Senate Small Business Committee holding Markup

According to Trading Markets:

MARKUP NOTICE

For July 30, 2008

The Committee on Small Business and Entrepreneurship will hold a public markup of a bill to reauthorize the Small Business Innovation Research (SBIR) Program on Wednesday, July 30, 2008 at 11:30 a.m., in room 428A Russell Senate Office Building.

All agencies with an extramural research and development budget exceeding $100 million are required to allocate 2.5 percent of this budget for the SBIR program. Currently, 11 federal agencies participate, and each of these agencies issues solicitations on a periodic basis, seeking innovative project proposals from small businesses to meet the agencies’ needs and keep our country on the cutting edge of technology.

Next Steps: If the bill is passed in the SBE committee, it will then go before the full Senate. It’s doubtful that this would happen before the upcoming recess, however. Once the bill passes the Senate, it will then be headed for conference committee with the House.

We will have more on this markup after it happens!

Conversation with Michael Weingarten

The feature story in the July 2008 Oncology Business Review is “On-Conversation with Michael Weingarten, Director, Small Business Innovation Research program (SBIR), Office of the Director, National Cancer Institute.”

NOTE: We have highlighted a few of Weingarten’s answers below. Please follow the links for the full interview.

OBR: HOW HAS THIS PROGRAM BEEN ADMINISTERED TO THIS POINT?

Typically, at the NIH, the average size of an award for a Phase 1 is about $150,000. After a company has demonstrated the feasibility of the technology they apply for a Phase 2 follow-on award. That’s a much larger dollar size award at the NCI – on average, about a million dollars. It cuts across everything that the NCI does in terms of technology that supports cancer patients. At the NCI it’s a $100 million program.

OBR: WHY ISN’T THIS MONEY COMING FROM THE STREET?

Phase 1 and 2 dollars is really only enough to take a company maybe halfway through preclinical development. Unfortunately, after the SBIR money runs out, you might have promising data but haven’t advanced the technology far enough to where the private sector will step in and fund the ongoing development process. Typically, venture capital (VC) and other investors come in some time during Phase 1 or Phase 2 clinicial trials, so we have this big funding gap we call “the valley of death” – that’s where the project hasn’t advanced far enough for the company to raise capital, yet, results look promising. They just need a bit more cash to cross that valley. They need a bridge.

OBR: OKAY, SO WHAT EXACTLY IS THIS BRIDGE MADE OF?

We’re going to provide a company up to $3 million dollars in additional funds over a three year period, but in order to receive those funds a company is expected to go out and raise funds to match the NCI investment. That’s what the National Science Foundation (NSF) found with their award, that the most successful aspect of it was this requirement for matching funds.

OBR: IS THE PROGRAM EMPHAZISING CERTAIN TECHNOLOGIES?

Two areas that we’re focusing on right now are cancer therapies, and cancer imaging technology. New, effective therapies and imaging technologies will ultimately help prevent, detect, and treat cancer.

Ultimately, patients benefit from the therapies and technologies developed by successful SBIR awardees, with the help of small businesses and the NCI.

The SBIR Program was established under the Small Business Innovation Development Act of 1982 and, by way of several reauthorizations, has since provided seed money for small companies involved in the development of innovative technologies. SBIR funding promotes a broad range of scientific activities and is available through such agencies as the Departments of Defense, Energy, and Health and Human Services (HHS). The National Cancer Institute (NCI), part of HHS National Institutes of Health, confers SBIR grants and contracts (these are not loans) specific to the development and commercialization of oncology research. As of May 2008, the NCI SBIR Program now includes a new pilot initiative referred to as the SBIR Bridge Award. This enhancement of the SBIR Program was highlighted at the Biotechnology Industry Organization (BIO) Convention in San Diego.

SBIR in the Wall Street Journal

With three weeks remaining before the August recess, time is running short for the Senate to continue to meet regarding the SBIR bill. (NOTE:  the House passed a SBIR reauthorization bill in April). Yesterday the Wall Street Journal ran a piece outlining the debate on who should receive these SBIR grants:  Should a small business that attracts the keen eye of venture capitalists also be eligible for SBIR grants?

Key Arguments for Restoring Eligibility to Venture Capital-Backed Companies

·         The companies that venture capitalists back have already been vetted to show their potential for ability to commercialize research; this is the goal of the SBIR program

·         These are small companies, often with no revenue.  VC funds tend to be tied to later stage research, whereas SBIR grants are used to fund early stage research.  This early stage research is often too conceptual to attract VC funds, which makes SBIR funding all the more important.

