Advancing Translational Research Small Business Innovation: NCATS SBIR STTR Funding

Advancing Translational Research Small Business Innovation: NCATS SBIR STTR Funding Opportunities

National Center for Advancing Translational Sciences

Oct. 27, 2014

Operator:Hello, and welcome to Advancing Translational Research and Small Business Innovations: NCATS SBIR and STTR Funding Opportunities. My name is Connie, and I’ll be inthe background answering any WebEx technicalquestions. If you experience technical difficulties joining the WebEx session, pleasedial 1-866-229-3239. Please note that as an attendee, you are part ofa larger audience. However, due to privacyrights, we have chosen not to displaythe number or list of attendees toeveryone on the call today. Allattendees will be in listen-onlymode throughout the duration oftoday’s call. As a reminder, today’s callis being recorded. We will be holdinga Q&A session atthe conclusion of today’s presentation. You may ask an online questionanytime throughout the presentationtoday by simply clicking on thequestion mark icon located on the floating toolbaron the top of your screen or right side of yourscreen. With that, we invite you to sitback, relax and enjoy today’s presentation. I would now like to introduce yourfirst presenter for today,Cartier Esham, Executive Vice Presidentfor Emerging Companies. Cartier, you nowhave the floor.

Cartier Esham, Ph.D.:Good morning, and thank you.Good morning, good afternoonto everyone on the call. Again,as stated, my name is Cartier Esham. I’m the Executive Vice Presidentof Emerging Companies for BIO.On behalf of NIH and BIO, I would like to welcome you to this very important webinardiscussing NCATSSBIR and STTR funding opportunitiesat NIH.As you know, the SBIR and STTRprograms provide critical fundingfor emergingbiotechnology companies. This funding allows these small companiesto advance early-stage researchand advance their pipeline. During today’s webinar, we willhave Dr. Matthew Portnoy, the SBIR/STTR Program Coordinator in theOffice of Extramural Research at NIH provide an overview of NIH’s SBIR/STTRprograms, including important informationon critical improvements made tothe program as part of the 2011 reauthorization, all of these provisions which are now currently being implementedat NIH.Second, we will have Lili Portilla, Director of Strategic Alliancesat NCATS, who will provide very importantinformationvia an overview of the newly implemented SBIR/STTR program at NCATS, aswell as opportunitiesfor other funding sources for smallcompanies. Thank you again for joining ustoday. I look forward to theQ&A session followingthe end of the presentation. I will now turn the webinar over to Dr. Portnoy.

Matthew Portnoy, Ph.D.:Today, I will be giving a shortoverview of the NIH SBIR and STTR programsto set the stage for Lili to talk more specifically aboutthe NCATS SBIR and STTR programs.The SBIR,Small Business Innovation Research,and STTR, Small Business TechnologyTransfer, are two congressionallymandated programs whereby federalagencies set aside a portion of their extramural research budgets,and percentages on the left are whatwe set aside this fiscal year for grant and contract funding to for-profit small businesses to do technologydevelopment and commercializationresearch.

The program is a phasedprogram whereby applicants apply for a small phaseI feasibility study, typically 150 thousand dollarsand six months to one year in duration.Following phase I, companies applyfor phase II, which is a more fullresearch and development effortover two years at 1 to 1 1/2million dollars. NIH offers a secondsequentialphaseII, which we call a phase IIB. This is a second phase II wherebyapplicants can request up to 3million dollars over three years or up to1 million dollars per year for technologies that typicallyneed to go to the FDA or may require complex and additional funds. And many butnot all of our Institutes and Centers participate inphase IIB.

The phase III portion of the SBIRand STTR programs are called the commercializationstage. It is at this stage wherefederal SBIR and STTR support endsand companies need to work to findfollow-on funding, be it from venture capital, angel investors, strategic partnersor another source. When consideringapplying for SBIR and STTR, companiesneed to think about the exit earlyand realizethat NIH is typically not goingto bethe customer or primary customerof the technology we support.We hope that most of our technologywill be commercialized into theopen marketplace. I also want tonote that while the SBIR and STTR programsuse these phases,phase I, II andIII, this is unrelated to the phases of clinical trial research; however,SBIR can fund clinical trial research.

