The state's fledgling biotechnology companies need additional tax breaks if they are to flourish, two players in the state's biotechnology game said at a congressional hearing in Baltimore yesterday.
Crop Genetics International has raised nearly $65 million but is still four to five years away from bringing any significant product to the market, said Dr. James H. Davis, vice president of research and development for the Hanover-based company.
Like most other businesses that need to raise capital, his company would like to see tax breaks reinstated for long-term capital gains to help shake loose more money from venture capitalists.
A lower tax rate on money invested for three years or more, he said, would stimulate investment in Crop Genetics and many other young biotech companies. Gains from investment -- so-called capital gains -- are taxed virtually the same as salary or other current income, except that the maximum rate on capital gains is 28 percent.
While Dr. Davis believes his company's biological agents for warding off crop pests have a great future, he acknowledged that for many investors the "returns are not immediately obvious."
Dr. Davis told Representative Tom McMillen, D-Md.-4th, who chaired most of the session at the World Trade Center's Maryland Room, that "compared to pharmaceuticals, agricultural biotech is still in its infancy." It therefore may need more tax incentives to stimulate more investment, he indicated.
Wayne Swann, director of the technology liaison office at the University of Maryland in College Park, added his own pitch for an investment tax credit that would go to investors in fledgling XTC technology firms rather than to the companies themselves.
This would stimulate the flow of desperately needed venture capital, he said.
The university's scientists have generated "five separate technologies that could spin off companies now," said Mr. Swann, except that the university can't get venture capitalists involved, given the present tax structure.
Mr. McMillen agreed in principle, noting that the research and development tax structure "is great if you're making money, but we need something else to help small-capitalization companies."
The hearing in Baltimore was being conducted under the auspices of the Committee on Science, Space and Technology's subcommittee on the environment. The hearing took its title, "Biotechnology in a Global Economy," from a report by the same name issued in October by the congressional Office of Technology Assessment.
OTA officials outlined their report for the subcommittee and made copies of it available.
While none of Maryland's biotech firms are huge employers, there are many of them, due in large part to the presence of governmental institutions that are conduits for research funds, such as the National Institutes of Health and the United States Department of Agriculture.
The region is home to 107 biotech firms, or nearly one out of every 10 such firms in the nation.