Financing Your Biotech Startup: The NIH SBIR Program
You have a good idea and some hot data. You started a company. You managed to get some seed money. More research funds are always helpful. You don’t want to cede any additional control of your company, and venture investment for early-stage biotech is slowing. How about small business support from the National Institutes of Health (NIH)?
Small Business Innovation Research (SBIR) grants from the NIH can be an effective way to not only get additional research funds without giving up additional equity, but also get critical feedback for your program. Shown in the graph below, money expended by the NIH on SBIR grants has grown significantly since 2015.
SBIR Phases There are multiple phases/types of SBIR grants, but, at a minimum, the common forms are Phase 1, Phase 2, and Fast Track. The phases have differing restrictions on term, total dollars, and goals you must bring to the table.
Phase 1 grants are meant to be for proof-of-concept research and most institutes cap the awards at $150,000 for 6-12 months. However, several Institutes will allow you to exceed this cap with the proper justification, and advance discussion.
Phase 2 grants are meant to expand and continue your research efforts, based on the goals you achieved in Phase 1. Ultimately, this award is to prove that there is a potential commercially viable program. Here, the dollar amounts go up significantly…typically $1 million for 2 years. But, again, several Institutes will allow you to exceed this dollar cap (sometimes significantly) with the appropriate justification, prior notice, and discussion.
Fast Track grants are a special mechanism where you apply for both a Phase 1 and a follow-on Phase 2 at the same time. You get a single scientific/programmatic review and must show that you have solid, rational, achievable GO / No-GO decision points at the end of your Phase 1. Phase 2 money does not flow unless you achieve your Phase 1 deliverables.
More Than Simply Funding The NIH SBIR programs not only offer an opportunity to get funding for your research without giving up more control of your nascent organization, but also provide critical reviews and insights into how others from industry view your approach. For any Phase 2-containing application, this is a chance to get important feedback from both industry and academic specialists on your proposed plan for leading your research program to a commercial product that will ultimately help patients in critical need of new treatments.
Do You Have a Commercialization Plan? The ultimate goal of the NIH SBIR/STTR* grant program is to help small businesses develop therapeutic interventions/technologies that actually have the potential to get to market. A commercialization plan is required in any Phase 2-containing application. The reason is to make certain that the company has thought about how the product can be commercialized, what the competitive landscape looks like for this product, and where it fits in the marketplace. Watch for more on the commercialization plan in a later post.
Why not think about how NIH dollars can help your small business?
For more insight on writing a grant, check out our 4-part series including:
SBIR/STTR deadlines are January 5, April 5, and September 5, with earliest start dates of July, December, and April, respectively.
Notes: You must be registered with several entities (eRA Commons, SAM), have a UEI number, and an actual separate, specific physical address before you apply for an SBIR, and these registrations can take several weeks to complete.
*The Small Business Technology Transfer (STTR) program is another award mechanism and not covered here, but will be the topic of a future post.