The key differences between theSBIR and STTR programs are shownon this slide. On the left, we haveSBIR,and SBIR allows partnering. So,the company can do all of the work if it has the technical capability,or it can subcontract out up to one-third of phase I or halfof phase II to another party inthe U.S.The second difference is the principalinvestigator. On an SBIR,the principalinvestigator, or PI, must have primary, meaning greater than 50 percent employmentwith a small business at time ofaward and throughout the durationof the award. This precludes full-time universityprofessors typically from servingas the PI onan SBIR.

However, if we look atthe right side of the slide,the other differences are the STTRprogram requires a not-for-profitinstitutional partner,typically a university, wherebythe small business must do a minimum of 40 percent of the workand receive 40 percent of the budget.Theresearch partner must do at least30 percent of the work and receive 30 percentof the budget. The remaining 30 percent can either goto the small business,or the researchinstitution, or split between them, or could go to a third or fourthparty depending on the needs ofthe project. In an STTR, the PI can eitherbe employed by the small businessor the research partner.So, this unique program does allowuniversity professors to serve asthe PI on the project.However, regardless of the programand regardless of where the PI is,the award is always made to thesmall business.

The congressional goals of theSBIR program are shown on this slide,which was started 32 years ago,in 1982, by an act of Congress.The goals are to stimulatetechnological innovation, use thesmall business to meet federal research and development needs, foster and encourage participation byminorities and disadvantaged personsin technological innovation, andincrease private sector commercializationinnovations derived from federal R&D.AsCartier mentioned a few momentsago, the SBIR and STTR programs were recentlyreauthorized by the ReauthorizationAct of 2011, and both programs arenow good through 2017in terms of their authorizationfrom Congress. STTR has a very similar goal interms ofits desire to commercialize technologyto small businesses.However, asI mentioned, this requires a partnership witha not-for-profit research institution to foster technology from thatinstitution to the small business.STTR was started 10 years later,in 1992, but is now on the samecycle of reauthorization with the SBIR program and is good through2017.

SBIR and STTR is an important programfor the federal government in thatthe governmentis giving awards in the forms ofgrants and contracts, and it dependson your agency. NIH happens to doboth. And we are—the government is strategicallyinvesting in innovation in yourcompany.Perhaps most importantly, this is non-dilutedfunding.These are not loans.There is norepayment.There is no debt serviceto the government.No equity forfeiture;the government does not take apercentage ownership of your companyin exchange for the award. And finally, the government doesnot take any intellectual propertyrights for your award. There isno forfeiture. The company controls all of thedata, all of the IP and all of thecontrol of their company.

NIHSBIR and STTR is funded through24 of our 27 Institutes and Centers,shown on this organizational chart.As you will hear about in a moment,NCATS, at the bottom, highlightedin dark green, is the newest of ourNIH Institutesand as such has an SBIR and STTRprogram. However, when you applyto us or if you give my office acall,we will likely refer you to oneor more of our Institutesand Centers to speak to a program officer inyour technology areas. The criteria for eligible small businesses are very important, and these are set by the Small BusinessAdministration, the SBA, which oversees the program. AsI mentioned earlier, these are for-profit U.S. small businesses, small being defined as 500 or feweremployees. The work must be done in the UnitedStates, and the ownership of thecompany is key. The first criteria is that companiestypically will need to be greater than 50 percent U.S. owned and operated by individuals who are permanent residentsor U.S. citizens. And the vast majorityof NIHSBIR and STTR companiesfall into this category.However, an eligible small business may be owned byanother company or companiesthat themselves are greater than50 percent U.S. owned and operated by individualswho are permanent residents or are U.S. citizens. Finally, a new provision, whichwe implemented in 2013, is thatsmall business concerns that arenow more than 50 percent or majority owned by multiple, meaning two or more venture capitalfirms, hedge funds or private equityfirms, can now also be eligible to applyfor SBIR only. This is specific toSBIR. And eligibility is determinedat the time ofaward.

