The R&D Tax Aspects of Regenerative Medicine
There are currently more than 122,000
people on organ transplant waiting lists in the United
States. The game-changing, rapidly-evolving field of
regenerative medicine promises to change the lives of many of
these patients, as it enables new ways to repair body parts
and tissues compromised by trauma, illnesses, and aging.
Technological advancements in cell therapies, biologics, and
3D bioprinting have unlocked groundbreaking new opportunities
for regenerative medicine. The present article will assess how
such developments will shape the future of healthcare. It will
further discuss the R&D tax credit opportunity available
for companies investing in this revolutionary field of
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
Eligible costs include employee wages, cost of supplies, cost
of testing, contract research expenses, and costs associated
with developing a patent. On January 2, 2013, President Obama
signed the bill extending the R&D Tax Credit for 2012 and
2013 tax years. A similar extension is expected for
- New or improved products,
processes, or software
- Technological in nature
- Elimination of Uncertainty
- Process of Elimination
Unlike conventional medicines, which are
palliative, regenerative medicine addresses the underlying
causes of disease and has the power to restore lost
functionality of organs and tissues. Game-changing
developments in regenerative medicine promise to resolve unmet
medical needs, enabling the body to heal from within.
There are three approaches to
Recent research efforts have focused on boosting rejuvenation
and regeneration while also developing new ways to overcome
donor shortage, immunosuppression, and organ rejection
challenges that are common obstacles to replacement therapies.
June 2014 report by Allied Market Research forecasts that the
regenerative medicine market will grow from $16.4 billion in
2013 to $67.6 billion in 2020, registering a CAGR of 23.2%
between 2014 and 2020. Central nervous systems applications
are expected to be the most attractive segment, growing at a
CAGR of 30.8% during the forecast period.
Due to its revolutionary potential, regenerative medicine has
been the subject of intensive research and development
efforts. A March 2014 survey of top pharmaceutical and
large-cap biotech companies carried out by the Alliance for
Regenerative Medicine (ARM) concluded the majority of
interviewed companies consider regenerative medicine as a
potential paradigm shift in the development of breakthrough
The therapeutic areas considered to have the most opportunity
were cardiovascular disease, oncology, neurodegenerative
disease, monogenic disorders, and ocular disease, with wound
healing and burns having the greatest near-term potential.
Product consistency and lack of standards were pointed out as
the greatest challenges facing this emerging field.
the words of Morrie Ruffin, Managing Director of ARM, "The
results of this survey confirm that pharma and biotech
companies see the value and long-term potential of
regenerative medicine and advanced therapies, and are
committed to investing in the sector through both internal
research and by partnering with academia and smaller
- Replacement, which is the use of
cells, tissues, or organs from donors to replace damaged
- Rejuvenation, which consists in
enhancing the body’s natural healing capacity.
- Regeneration, which involves the
delivery of cells or cell products to diseased tissues or
The American Society of Gene and Cell
Therapy define cell therapy as the administration of live
whole cells or the maturation of a specific cell population in
a patient for the treatment of disease.
Mahendra Rao, director of the Center of Regenerative Medicine
at the National Institutes of Health in Bethesda, MD,
highlights the game-changing potential of cell
therapies: “You could say that medicine up until now has been
all about replacements. If your heart valve isn't working, you
replace it with another valve, say from a pig. With
regenerative medicine, you're treating the cause and using
your own cells to perform the replacement. The hope is that by
regenerating the tissue, you're causing the repairs to grow so
that it's like normal.”
Cell therapy technologies include stem cell-based methods for
treating various disorders. The use of progenitor cells
capable of developing into many different types of tissue can
foster the body’s ability to heal itself and is, therefore,
one of the key areas for regenerative medicine.
According to Transparency Market Research, the worldwide stem
cells market was valued at $26.23 billion in the year 2013 and
is forecast to be worth $119.52 by 2019, growing at a CAGR of
24.2%. Regenerative medicine applications are a particularly
The potential role of stem cells in regenerative medicine
covers a wide variety of conditions, including injuries,
neurological disorders, Crohn’s disease, orthopedics, cancer,
organ transplants, incontinence, infertility, diabetes,
hematological disorders, liver disorders, cardiovascular and
myocardial infarction, and immunodeficiency disorders.
