The R&D Tax Credit Aspects of Schizophrenia

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        Over 1.1% of the world’s population is diagnosed with schizophrenia. It is estimated that the United States alone has approximately 3 million cases of schizophrenic people.  In the past, extensive research was conducted, but scientists still have little knowledge about the disease and what causes it. Currently, drugs are effective at treating hallucinations and paranoia, symptoms common in schizophrenia, but researchers still have not identified a treatment for cognitive problems and social difficulties caused by the disease.

        An average person has a 1 in 100 chance to develop schizophrenia. While the exact cause of the disease is still unknown, research suggests there are various factors that may contribute to developing the illness. Genetics, brain development, and neurotransmitters may play a role.  A single genetic mutation known as 22q11 can increase the chance of schizophrenia by a ratio of 1 to 4.

        Another increase in risk for developing the disease may result from a large number of smaller mutations.  Changes in the brain’s structure also occur in some people with the disease, which suggests the disease may be a disorder of the brain. Studies demonstrate that unbalanced amounts of neurotransmitters, dopamine, and serotonin may lead to conditions associated with schizophrenia. 

        Innovative research and development efforts pertaining to schizophrenia are now eligible for R&D tax credits.

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 payroll taxes.

Symptoms of the Disease

        Although schizophrenia symptoms vary per individual, they all negatively impact a person’s ability to function normally. Major symptoms comprise of delusions, hallucinations, abnormal motor behavior, poor memory, and disorganized thinking.

        Certain behavioral symptoms include a lack of emotion, not making eye contact, lack of motivation, depression, social withdrawal, and a decrease in being able to express emotions. Living with schizophrenia puts a strain on an individual’s everyday activities, which is why researchers are determined to discover more about the disease and find a cure.

Researching Schizophrenia

Stem Cell Research

        The New York Stem Cell Foundation (NYSCF) and the Stanley Center at the Broad Institute of MIT and Harvard work together in stem cell research to uncover more information about schizophrenia. NYSCF engineered stem cell lines from skin samples of patients, whose information was supplied by the Stanley Center. These skin samples are developed into induced pluripotent stem (iPS) cell lines. 

        An innovative robotic machine, The NYSCF Global Stem Cell Array, was utilized to produce multiple amounts of stem cell lines. Once the iPS cells grew, they were transformed into adult brain cell models affected by schizophrenia. iPS cells are ideal for research purposes because they offer endless supplies of diverse cells. Stem cell studies allow scientists to broaden their span of research to explore the unknown of any disease.  By analyzing stem cells, researchers get an in-depth view into how schizophrenia actually impacts our cellular composition.   

Mouse Model Developments
        A mouse is 99% similar to a human, which makes it a preferred model for genetic testing in lab research and experimentation.  In 2007, researchers from Johns Hopkins University developed the first mouse model intended for schizophrenia research. The engineered mouse was designed to model anatomical and behavioral effects of the disease. The mice models had a shortened form of DISC1 protein, which disrupted their usual functions. Observations were made about the mice pursuing their daily activities.

        It was found that the mice experienced similar behavior to patients with schizophrenia. They exhibited difficulty finding hidden food, were restless when put in an open field, and were not capable of swimming as long as normal mice.  Thus, mice models play a significant role in lab research because they help scientists investigate unknown facts about diseases without experimenting on humans.

        The National Institute of Health also contributed in funding the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) initiative program. In this program, researchers studied how the brain functions.  The premise of this program is to develop new tools that can assist in treating brain disorders and diseases.

        Designer Receptors Exclusively Activated by Designer Drugs (DREADD) 2.0 is a tool created to control neurons. The tool affects a synthetic brain chemical messenger system that connects with the body’s natural systems. Researchers developed mice models with designer receptors that attach to synthetic proteins located on neurons.  A designer drug binds to its receptor and can either block or set off neuron activity depending on how researchers program the components. DREADD 2.0 affects the designer receptors and drugs, which permits researchers to control mice models’ brain circuits and any associated behaviors.  

Drugs in Development for Schizophrenia


        Intra-Cellular Therapies is a biopharmaceutical company whose focus is to develop drugs for the treatment of diseases in the Central Nervous System (CNS). While developing drugs, Intra-Cellular Therapies utilize a state-of-the-art platform, CNS Profile, to select compounds with the highest potential to treat disease. This company is currently testing a pill that focuses on working directly inside neurons instead of outside them.

