The cost of losing innovation

Here are two examples of companies that worked to develop vital treatments for children, illustrating the urgency of restoring SBIR eligibility:

In the early 1990’s, MedImmune received SBIR Phase 1 and 2 grants to support research and development for a monoclonal antibody to prevent a viral infection called respiratory syncytial virus (RSV) in neonates. 

The product – Synagis – became the first and only FDA approved monoclonal antibody product to prevent an infectious disease. Synagis has been used by more than one million children. If current SBIR rules prevailed when MedImmune’s scientists first applied for an SBIR grant, MedImmune would have been ineligible to receive those SBIR funds and it would have significantly impacted the development of that program. 

AGTC, a small private biotechnology company with seven employees working on therapies to treat and cure genetic diseases applied for a Phase I/II SBIR grant in 2003 that was initially approved but had to be withdrawn due to the company’s majority investment stake by a venture capital company. This grant would have advanced a treatment for Pompe’s disease, a fatal genetic disorder that in many cases results in death of infants by one year of age. No further work has been done on this program in the past eight years.

In real terms, the ability of the SBIR program to provide critical funding for projects with the most potential to benefit the public will remain hampered, unless SBIR reauthorization updates the program to address the current realities facing small, innovative American companies. 

Securing funding for promising early-stage projects is as difficult as it has ever been. The biotechnology sector continues to feel the impact of the economic downturn and the amount of venture capital dollars have decreased in recent years.

This is an industry that provides high-paying jobs to millions of individuals. In 2008, total employment in the U.S. bioscience industry reached 1.42 million jobs and the average wage for bioscience jobs was $77,595, according to a Battelle/BIO 2010 report. 

The potential of biotechnology both as an economic driver and in delivering solutions to our nation’s most critical public health needs has not yet been maximized. SBIR could play a critical role in helping achieve those goals.

Congress can continue to speed the development of novel therapies, help deliver solutions to our nation’s most critical public health needs and support an industry that provides high-paying jobs to millions of individuals by allowing the government to partner with small biotechnology companies that have promising science, but need additional resources at key stages of development not readily available in the private capital markets.

We recommend strengthening and restoring the SBIR program as follows:

- Increase science-based competition by allowing small companies that are majority owned by venture capital companies to once again compete for SBIR awards based on scientific merit

- Establish SBIR eligibility rules that make the application process more straightforward and user-friendly in regards to determining the size of the company and the manner in which affiliation rules are applied.

- SBIR reauthorization should include a more rational and effective affiliation process regarding determinations about an applicant’s investors’ portfolio companies supported by its investor.

SBIR should be an aggressively competitive program that fulfills federal research and development goals of bringing breakthrough public health discoveries to the public. The program can provide critical support to small biotechnology companies that are often forced to shelve promising therapies that address some of the nation’s most daunting public health needs.

Scott Koenig, MD, PhD, is President and Chief Executive Officer of MacroGenics Inc and Chairman of the Board of Applied Genetics Technology Corporation (AGTC).

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