Paying for research: Innovative grants crucial to new medicines

A Florida-based biotechnology firm developing a breakthrough technology in gene therapy for alpha-1-antitrypsin deficiency, a genetic disease, was forced to delay its research because of funding problems.

The technology is noteworthy because company officials believed it could have led to a promising new therapy for children and, possibly, additional treatments for chronic neurological diseases, cardiac diseases and others.

Similarly, another small biotechnology firm with promising technology in two disease indications had to put its projects on hold. One was a new vaccine to prevent the West Nile virus, and the other involved treatments for many types of cancers.

What do these two firms -- just to name a few -- have in common? They are both victims of the Small Business Administration's new interpretation of the Small Business Innovation Research program. Many small businesses, including start-up and emerging biotech firms, rely on SBIR grants for seed money to fund early-stage research.

Unfortunately, SBA has altered its interpretation of eligibility standards to exclude companies majority-held by venture capital and other investors.

Under this new interpretation, firms are only considered small if they record their funding from actual individuals as opposed to investment groups that provide the bulk of early-stage funding in the biotech industry.

We believe this interpretation bears no relationship to how companies are actually funded.

Before most biotechnology products can become commercially available, 10 to 15 years of research and development and about $800 million in funding is needed to complete testing and win FDA approvals. Nevertheless, the 800 million patients who have been helped by one or more of the 200 biotech drugs and vaccines currently on the market likely would attest that the wait is worth it.

While there are many funding strategies, the typical form of investment in promising, early-stage companies is venture capital. Because of the significant funding required to bring biotech products to market, very few firms are capable of commercializing their technologies without significant venture funding.

In 2004, biotech firms raised $5 billion in venture capital funding, and firms have raised $1.3 billion in such funding so far this year.

This may seem like more than enough funding, but biotech start-up companies require far more capital investment than any other industry, and SBIR grants are critical in filling the funding gap. Yet, under this new rule, SBA is penalizing biotech firms that have the strongest science and likelihood for success -- the very purpose of the SBIR program -- by excluding them from the program designed to support development of technology that could attract venture investment. Indeed, this mistaken policy virtually disqualifies the entire biotech industry from this program and further delays the development of new products for patients waiting for new breakthrough medicines.

As a result of the new interpretation, the applicant pool for grants is downsizing and the unveiling of life-saving and life-enhancing technology is being postponed. Many companies are not applying for these grants or are holding SBIR submissions in hope that this issue will be resolved prior to their submission.

Earlier this month, two Missouri legislators, U.S. Rep. Sam Graves (6th District) and U.S. Sen. Kit Bond, introduced the Save America's Biotechnology Innovation Research Act (House Resolution 2943/Senate 1263). I urge you to contact your legislators to ask them to support this legislation. As the world's leader in biotechnology, this country has benefited greatly from the SBIR program, which has been an essential component in the commercialization and economic development of the biotech industry. The new interpretation will prevent the most innovative biotech companies from participating in the SBIR program. If this continues, the results could be devastating for the future of the biotech industry and the patients we serve.

James C. Greenwood is president and CEO of the Biotechnology Industry Organization in Washington, D.C.