        Intra-Cellular Therapies have been experimenting with a schizophrenia drug known as ITI-007. ITI-007 is an oral drug that impacts the dopamine receptor modulation in order to reduce symptoms associated with the disease. Presently, the drug passed the first of two Phase III trials. During the Phase II trial, the 60 mg dosage reached all the primary and secondary goals, but the 40 mg dosage wasn’t as successful. The 60 mg drug improved user scores on the Positive and Negative Syndrome Scale (PANSS) and the Clinical Global Impression Scale for Severity of Illness. So far, it is proven through trial results that the drug has positive effects on patients. Regardless, ITI-007 must go through the second Phase III trial and pass FDA standards.          

        Forum Pharmaceuticals is a biopharmaceutical company in the process of creating a drug called Encenicline, which serves as a treatment for cognitive impairment. Encenicline is an oral medicine that is an agonist of the alpha 7 receptor. Encenicline targets the alpha 7 receptor to increase its response to acetylcholine, which is believed to improve sensory gating, attention, and cognition.

        Phase II results were recently released to the public, which demonstrate positive outcomes. The study examined the safety and effectiveness of the medicine when people took two doses. These doses helped patients with cognitive impairment in completing normal day-to-day actions. The end results helped the company plan trial designs and distribution of dosage amounts during the next Phase III trials. 

        The FDA has given Forum Pharmaceuticals access to the Fast Track Program. This program quickens the process of developing and reviewing drug candidates with the intention of treating serious conditions. Due to the successful Phase II trial and the Fast Track Program, Encenicline has become the first alpha 7 drug candidate to reach the Phase III trial.

Advancements in Diagnosing Schizophrenia

        A conducted experiment indicates that eye movement tests can demonstrate whether or not a person has schizophrenia. Researchers from Scotland, Germany, and the U.S. analyzed participants by using modern eye tracking technology. EyeLink or EyeLink 1000 were the equipment utilized on a control group and a group of participants who had schizophrenia.

        The EyeLink equipment focused on testing visual patterns, such as looking at a moving object for 20 seconds and focusing on one stationary object. Different images were viewed by participants to see if they had expressive or neutral faces. The eye tests were proven successful by diagnosing 98% of the participants correctly. 

        Participants retook the test after nine months, and the reliability of the technology and patient diagnosis remained the same. Scientists analyzed the results, which showed that participants with schizophrenia had a lower performance for the visual tests compared to the control group.

        A study was published by researchers from Columbia University, the New York State Psychiatric Institute, and IBM's T.J. Watson Research Center. A computerized speech analysis program was used to assist in diagnosing if someone has schizophrenia. An advantage of using this program is that it can pick up signs from a participant that a researcher or physician might accidentally miss. One of these signs is referred to as a jarring disruption, where a person doesn’t get the entire meaning across in conversation and jumps from sentence to sentence.

        Researchers developed a formula to determine when jarring disruptions occur throughout a person’s speech.  The formula measured coherence and two syntactic indicators during a person’s speech, including the length of a sentence and how many clauses are taken.  By analyzing an individual’s speech skills, doctors have a specific target in order to determine if a person may develop the disease. Researchers discovered the computer program functioned better than other technologies, such as neuroimaging and EEG recordings of brain activity. Using computers to analyze an individual’s speech patterns can be another mechanism to prevent schizophrenia from developing in the first place.

Technology for Treatments

        Increasing evidence exists explaining that computer assisted programs can help people overcome some symptoms of schizophrenia. Researchers from the University of Cambridge developed an iPad game called Wizard to help improve an individual’s episodic memory.

        A study was conducted on 22 test subjects with schizophrenia. The participants were split into two groups, where the cognitive training group played the game Wizard for 8 hours over four weeks and the control group continued with their normal routines. At the end of the study, the patients' improvements were measured with the Cambridge Neuropsychological Test Automated Battery (CANTAB) PAL and the Global Assessment of Functioning (GAF) scale.  Researchers analyzed the test results and discovered that the cognitive training group had better cognitive skills than the control group and overall had higher scores on the GAF scale. While researchers are still searching for a medicinal cure to schizophrenia, developing games geared towards cognitive functions may assist in retrieving memory skills of a person diagnosed with the illness. 


        There has been a significant amount of research and experiments conducted to discern why individuals have schizophrenia. Scientists and companies used mice models and stem cell research to advance research efforts. Drugs, such as Encenicline and ITI-007, are currently in development with the intention of becoming available to patients in the near future.

        Utilizing technology for diagnosis and treatment may be effective new approaches to assist individuals with schizophrenia. Research and development tax credits are available to companies and scientists who utilize modern technology and processes to research and test schizophrenia.

Article Citation List



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

Jacob Goldman is the VP of Operations at R&D Tax Savers.

Lauren Chin is a Tax Analyst at R&D Tax Savers.

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