Mind to Market

Monday, July 09, 2007

BIO and SBIR

The Biotechnology Industry Organization (BIO) is calling for reform of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs. The House Science and Technology Committee's Technology and Innovation Subcommittee has been meeting to discuss the SBIR and STTR programs with an eye toward reauthorizing the programs in 2009. The SBIR and STTR programs are set asides specifically earmarked for small business to enable them to do the type of innovative research that small businesses are known for.

The Small Business Administration (SBA) administers the SBIR/STTR programs. They were the ones that came up with the definition of what a "small" business is. Their definition for the purposes of the SBIR/STTR programs was that a small business must be majority independently owned. A 2003 determination by the SBA ruled that companies that are majority owned by venture capital firms are not "independent" and therefore ineligible to participate in the programs. This had the effect of making ineligible more than half of all small biotech firms in the U.S.

Although research costs in most industries are concentrated on salaries, biotech research has the added burden of high lab costs and the extended time required to develop a drug. Because of these higher costs venture capitalists often end up owning the majority of the companies they invest in at an early stage. A large number of the most innovative companies developing diagnostic and therapeutic technologies are ineligible to receive SBIR/STTR funding as a result.

But the SBIR/STTR budget is nevertheless distributed. As the pool of eligible biotech companies shrinks funding is flowing into a limited number of companies; "grant hogs" as BIO calls them, are scooping up hundreds of grants with little or no competition.

Stay tuned for: How to Become a Grant Hog.

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