The SBIR Drop in the Bucket

The capital to start or grow a company developing products for global health may come from several sources which are, in order of rapidly decreasing likelihood:  the founder’s pocket, foundations and their pass-through surrogates, the federal government, venture capital firms, and angel investors.  One would think that federal government policies would favor direct aid to global health-oriented companies given the potential for social benefit and improvement in US prestige.  After all, since 1982, the Small Business Innovation and Research (SBIR) program has required Federal agencies with extramural research and development budgets over $100 million to use an annual set-aside of 2.5% of that budget for small companies “to conduct innovative research or research and development (R/R&D) that has potential for commercialization and public benefit” (SBIR Program).  For health-related research, the National Institutes of Health, the primary agency for health-related research, has  a 2009 extramural research budget of about $24 billion in 2009 and, therefore, an SBIR set aside of about $600 million ($672 million was spent in 2008, NIH SBIR).

Through it’s SBIR program, the NIH is a relatively small investor in biotech/pharma/medical product development (the venture capital investment in biotech companies was $8 billion annually pre-crash), but SBIR money is in the form of a grant (non-dilutive of ownership), is relatively free of constraints, and is renewable, and therefore ideal for a company’s higher-risk projects (like products for global health).  Despite that fact that the initial grant is small ($100-300,000), the program is popular with more than 4000 applicants annually and about 30% of first-timers getting funded.  And although some in the research community would argue that the SBIR program is a diversion of “their” money,  it funds work that is a step closer to a tangible benefit than most NIH-funded projects (and recipient institutions’ overhead costs).

Thanks to a new reporting tool (NIH Research Portfolio Online), one can get an idea of the extent of SBIR funding overall, and an estimate of the amount going into global health product R and D.  The institute most likely to fund global health product development is the National Institute for Allergy and Infectious Disease, and in 2008, it spent about $100 million in SBIR grants, the second highest after the National Cancer Institute (NIH Databook).  This money funded about 385 projects (new and re-funded) on topics ranging from new vaccine delivery methods to preclinical testing of novel antibiotics.  Using the WHO list of neglected diseases (leishmaniasis, schistosomiasis, onchocerciasis, lymphatic filariasis, Chagas disease, malaria, leprosy, African trypanosomiasis, tuberculosis, and dengue) plus diarrheal illnesses, I looked for projects that seemed related to developing global health treatments or diagnostics and identified 59, about 15% of the total and therefore about $15 million in funding.  Malaria and tuberculosis were most popular (about 12 projects each), and filariasis and trypanosomiasis the least (1 each).

The good news is that these 59 projects represent about 50 companies that think they can make money (some day) by inventing products for neglected diseases.  The less good news is that $15 million spread over about 60 projects (or $250,000 each) does not buy much r and d.  But since many small companies cobble together multiple sources of funds and are boot-strapping themselves to a product, the money is helpful.  And any drop in the bucket for neglected disease product development is good.  But for a country that each year puts $24 billion of public money into “health research,” $700 million of which is set aside for companies doing product-related work, $15 million looks paltry.

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