The R&D Tax Credit Aspects of Liquid Biopsy Testing
A liquid biopsy is a new type of test that
is being utilized to determine if patients may have cancer .
It can pinpoint cancer cells in a patient and determine
whether they are mutating and/or reacting to treatment
differently. Detecting any form of disease early on reduces
the chances of the disease escalating in an individual.
The Research &
Development 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
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.
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Cancer is the second largest cause of death
to people in the United States. Approximately, 14.5 million
people in the United States alone were diagnosed with
cancer at one point in their lives. It is
estimated that in 2016 a total of 1,685,210 U.S. individuals
will be diagnosed with cancer. Utilizing new forms of
technology and innovative processes can help decrease the
number of deaths caused by cancer.
Figure 1. Cancer cell
Cancer Biopsy Testing
Currently, different types of biopsies are
utilized depending on the type of cancer. The various types of
biopsies available to patients include a Fine Needle
Aspiration, Core Biopsy, Excisional or Incisional, Endoscopic,
Skin, Sentinel Lymph Node Mapping, Laparotomy, and Thoracotomy
Biopsies. All of these types of biopsies are invasive
and vary in the amount of surgical activity that is conducted
on a patient.
For example, a fine needle aspiration biopsy is the least
invasive form where a needle takes a small amount of fluid and
tissue from the tumor. Although this is the least invasive,
sometimes there may be issues in determining an accurate
diagnosis due to the small amount of tissue that is collected.
One of the most invasive biopsies is an excisional biopsy
where skin is cut through to retrieve a whole tumor. Although
this form of testing is more invasive, it provides a better
understanding of an individual’s cancer to provide a more
Liquid Biopsy Tests
A liquid biopsy test is still a relatively
new method and requires technological advancement particularly
in sequencing technology. Liquid biopsies consist of
collecting cancer cells (CTCs) or DNA (ctDNA) in order to
examine tumors and determine what procedure can be done to
The two main essentials of gathering CTCs and ctDNA are key to
detecting whether a patient has cancer or noticing if there
are any changes that are occurring in a tumor. CTCs are cells
that are located in the bloodstream after being released from
a tumor cell. ctDNA are pieces of DNA from tumors that can be
found in the bloodstream as well.
Liquid biopsies arise due to the availability of sequencing
technology. Although this technology is available, it is still
difficult to determine the exact number of mutations with
cancer cells. At times the method utilized to gather data from
a patient doesn’t fully gather all of the information needed
to correctly identify if an individual may have cancer.
Improvements need to be made in sequencing technology in order
to achieve an accurate diagnosis for a patient.
Researchers have experimented with the concept of liquid
biopsies by conducting the test mainly on cancer patients who
have lung, breast and prostate cancers. The procedure for a
liquid biopsy is quicker than surgery. Tests can be
conducted to detect cancer or identify changes in cancer.
Doctors can perform a liquid biopsy as an early detection
method to accelerate preventative measures. The earlier the
detection, the better the outcome will be for a patient.
the past, many researchers were skeptical of utilizing liquid
biopsy tests as a replacement for tissue biopsy tests. They
weren’t sure if liquid biopsies would generate results that
were as accurate as tissue biopsies.ix Although the acceptance
of liquid biopsies has been increasing, there are still
multiple unknown factors that have to be determined before
fully implementing these tests. For example, liquid biopsies
aren’t available to test for all forms of cancer and it hasn’t
been determined how often tests should be conducted on a
patient. Although with the continuation of research and
experimenting by professionals the future of liquid biopsies
New Research Studies
Researchers from the Stanford University School of Medicine
have created a solution for conducting a liquid biopsy test by
improving the technique to detect DNA associated with tumors
in an individual’s blood sample. This newly developed
technique is known as the integrated digital error suppression
(iDES). The method ultimately functions by collecting
small amounts of DNA and looking at a section of mutations
associated with cancer.
The general process consists of amplification which multiplies
small fragments of DNA . Amplification is required in order to
create an accurate sequence which can be examined. The issue
with amplification is that errors may be introduced and
researchers have to figure out if the error is a mutation or
was developed during amplification. To resolve this issue,
Stanford researchers invented a method to keep track of DNA by
creating bar codes designated to each DNA molecule that was
obtained from an individual’s bloodstream.
Another process being utilized is known as
background polishing to further detect if there are any errors
that are created. During the study it was found that
sequencing errors have a greater chance of happening at
certain places in DNA particles. By developing innovative
techniques for the liquid biopsy procedure, detecting cancer
can be much easier for physicians.
Guardant Health, Inc.
Guardant Health, Inc. headquartered in Redwood City,
California developed Guardant360 which is a form of cancer
detection consisting of a genetic scan that looks for any
mutations in cancer cells. Guardant is studying treatment
selection and monitoring as well as early detection of cancer.
Almost $200 million was contributed to the company from
OrbiMed Advisors, Khosla Ventures, Formation 8, Lightspeed
Venture Partners, and Sequoia Capital.xii
Liquid biopsies are beneficial because they are less invasive
tests and can be conducted more often compared to tissue
biopsies. These tests can be utilized to determine if tumors
are mutating and are becoming resistant to the current cancer
treatment a patient is receiving. This test is important
because it gives doctors the ability to determine if a certain
drug therapy isn’t performing well. Doctors can then diagnose
a patient and provide him or her with the right treatment that
is needed. Recently, the Guardant360 test was implemented in a
study conducted by the American Society of Clinical Oncology.