The following image
illustrates diseases and conditions for which stem cell
treatments are being investigated.
2013, there were already, then there are already five or six
non-pluripotent stem cells-based products in the U.S. and
other countries, namely, Provenge, for prostate cancer;
Appligraf, to treat diabetic foot ulcers; Carticel, to replace
knee cartilage; Gintuit, to promote healing after gum surgery;
and Fibrocell, for replacing fibroblasts.
Since then, cell therapy has expanded significantly and
current research aims to enable the use of different cells,
including cardiac, muscular, bone marrow, and many others. The
use of autologous stem cells proved to be a huge advancement
in the cell manufacturing process. These cells are removed,
stored, and later given back to the same person making cell
therapy much simpler.
There is particular interest in the so-called mesenchymal
cells, which can develop into bone, cartilage, and fat and can
be used to treat the heart, the blood vessels, and Crohn's
disease. Mesenchymal cells are found in the bone marrow and
various other places in the body. Their availability in the
adult body is enough to treat patients with their own cells,
thus avoiding the need for antirejection medication.
The potential role of neural stem cells (NSC) is also
extremely exciting, particularly when it comes to treating
acute central nervous system (CNS) disorders and
neurodegenerative diseases. Most of these diseases involve
cell death, which is aggravated by the absence of regenerative
abilities for cell replacement and repair in the CNS. The use
of NSC could be a way to overcome this shortcoming and has
been studied in the treatment of conditions such as
Parkinson’s and Huntington’s Diseases as well as multiple
2013, an agreement between Newark, California-based StemCells,
Inc. and the California Institute for Regenerative Medicine
resulted in the investment of $19.3 million to help fund
preclinical development and IND-enabling activities of the
company's proprietary HuCNS-SC® product candidate (purified
human neural stem cells) for Alzheimer's disease.
Headquartered in Hackensack, New Jersey, BrainStorm Cell
Therapeutics, Inc. is also engaged in the treatment of
neurodegenerative diseases, such as Amyotrophic Lateral
Sclerosis. The company’s proprietary stem cell technology
NurOwn™ induces differentiation of the patient’s mesenchymal
stem cells into neuron-supporting cells that are
transplanted into the spine or muscle tissue. They protect
existing motor neurons, promote motor neuron growth, and
re-establish nerve-muscle interaction.
Also focusing on neural cell therapy applications, researchers
from the University of Pittsburgh are studying ways to deliver
stem cells to the brains of patients recovering from strokes.
Their hope is to boost the brain’s own ability to reorganize
and compensate for the cells destroyed. Initial results show
great promise in reverting tissue damage.
There is also great promise in the use of stem cell treatments
to slow or revert vision deterioration. One example is the
ability to grow new retinal tissue, which is then injected
underneath the patient’s retina. Advancements in this area
could benefit over two million Americans who suffer from
age-related macular degeneration.
3D bioprinting takes the symbiotic
relationship between medicine and technology to a whole new
level. While following the usual additive manufacturing logic,
3D bioprinting relies on very unique materials. In other
words, it consists in the ability to print with living cells.
Needless to say, such ability can revolutionize medicine. For
decades, tissue engineers have tried to build replacement
organs. However, the traditional method of manually delivering
cells has proved inadequate for the task. Not only was it
arduous and time-consuming, but it also limited the complexity
of tissues that were produced, making it impossible to
replicate original structures.
bioprinters completely modify this scenario, as they allow for
more efficiency and complexity. Potential applications are
numerous and include the creation of cellular tissues for drug
testing and medical training, and the development of
transplantable and bionic organs. When it comes to
regenerative medicine, 3D bioprinting is undoubtedly a
game-changer that can potentially take thousands of people off
of organ transplant waiting lists.
2013, bioengineers from Cornell University have successfully
built a facsimile of a human ear that looks and acts like a
natural one. The process consists of printing a seven-part
mold and injecting it with bovine cartilage and collagen from
rat tails, which serves as scaffold. Several days in cell
culture guarantee the propagation of cartilage, which
eventually replaces the collagen. This achievement was
considered revolutionary for children born with underdeveloped
or malformed outer ears.
