malaria or zika. Though still in its infancy, gene drives could be ready for use in less than a year, according to biologist Anthony James of UC Irvine and, once deployed, could lead to the extinction of specific virus-carrying mosquito species in as little as a couple of years.

        Using CRISPR for mosquito control, however, has naturally raised concerns from both researchers and the general populace. Before we can comfortably release a genetically modified species back into its natural environment, it is argued, we must fully comprehend all of the intended and unintended effects of such an outcome on the entire ecosystem – not just the species in question.

Comparing CRISPR to other Gene Editing Tools   

        While CRISPR is decidedly a revolutionary technology, gene editing as a field of study is certainly not new and actually first captured the attention of biologists over four decades ago. Indeed, in the 1970s, Frederick Sanger and a team of other scientists created a method of genome sequencing – The Sanger Method – that ultimately evolved into other, quicker techniques such as “shotgun sequencing” and Polymerase Chain Reaction . What makes CRISPR so ground-breaking today is that it has proven to be considerably cheaper, faster and more accurate than any other form of gene editing in existence .   

        Presently, only two other technologies compete with CRISPR in the science of gene editing: zinc-finger nucleases and TALENS. Like CRISPR, these systems can unleash a DNA-snipping entity on a particular gene. However, unlike CRISPR, which includes an RNA molecule in its locus, zinc-finger nucleases and TALENS are devoid of RNA molecules, and this exclusion makes these methods less adept at precision-cutting.

        What is more, CRISPR offers the added benefit of being able to target multiple genes in a single cell. Indeed, several CRISPR-Cas9 systems can exist in one cell, all targeting different strands of DNA — it's just a matter of programming the different GPS systems (i.e. RNA molecules) to set them on their respective courses. Such multitasking isn’t possible with alternative gene-editing techniques, such as TALENS or zinc-finger nucleases. In light of the fact that most diseases involve more than a single gene, CRISPR provides a viable pathway toward researching and potentially even curing the most complex genetically-linked maladies in the future.

Patent Dispute

        CRISPR, for all its boundless potential and wonder, has been in the news lately for a reason unrelated to its gene-editing merits. As it happens, the technology is actually in the middle of a highly contentious, not to mention extremely expensive, patent dispute.
In 2013, Feng Zhang, a co-founder of Editas Medicine and a member of the MIT-affiliated Broad Institute, was awarded the patent for CRISPR as a result of his landmark work performed in MIT’s lab. However, two other esteemed biologists, specifically Jennifer Doudna of the University of California-Berkeley and French national Emmanuelle Charpentier, contest that they actually jointly invented CRISPR following an initial meeting between the two back in 2012.

        At the present writing of this article, the patent clash carries on and is further complicated by the fact that patent laws actually changed during the exact reference period in question. Specifically, the 2013 version of the patent law dictated that patents were to be awarded to whoever filed first, which in the case of CRISPR was unequivocally Doudna/Charpentier.  However, on a bit of a technicality, Zhang requested an accelerated review of his application that he was later granted, and was thus awarded the patent before Doudna and Charpentier’s application could be completed. 
While Zhang is affiliated with the aforementioned Editas, a Cambridge, Massachusetts-based company, Doudna started her own CRISPR-focused entity called Caribou Biosciences and, not to be outdone, Charpentier also kick-started a new venture of her own: CRISPR Therapeutics. The impending decision from the patent office will directly impact the viability of each company and send ripple effects through the entire CRISPR industry as the non-patent holders will be forced to license the use of CRISPR from the patent-holder(s) for future research activities. To make matters more intriguing still, Editas, with the financial backing of Bill Gates, Google Ventures, and a consortium of other investors, recently went public in 1Q 2016 . To be sure, the patent ruling will undoubtedly exert considerable influence over Editas’ profitability potential and its ability to bring breakthrough products to market.  


        CRISPR is a truly revolutionary technology that allows for quick, reliable and cost-effective gene editing. A large amount of research and experimentation has been conducted to find out more about the medical applications for CRISPR. With the growing use of this new technology, R&D tax credits are available to companies who are involved in research and new innovations for genome editing.

Article Citation List



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

Robert Goulding is a CFA and Investment Professional with R&D Tax Savers

Jennifer Reardon is a Project Coordinator with R&D Tax Savers.

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