NCI Leaders Offer Tips on Non-Dilutive Funding and Bridging the Valley of Death
By Terri Somers
Biocommunique Editor
Mentioning non-dilutive financing to biotechnology executives these days is akin to talking about fresh water to someone stranded on a desert island.
Proof of that were the more than 60 biotechnology insiders who turned out last week to hear leaders from the National Cancer Institute explain how to be a better competitor for SBIR and STTR grants that aim to help push cancer therapies, diagnostics and imaging technology closer to commercialization.
The NCI has to answer to cancer patients and therefore it wants to drive products to market, said Michael Weingarten, Director of the NCI SBIR Development Center. And commercialization, meaning a company’s plan to commercialize a product and the actual commercial viability of a product, is key to winning a grant, Weingarten said.
He and his colleague, Ali Andalibi, the Program Director of the NCI SBIR Development Center, offered plenty of guidance on how to file a better grant application before holding one-on-one meetings with some attendees to answer specific questions they had regarding their company’s grant application.
Yong Quian, of Biomedicure, said he had attended previous funding seminars but found Weingarten’s more informative.
“For example, we found out we were able to apply for more funding than we knew about, including grants for contracts services,” Quian said.
Other attendees were excited to hear the program is very product focused.
For a therapeutics company like us, that is very refreshing to hear rather than learn that they are interested in a lot of basic science,” said David Roth, of Halozyme Therapeutics. “While that basic science may be interesting, it’s not always commercially applicable.”
The SBIR program, for which the NCI must set aside 2 ½ percent of its funding, gives companies a shot at more than a $1 million in non-dilutive financing, while also retaining their intellectual property rights for a product and not burdening them with repayment, Weingarten said. And being selected as an SBIR grant recipient also provides recognition to a company, while also verifying and validating its product because it must pass through the NCI peer-review process, he said.
That validation could be helpful in attracting funding from private investors, which are still responsible for funding commercialization, he said.
There are a few different types of SBIR grants, which provide $93 million in funding.
The Phase 1 grant is up to $150,000 of funding over six to twelve months for proof of concept of an idea or technology. After receiving a Phase 1 grant, companies can apply for a Phase 2 award, which on average are about $750,000. Phase 2 applications should definitely have a commercialization strategy and a fund raising plan, Weingarten said.
Currently, venture capital-backed companies are not eligible for an SBIR grant. That restriction may be removed when the program is reauthorized, he said. One bill working its way through the Senate would remove the restriction and require 18 percent of the SBIR funding to be directed toward VC-backed companies, he said. One Senate bill would also increase the funding set-aside to 3 percent of all NCI funds, he said.
Under the SBIR program, companies must be in the United States and employ less than 500 people, including the primary investigator involved in the project.
Eligibility for STTR grants, which provide $11 million in NCI funding, is different. STTR funds can go to partnerships between small business and research institutes, but the partners must have an intellectual property agreement in place. The lead investigator can work at either the company or the institute, or there can be multiple lead investigators.
In an attempt to push even more of the projects it funds toward commercialization, the NCI created two new programs: one is an institution and another is a third grant program.
The NCI SBIR Development Center, which Weingarten runs, is staffed with ten people who have a background in biotechnology and pharmaceuticals, including commercialization experience. Those staffers are available to meet with grantees to offer guidance in commercialization, including regulatory submissions.
“I thought it was actually refreshing to hear that they put together this new development center, which is exactly what the needed to do though I never would have conceived of it,” said Halozyme’s Roth.
Meanwhile, the NCI last year started the Bridge Awards program, which aims to help companies stuck at one side of the “Valley of Death” make it across to the other side, where they should be able to attract private investment from venture capital or institutional investors.
Grantees can receive up to $3 million over this milestone-driven three-year program. Successful grant applicants must prove that they have secured private funds matching the amount of the NCI Bridge Award. Those matching funds can come from private investors, foundations, angels or states: “We are very flexible,” Weingarten said.
San Diego-based LPath was one of the two companies to receive the first Bridge Awards last year.
Roth, who has been writing grants for 10 years, said he’s experienced two companies die at the precipice of the Valley of Death. So the Bridge Awards are crucial as that valley has grown wider, he said.
Richard Heyman from Aragon Pharmaceuticals said the seminar was very helpful in explaining how to best frame the commercial part of the grant application.
“I thought that in the commercial piece I had to come up with true market size, but they explained you had to show how this would make the company more fundable to new investors or, ultimately, bit pharma,” Heyman said.
“So instead of trying to come up with numbers that are 12 years down the road – like we’re going to have a 13 percent market share penetration of a 1.whatever billion dollar market – they are saying they want to see how we get to the next inflection point that allowed VC or angles or pharma to come in and say that it is a good time to partner.”
“To me, always being on the small biotech side, I thought that was must more realistic and healthy approach,” Heyman said.
For more grant information, or to register for updates on funding programs, visit http://sbir.cancer.gov .
The slides presented during the seminar are available on our website events page.