Subject: Re: Drug costs $25. Sells for $25k.
US corporate federal (can't comment on state) tax law allows R&D to be FULLY deducted from income earned the same year. If business has a tax LOSS that year, they can "carry back" AND "carry forward" the loss until they recoup the entire amount lost from profits.

No, you can't recoup the entire amount.
Not being taxed on an expenditure is not the same as getting back money equal to that expenditure.

Counting R&D as an expense when calculation profit makes perfect sense, same as it does for any other kind of expense.

The only fine point for tax purposes is which year you count which percentage of the expense. You might spend $100 on R&D in year 1 and expense it all for tax purposes in year 1, or you might spend $100 in year 1 and expense $20 in each of years 1-5, but it's still and expense and still gets counted as an expense, and that still makes sense.

It might be counted as a current expense that is deducted immediately or as a capitalized expense that is deducted in parts over time with a depreciation schedule, but it's still an expense. It might even be counted one way for GAAP or IFRS financial reporting and the other way for tax, but it doesn't really make much difference. This affects the timing of your tax bill (not its size) and your reported book value and the order of your headline earnings, but little else.

A shorter version: if you spend $100m on R&D and get no revenue from that product, even if you get it as a tax deduction like any other expense, you have still lost $100m.

If you hadn't done that R&D, your pre-tax profit would be $100m higher, and you'd be paying tax on that additional profit, so your tax bill would be higher. But a $21m lower tax bill on a $100m lower pretax profit and $79m lower after-tax profit isn't exactly making you whole.

Jim