STTR follows very similar eligibility criteria for the small business as on the previous slide with the exception that majority venture capital-owned companies are not eligible for STTR.As I also stated, the applicantis a small business whereby the small business must do a minimumof 40 percent of the work and the partneringinstitution a minimum of 30 percent. This researchinstitution is typically the university;however, it can be other not-for-profitresearch organizations or a federallaboratory. Both the small businessand the research partner mustenter into an intellectual propertyagreement to make sure that eachof their rights are retained, and the government does not get involved in those discussions.

The success rates of the programare shown on this slide, SBIR onthe left, STTR on the right. Fiscal2012 in blue, fiscal 2013 in red, which isthe most recent year we havefull data.The most common point of the programis the phase I success rate shown onthe middle set of the bars, and you cansee here it is about13 to 15 percent for phase I in SBIR and 18 to 20 percentforphase I for STTR.phase II, which is the right set of bars,you can see is approximately 25 to 40 percentsuccess rate for both programs.This is higher because you haveto have a phase I in order to geta phase II. So, the phase II applicantpool is phase Iawardees. The left set of barsshow the success rate for our Fast Trackprogram, which is a combined phase I and II submissionand award process which has a 15 percent success rate for phase I — excuse me, for Fast Track — for SBIR and approximately 30 percentfor STTR. You can see here thatthe last few years, STTR has hada higher success rate in generalthan SBIR,but that is not necessarily by design.That is a smaller program by overalldollars, and we do get fewer applicationsin the door. Please note that these success rate percentagesare averaged NIH wide.The success rate in any one ofour Institutes and Centers may vary depending on the volume of applicationsthey receive, their budget and theirprogrammatic priority. And I should also note that thesesuccess rates more or less hold no matter whichof the 11 agencies you apply for. NIH is the second largest of the11 agencies in the SBIR and STTRprograms.

Now, I would like to highlighta few of the important changes thatwe have put into the solicitations this year as a result of implementationof the Reauthorization Act of 2011. Applicants now have the flexibilityto switch between the SBIR and STTRprograms atphase II or phase IIB, which is the secondphase II, meaning that whetheryou have a phase I STTR orphaseI SBIR award,you can now apply eitherfor SBIR or STTR inphase II. Likewise, if you havea phase II SBIR or STTR award,you can apply either for SBIR orSTTR inphase IIB, or the second phaseII. In all cases,I strongly encourage applicantsto talk with program officials beforethey apply for any of the phases and especially in between if you’regoing to be switching phases. The link at the top goes toa guide notice which also explainsthese new policies that have been implemented.

Additionally, anew provision offered to NIH in the reauthorizationallows us to offerfunding opportunities to allowapplicants to skip phase I and apply directly forphase II. We call this directto phase II.The funding opportunityis shown here,PAR-14-088, which you can click the link onthe slides, or you can Google that. This type of solicitation allowscompanies that have already donethe equivalent feasibility or equivalent phase I-like work on their ownwithnon-SBIR and STTR funds to apply directly forphase II. Not all of our Institutesparticipate in the direct phase II — around20 of our 24 do — and I strongly encourage anyoneconsidering the direct phase IIto speak to a program officer about it. All program officers for all of our solicitationsare listed at the bottom of Section7 of every single one of our grantopportunities.