 

For example:   That irks executives at venture-backed companies like Applied Genetic Technologies Corp., a small gene-therapy start-up in Alachua, Fla., that is working on cures for rare eye diseases and other ailments. Five years ago, the company had a small-business grant for more than $500,000 revoked because it had recently crossed the 51% VC-ownership threshold. The funding was for research into therapies for Pompe disease, a rare muscle disorder that is often fatal in children.

 

“Here I am, 12 people, working on very early-stage, risky technologies for ‘orphan’ diseases, which I would think the government would encourage, and I don’t qualify for funding,” says Sue Washer, the company’s president and chief executive. Although Applied Genetic has raised about $27 million from venture capitalists, that money is targeted at the company’s treatment for a certain type of emphysema, which was already being tested on patients, according to Ms. Washer.

 

Concerns About VC-Backed Companies

·          Venture Capital-backed firms have an advantage in the SBIR application process and will “write slicker grant proposals,”.

·         The venture community will “turn the program into a ‘feeder’ program that would let government fund high-risk research and allow VCs to profit later.

The House bill would “squeeze out the very small companies” and leave fewer grants for deserving research in markets too small to interest venture capitalists, says Michael Squillante, vice president of research at Radiation Monitoring Devices Inc., a Watertown, Mass., high-tech company. The firm has received many of the Innovation Research grants but no money from venture investors.

However, the Senate is unlikely to take up the House version of the bill, says a person familiar with the legislation. Instead, the Senate’s small-business committee, headed by Democrat John Kerry, is likely to try to strike a compromise, this person said, allowing companies controlled by venture capitalists to participate, but setting limits on the number of VC-controlled firms.

 

More from Maryland

Both Forbes and East Coast Blogging mentions that people can now apply for the $6 million in biotechnology tax credits in Maryland. They didn’t discuss how enthusiastic the Maryland Biotech community is over this new plan.

There is a lot of growing excitement over Governor O’Malley’s BIO 2020 Initiative. Today, the Baltimore Sun covered what lengths people are going to to make sure they are eligible for the tax credits:

Mark A. Vulcan - a tax attorney and CPA - had something of a rock star moment when he rolled into work at the Maryland Department of Business and Economic Development’s Baltimore offices yesterday morning just before 8.

There, crowding in the lobby at 217 E. Redwood St., were more than a dozen slightly bedraggled biotech executives, some of whom had slept on the sidewalk, and all of whom wanted an audience with Vulcan.

At 9 a.m., he began accepting applications for a state tax credit program worth up to $250,000 apiece for eligible biotechnology business investors. So company representatives wanted to make sure their backers got a piece of the limited pie - distributed on a first-come, first-served basis.

The best quote: “Over the past couple of years, there have been some early birds, but they camped out last night like we were selling Hannah Montana tickets,” Vulcan said.

Looks like Maryland has quite a hit on its hands. Other states – what are you doing?

From the Baltimore Sun:

Biotech Tax Credit

What: A $6 million pool of tax credits available to those who invest in qualifying biotechnology companies. A minimum of $12,500 and a maximum of $250,000 are available.

Who: Qualified investors are those who invest at least $25,000 in a qualified Maryland biotech. Qualified biotechs have their headquarters in the state, have fewer than 50 employees and have been in business for less than 10 years generally.

When: Applications are accepted in July each year and take roughly 30 days to review.

Next: The competition should ramp up in coming years if Gov. Martin O’Malley’s plan to double, and eventually quadruple, the available credits is approved

In the States - Innovation!

We’d like to welcome readers of SBIRGA to our blog.  If you have read our material, you will understand that we remain neutral on the issue of grant amounts.  We do, however, support agency flexibility.  It should be left to the experts to determine what award amounts are appropriate for promising new projects. 

 

This is especially true when we look at what individual states are doing.  Many states have recently launched their own biotech initiatives.  We are thrilled to see that these states continue to recognize the potential of the biotechnology sector to their local economy. 

 

Maryland’s Governor Martin O’Malley just announced a $1.1 billion biotech initiative.  The Frederick News-Post describes this move:

Under the BIO 2020 Initiative, announced by O’Malley on June 16, Maryland will invest $1.1 billion in its bioscience industry over the next 10 years — the largest per capita investment in the biosciences made by any state in the country — to attract and grow biotechnology companies in Maryland.

 

And straight from Harrisburg, Pennsylvania Governor Ed Rendell announced a new state investment of $17.5 million, which:

will help four venture capital companies invest in alternative energy, medical, agriculture, and health care technologies. Through our venture capital initiatives, were providing tools to support early-stage companies in every region of Pennsylvania, Governor Rendell said. Our investment programs hold the promise of building our technology-based economy and positioning us to compete in the global marketplace.

 

We are excited to see innovation become a priority for these states and look forward to watching other states follow their lead.