Likewise, researchers at the Wake Forest Institute for
Regenerative Medicine (WFIRM) have successfully used 3D
bioprinting to build bladders, urethras, and other body parts.
The Institute also works on the production of skin grafts,
bioprinted with the patient’s own cells. The process consists
of placing skin cells directly into a print cartridge, along
with essential materials to support them, and then printing
directly on the patient's wound at the site of the wound. The
Institute’s innovative efforts aims to benefit thousands of
soldiers with life-threatening burns.
part of a $24 million effort funded by the U.S. Space and
Naval Warfare Systems Center, the WFIRM recently used human
heart cells made from skin cells (previously transformed into
plenipotentiary stem cells) to produce a miniature 3D printed
heart. Capable of beating autonomously, the so-called “tissue
organoid" has been considered a major step forward.
Printing solid organs, such as the heart, liver, or kidneys,
is a particularly complex task that involves more cells and
requires an extensive vascular structure. Researchers from the
Cardiovascular Innovation Institute at the University of
Kentucky are engaged in creating a fully functioning, 3D
bioprinted human heart using fat-derived cells.
There have also been significant advances in the 3D printing
of human cartilage, which could allow for the production of
implantable replacements. On March 2015, a group Swiss
researchers unveiled a process that would enable the printing
of a full size nose implant in less than 20 minutes. The same
technology could be used for ear and knee implants. Such
implants offer significantly lower risks of rejection as they
are made from the patient’s own cells. In the case of young
people, they can grow together with the patient, functioning
just like any other body part, which means being controlled by
the internal, biologic growth engine.
According to Allied Market Research, small
molecules and biologics are the largest revenue-generating
segment in the regenerative medicine market, estimated to have
reached $9.0 billion in 2013. This particularly promising
segment is anticipated to grow at a CAGR of 18.9 percent
between 2014 and 2020.
Also referred to as proteins, specialty drugs, or "large
molecules", biological medicines are a particularly promising
field for regenerative medicine innovation. They consist
of medications derived from living material - human, animal,
Different from chemically derived drugs, which constitute
"small molecules" and present clear-cut chemical structures,
biological medicines can be composed of up to 20,000 atoms.
With 100 to 1,000 the size of traditional drugs, biologics are
much more complex and harder to replicate. Such drugs also
interact differently with the body than other medications and
are most commonly administered by injection or infusion.
When compared to traditional drugs, biologics can be
significantly more effective, often resulting in abbreviated
recoveries. This is possible because, unlike chemical-based
medicines, biologics are more targeted to diseases. Developed
through genetic modification, such drugs present high accuracy
as they search for the diseased cells to be treated. Moreover,
by accounting for genetic differences, biologics can provide
more "personalized" treatments, specially designed for certain
subgroups of patients.
2011, the approval of the first biologic agent for maintenance
immunosuppression in kidney transplantation shed light on the
role these drugs can play in organ transplantations.
Immunosuppressive drugs decrease the activities of the immune
system so it does not attack a person's own tissues or
transplanted organs or tissues. This important line of therapy
faces the challenge of reducing adverse effects, which often
threaten the immune system’s general ability to fight
Developed by Bristol-Myers-Squibb, Belatacept (trade name
Nulojix), is a T-cell co-stimulation blocker, capable of
selectively blocking T-cell activation. This biological drug
was created to provide extended graft survival while limiting
the toxicity generated by standard immune suppressing
regimens, such as calcineurin inhibitors.
Bristol-Myers-Squibb recently announced the results from a
long-term follow-up study of Nulojix regimens, which
demonstrated a statistically significant 43% relative risk
reduction of death or graft loss at 7 years, with survival
benefit of 52% observed as early as 5 years post-transplant.
The results also demonstrated statistically significant and
sustained difference in renal function of Nulojix when
compared to cyclosporine-treated patients.
Regenerative medicine has the potential to
enhance the metabolic and biochemical function of tissues,
boosting the body’s ability to heal itself. It can help retard
damage to diseased tissues and repair injured ones. In other
words, it can change the face of medicine. Ongoing
research on cell treatments, biologics, and 3D bioprinting
promise to pave the way for this unprecedented paradigm
shift. R&D tax credits are available to support innovative
efforts in these areas.