I alluded to and mentioned earlierthat majority venture capital-backed firms can now apply for NIHSBIR opportunities as of the middleof last year. Every single one ofour SBIR solicitations we issuehas this additional criteria in there,and if you are a majority venturecapital-backed firm, there is anadditional requirement to fill outa form to tell us you are so inyour application. This is used strictly for trackingpurposes; the ownership status ofyour company is not considered inthe review or the funding process. And lastly, although it has beenover a year, I want to remind everybodythat in addition to the other standardregistration in DUNS, SAM, System for Award Management, grants.gov and eRA Commons, all SBIR and STTR applicantsmust register at the Small BusinessAdministrationcentral company registryat SBIR.gov before submitting to an agency.With that, I’ll turn it over toLili to give specifics about the NCATSSBIR and STTR programs.

Lili Portilla, M.P.A.:Thanks very much, Matt. I’m Lili Portilla. I’m theDirector ofStrategic Alliances here at NCATS,and it’s my pleasure to welcomeyou today andto talk to you about our SBIR/STTR program as well as someothersmall business resourcesthat NCATS has.As Matt mentioned, NCATS is the newestNIH Institute.We were put together in 2011, andunbeknownst to many, we do have an SBIR/STTR programhere.17.6 million dollars awarded annuallythrough our program; we hand out both grants and contracts, and we participate in FOAs, many FOAs across the NIH and manyof the ones that Matt mentionedin his presentation.And we also take on Fast Track applicationsand on occasion, on a case-by-casebasis, we will look at phase IIB awards as well.

So, I’m not going to spend toomuch time here because I think Matt didan excellent job at explaining thedifferences between the SBIR andSTTR programs.One of the benefits certainly that wesee here are for allof the SBIR and STTR funding across theNIH is that it is like one of the largestfunding sources of early-stagelife scienceshere in the U.S. IP rights are retained by thesmall business; it is not a loan, non-diluted capital.Projects undergo an NIH rigorous scientificpeer review process which providesrecognition and verificationand also visibility of the researchthat is going on in your small business concern. And italso helps provide leverage in attractingadditional capital,strategic partners,for the IP, for the technology that gets developed.

Here at NCATS, we are a disease-agnostic Institute,meaning that we don’t focus on anyonespecific part of the body here. We look at — we are very interested in thesethree areas of application. And we recognizethat sometimes you have to focuson a particular disease indicationin order toconfirm the platformthat you are working on. So, wealways — I just want to make sure thateverybody understandsthat we are notlooking at any one particular diseasehere. And it is always good to have aconversation with myself, with the programdirector here, to get a sense of what you would like, what your applicationwould look like. But here is a snippet of a fewareas that we have great interest in further developing. We like innovative platforms for the prioritization of targetsfor therapeutic interventions underdrug development. We look at technologiesto determine alternative uses forexisting therapeutic interventions. We like repurposing projects here, and also, we focus on clinicalresearch tools and informatics, and again, our list on our websiteis much more comprehensive, buthere is a sample of what we are lookingfor.

So, when are SBIR and STTR — when is it appropriate?It is appropriate for innovativesolutions to significant unmet clinicalneeds. It helps leverage the company expertise.It is seeking funding to producefeasibility data which is, as Matt explained, what happensduring a phase I of an SBIR/STTR,and it also seeks funding for further development, which is whathappens under a phase II. And the early-stagebusinessrun by socially and economicallydisadvantaged persons and women-owned businesses, there is a focuson that as well under the program. And, established small businessconcerns seeking funding to pursuenew projects are alsowhen the SBIR and STTR are appropriate.

So, when is itnot appropriate? Chasing NIH funding solicitations,but why not?Needing cash urgently is not agood reason to apply to the program because it does take a while fromthe time of submission to the timeyou get your award.It can range anywhere between eightand 12 months. And wedon’t — I don’t think it is appropriatealso for“me too” products matching acompetitor’s capabilities, incremental innovation, no changeto the clinical paradigm, basicresearch still required to demonstrate commercial and clinical feasibilityof the project, andalso tryingto bridge funding froma lost R01; that would not be a good reasonto apply for a SBIR or STTR.