Chat with John Risner, President of the Children’s Tumor Foundation

Hopes and Cures spokes to John Risner, President of The Children’s Tumor Foundation about the group’s work, in particular about funding for research.  CTF is a non-profit 501(c) (3) medical foundation, dedicated to improving the health and well being of individuals and families affected by the neurofibromatosis (NF).

 

ABOUT NF

Neurofibromatosis (NF) is the term for three distinct genetic disorders, NF1, NF2 and Schwannomatosis.   The most common form, NF1 (1-3,000 births), has a wide range of severity, ranging from café au lait spots to learning disabilities, bone abnormalities, and brain and spinal tumors.  NF2 (1-25,000 births) is characterized by multiple brain and spinal tumors, commonly causing deafness, severe balance problems, decreased mobility and vision loss.  Schwannomatosis (1-40,000 births) causes nerve tumors associated with chronic pain.   NF affects both sexes and all races and ethnic groups equally.  NF is more prevalent than cystic fibrosis, Duchenne muscular dystrophy and Huntington’s disease combined. 

Ed. Note: The University of Utah describes possible symptoms of NF1

 

The Children’s Tumor Foundation focuses on four areas:

 

1) Research.  We fund, lobby for, and promote collaboration to increase research.  We are the largest non-government funder for this type of research.  We provide very early funding, what we call phase 0.5, and develop grant mechanisms to fill gaps in the research landscape where small amounts can have a large impact.  Projects we support in early stages often count on SBIR funding for phase 1 and 2 research.  

 

2) Public education.  We do a lot of advocacy work as well as family-oriented events to raise awareness of this illness.  Our website is a place that brings together patients, family members and scientists in a meaningful way. 

 

3) Clinical centers.   In an effort to increase the clinical centers for NF patients, CTF has followed the model developed by the Cystic Fibrosis Foundation.  We have developed a grant program to fund clinic coordinators in hospitals so that they can provide increased patient support, counseling and better track patient data.  Data is a key asset for clinical trials, and this step is important to enhance the appeal of NF to pharmaceutical companies to encourage more trials.  In addition, it provides the hospitals with assistance in supporting their physicians and coordinating the multidisciplinary needs of the NF community. 

 

4) Patient support.  The website itself is a great tool to help patients and parents of patients connect with each other, through chat rooms and discussion boards.  While the work done is focused nationally, it is not uncommon for international patients to also use the discussion board.  Also our Chapters and Affiliates nationwide provide a wealth of patient support group meetings and local services.

 

Drug Discovery Initiative

Currently there is no effective drug treatment for NF.  Because of this, we provide seed grants to encourage early-stage research for preclinical testing.  We launched this program in response to declining federal funding of research over the past few years.   The program has a simple 2-page application and a quick (3 month) turnaround.  These grants aren’t large (11-55k), but they can help get research for a treatment off the ground. 

 

As a requirement of funding, researchers post their models on our website.  It’s like Craigslist for research.  By posting the research to a public area, researchers are able to find each other easily and work can be a collaborative effort.  It’s a way to open up the drug pipeline.  This model is also similar to what other foundations have adopted, but on a smaller scale and at an earlier stage in the research.  One of the projects we funded last year at Ohio State was to test their small molecule compound, OSU03012 in NF mouse models.  Earlier this year, Arno Therapeutics, a biotech startup, licensed the compound from Ohio State.   This is the first one licensed, but we hope to see more. Because this program focuses on early stage research, we have not funded Phase I or II trials; we fund before SBIR can.   However, a lot of the work that we fund does end up being accomplished at the biotech level.  

 

The Children’s Tumor Foundation is very supportive of the House-passed SBIR bill.  We believe that the previous changes – to disallow VC-backed firms from competing for this Federal funding cut out the heart of the program.  Restoring funding for VC-backed firms makes sense, and will encourage continued investment in drug discovery and development.

 

           

The National Neurofibromatosis Foundation was founded in 1978 by Allan E. Rubenstein, M.D., Lynne Courtemanche Shapirio R.N., and Joel Hirschtritt, Esq.  In January 2005, the Foundation changed its name to the Children’s Tumor Foundation. The Foundation has a membership of over 50,000 constituents in all 50 of the United States, Washington, D.C., and 55 other countries.

 

In Your Own Backyard: How NIH Funding helps

Families USA released its June 2008 study of NIH grants awarded by state.  They conclude that

If the sum of all NIH awards to the states were to increase by 6.6 percent, the national economic benefit would add up to $3.1 billion worth of new business activity, 9,185 additional jobs, and $1.1 billion in new wages

We agree with this assessment and would like to see more funds go to support the best science.  Not only do these grants offer a much-needed boost to local economies, like in North Carolina and in Connecticut, but they ensure a better future to those suffering from life-threatening illnesses.