American Society of Clinical
The American Society of Clinical Oncology operated a study
involving over 15,000 participants to examine how effective
liquid biopsies can be in detecting cancer.
Specifically, the liquid biopsy test utilized in this study
was the Guardant360. Blood samples were collected from each
patient to analyze their ctDNA and look for tumors. The tumors
found in ctDNA were compared to the tumors found in tissue to
determine the accuracy of the Guardant360 test. The test
was found to be fairly accurate with the same mutations
discovered in ctDNA 94 to 100% of the time.
the study, there were some difficulties in detecting ctDNA for
some forms of cancer, such as brain cancer. A reason for this
may be due to the blood brain barrier that exists, restricting
ctDNA from entering the blood stream. More studies and
research have to be conducted to develop liquid biopsies that
are able to detect all forms of cancer.
Liquid Biopsy Test
There are already companies who see the
potential in the industry for liquid biopsy tests and have
invested time and money to develop these tests. Foundation
Medicine, Pathway Genomics, Grail and Trovagene are some of
the companies who are involved in this specified medical
Foundation Medicine, Inc. located in Cambridge, Massachusetts
created the FoundationACT which is a ctDNA assay that displays
a picture of DNA when tumor tissue isn’t accessible. Pathway
Genomics Corporation, headquartered in San Diego, California,
developed the CancerIntercept Detect test to search for any
ctDNA in nine various cancer cells. Trovagene, also from San
Diego, invented a urine-based liquid biopsy test. From San
Francisco, GRAIL, Inc. is focusing on developing a cancer
blood screening test to determine if a patient has cancer.
There are several well-known startups that have been
successful in receiving funding to further research and
develop liquid biopsy tests. In particular, GRAIL has received
over $100 million from Illumina, Gates, Venture Partners, and
other investors to proceed in researching early detection of
cancer.xii All of these investors strongly believe that the
medical field involving developments for liquid biopsy tests
will be successful in helping individuals. Although it is
harder to accomplish, companies such as GRAIL are involved
with creating tests for early detection providing the most
optimal precaution when screening patients.
During June 2016, the FDA approved the first liquid biopsy
test developed by Roche Diagnostics for non-small lung cancer
(NSCLC).xii This test specifically looks at the epidermal
growth factor receptor (EGFR) gene mutations which occur in
individuals who have NSCLC. The test was developed with the
goal of determining if a certain drug called Tarceva would be
successful for certain patients. Overall, liquid biopsy tests
offer many advantages for doctors and patients.
One of the challenges companies face when developing liquid
biopsy tests is going through a review from the U.S. Food and
Drug Administration. This method is relatively new for
detecting cancer cells and establishing what treatments should
be established for patients, which is why the FDA is taking
major precautions to ensure that this alternative is safe.
Research and experimentation has to be done by companies
before providing this alternative testing to individuals.
Theranos, Inc. is a blood testing company
that has been front page news recently. The company stated
that they offer cheaper and faster blood tests to individuals,
which has come under scrutiny by the public. The company
offers a variety of tests to patients including cancer,
cholesterol and diabetes. Theranos’ technology utilized
finger prick tests, which take just a drop of blood, compared
to typical blood tests. The Theranos blood sample could then
be utilized for up to 30 lab tests to be analyzed by Theranos
Allegedly, the test procedure and technology that was being
utilized by Theranos wasn’t providing accurate results. The
Theranos machine, known as Edison, wasn’t working properly
which resulted in Theranos diluting blood samples and
resulting to standard blood testing machines. One of the
issues that occurred within the company was a blood clotting
test that was conducted on 80 patients within a six month
period and produced incorrect test results.
a result of these issues, the FDA published 2 Form 483
inspection reports identifying 13 “objectionable conditions.”
The Theranos situation demonstrates that new products often
require new manufacturing processes to insure reliability.
Qualified new and improved processes are also eligible for the
R&D tax credit.
August 1, 2016 Elizabeth Holmes recently gave a presentation
about a new device Theranos was developing called the miniLab.
During the presentation, Holmes spoke about the new machine
and displayed data backing up the functionality of the
device. With the spreading issue of the Zika virus
around the world, a significant aspect of this new device is
whether or not it will be able to detect if any blood samples
contain Zika. Although this type of technology has already
been utilized in the past, the main significance of this
technology is developing equipment at a small scale in order
to be used in a doctor’s office. While Theranos is
still waiting for approval for these tests, there is a chance
that the miniLab will be available in the near future.
Theranos’ miniLab will provide the company with an opportunity
to rise up from their past conflicts.
introducing the miniLab, Theranos is moving towards a
different direction within the medical industry of selling
medical testing machines rather than their previous business
practice of conducting laboratory tests. The proposed medical
machines will be able to perform several tests that would be
able to be conducted within a doctor’s office. This technology
will be able to perform specific activities including DNA
testing, cell counting and chemical measurements. The device
itself functions by utilizing a robot , centrifuge, image
sensors and technology to amplify DNA. Theranos’
previous method of taking small blood samples will be utilized
and the proposed tests will need to receive approval from the
Food and Drug Administration (FDA).
Liquid biopsy tests have a huge potential
in the future to replace invasive forms of treatment, such as
tissue biopsies. An increasing amount of research is being
conducted by professionals and companies are beginning to
recognize the significance of this type of testing. With the
utilization of new technology and innovative processes,
R&D tax credits are available for companies who are
involved with the development of liquid biopsy tests.