House Adopts Changes to Small Business R&D Grant Programs

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By Greg Langlois

Emerging life sciences companies would benefit from a bill passed by the House Oct. 11 to enhance agency flexibility in overseeing popular small business research and development programs that drive technical innovation.

The legislation, H.R. 2763, would extend agency authorities and introduce new changes under the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. The programs, funded by set-asides from participating agencies’ research and development budgets for recipients outside the federal government, provide competitively awarded grants to small businesses, universities, and nonprofits. Small life science companies are among the programs’ biggest beneficiaries, according to the Biotechnology Innovation Organization, which welcomed the bill’s passage.

“Capital formation remains one of the most daunting challenges faced by new and emerging biotechnology companies, yet such companies are also the lifeblood of biomedical innovation, responsible for 70 percent of today’s clinical pipeline for new drugs and biologics,” Daniel Seaton, BIO’s director of health communications, told Bloomberg BNA in an Oct. 12 statement. Many companies rely on the programs to fund early research and establish proof of concept, he said, as well as to attract private funding.

New Authority, Requirements

The SBIR program requires federal agencies with research and development budgets over $100 million for nonfederal recipients to award 3.2 percent of those funds to small businesses for development of technology that can be commercialized, and the STTR program requires agencies with over $1 billion in those budgets to reserve 0.45 percent for small business awards. Eleven agencies participate in SBIR and five, including the Department of Health and Human Services, also participate in STTR. The programs provided nearly $3 billion in funding in the last fiscal year, House Science, Space, and Technology Committee Chairman Lamar Smith (R-Texas) said during debate on the bill.

Agencies provide SBIR and STTR awards in three stages: Phase 1 for research and development concept testing, Phase 2 for continued development building on Phase 1 results, and Phase 3 for commercialization. The awards can help companies bridge funding gaps between innovation concept and commercial viability.

Changes that the bill would make to the SBIR and STTR programs include:

  •  extending through fiscal year 2012 the authority of three agencies, including the National Institutes of Health, to make SBIR Phase 2 awards to projects that didn’t receive Phase 1 funding;
  •  making permanent a commercial readiness pilot program allowing civilian agencies to use as much as 10 percent of their program funding to push particularly promising technologies to commercialization;
  •  establishing a pilot program allowing agencies to set aside up to 5 percent of their program funds to award follow-up Phase 2 awards for research moving rapidly toward commercialization, with awardees required to match funding from third parties; and
  •  authorizing agencies to hire multiple vendors to provide assistance, such as sales, intellectual property protection, and market research help, to program recipients.

Support for Programs

The SBIR and STTR programs are key to supplementing private investment, said Brian Wamhoff, co-founder and head of innovation at HemoShear Therapeutics, a biotech company based in Charlottesville, Va.

“I think it’s a great thing for America and small businesses, particularly biotech,” Wamhoff told Bloomberg BNA in an Oct. 12 interview. “The combination of SBIR funding and private investment has really been key to our success.”

HemoShear has received multiple SBIR grants from five institutes within the NIH, he said, totaling nearly $20 million. The money has helped the company develop therapies for two rare and deadly metabolic disorders in children, said Wamhoff, who has testified in support of the programs before Congress.

The SBIR and STTR programs can be abused, he noted, by award recipients relying on their funding “just to stay afloat.” Some of the changes under the bill, including new agency reporting requirements, could address that concern, Wamhoff said.

There isn’t a companion bill to H.R. 2763 in the Senate at this point.

The programs were reauthorized through fiscal year 2022 under legislation signed by President Barack Obama in December.

To contact the reporter on this story: Greg Langlois in Washington at glanglois@bna.com

To contact the editor responsible for this story: Randy Kubetin at RKubetin@bna.com

For More Information

The bill is available at http://src.bna.com/tjN.

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