Families USA says it best:

NIH awards to states spur vital medical research, while at the same time injecting millions of dollars into local economies, creating jobs and new wages. This should be called a win-win-win, because it helps our state economies, our nation’s health, and the health of people around the globe.

Find your state HERE. 

Biotechnology, a Massachusetts Force

Recently, there was an interesting study conducted by PricewaterhouseCoopers, the New England Healthcare Institute, the Massachusetts Life Sciences Center, Xconomy and the Massachusetts Technology Collaborative on the Massachusetts Life Sciences Super Cluster, showing the value of a strong science sector economically.   This Super Cluster includes Universities, teaching hospitals, biotechnology, medical device, and pharmaceutical companies.  Software, venture capital, associations, and specialized life sciences businesses complete this cluster. 

 

The Massachusetts life science sector contributes approximately $8.8 billion annually and the life sciences workforce increased 8% between 2001 and 2006 while the rest of the MA workforce declined 2.5%.  We in the biotech industry most often discuss the value of the industry in terms of innovation and value to the public through new treatments/therapies, biofuels, and other improvements.  The Massachusetts numbers perfectly reflect this standard.

 

The Super Cluster study illustrates how life sciences contribute to local communities by providing revenue and jobs.  It also shows that growth in biotech cannot be taken for granted.  There is some concern that NIH funding has not kept pace with inflation and is negatively impacting collaborative efforts between research institutions and companies.  However, Massachusetts is a large receiver of SBIR/STTR Funding:

 

 [1st-chart]  Even in talent-rich life science super cluster areas like Massachusetts, developing research into commercially available products requires strong partnerships among universities, teaching hospitals, life science companies and venture capitalists.  

 

It was very exciting to see that an overwhelming number of life science executives surveyed (66.2%) said they consider themselves entrepreneurs [2nd-chart] and 66.8% expect their next position to be in a start-up company.  The innovative and entrepreneurial spirit is alive and well in the life sciences industry- we should make sure we keep it that way.

Who is Short-Sighted?

A post on SBIRGA asked the question, “Just how short-sighted is the VC community?”  The post discussed a recent analysis by the State Science and Technology Institute (May 28^th Digest) of a study conducted by Pricewatershouse’s MoneyTree Report that indicates venture capital companies are making more investments in later stage companies and fewer investments in start-up companies. 

 

This piece points to the important role of the SBIR program in funding new ideas that have the potential to become viable products, a point I most certainly agree with. 

 

Today, by far the largest seed capital fund in the country, the SBIR program, is run by the U.S. Government.  It amounts to $2.2 billion dollars annually and is given to companies that want to develop new technologies into viable products.  Generally it is given out in a $100,000 first round and a $750,000 second round on a competitive basis.  Doing the math, you see that several thousand new ideas get funded each year. 

The post goes on to state that the VC community is pushing an agenda on Capitol Hill that would change the SBIR program into one that helps leverage private investments in later stage companies with public money which may prohibit new ideas from getting funded and prevent early stage companies from developing.

 

The VC community is pushing changes through Congress that will convert the SBIR program into one that helps leverage their private investments in later stage companies with public money.  Sweet deal if you can get it.  But other than using taxpayer money to make the rich richer, what is the cost?

The MoneyTree Report does in fact illustrate the important role SBIR grant funding plays in providing seed money for projects that are too high-risk to attract venture capital funding.  SBIR provides validation that the research project has commercial potential and this support can help attract venture funds for these promising projects.  

 

The biotechnology industry has been advocating for reform for the SBIR program to once again allow biotech companies with venture capital backing from multiple investors to be allowed to compete for SBIR grants.  

 

The purpose is not to help VCs leverage their private investments in later stage companies.  If one of these companies has VC backing, it is likely tied to the more-developed lead product.  For example, small biotechnology companies may not have a product on the market, but will have 3-5 research projects in their pipeline.  These VC funds cannot be used to fund these other more early-stage research projects that may also have great potential; only the main project will receive the funds.  

 

SBIR grants help these early-stage innovative research projects get off the ground.  Biotech is a research and capital intensive industry – it can take 8-10 years and $800 million dollars to get one product through the FDA approval process – and there are more failures than successes.  It is important that SBIR funds go to new ideas and should be given to small businesses based on the merit of the project.  Companies that have attracted VC for one project should not be prohibited from competing for funds to research another therapy or treatment that has potential to benefit the public.  Helping small biotechnology companies have the ability to develop more than one project makes that company more stable and more apt to grow: this is good for innovation and good for building a young industry.

News Round Up (June 11)

SBIR Stories

• Free Money Myths from the Government
• Give Me Fish nets Phase 0 award

Blog Posts

• Venture Capital Alternatives: SBIR
• Just How Short-sighted is the VC Community?
• NIH SBIR Comes to Atlanta