3

NIH SBIR/STTR Processes

This chapter describes the National Institute of Health’s (NIH’s) processes for issuing calls for proposals, conducting outreach, selecting awards, and supporting awardees during their participation in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs across the 24 NIH institutes or centers (ICs) that administer awards through the programs.¹ It also considers the impact of NIH processes on the participation of woman-owned firms and firms owned by socially and economically disadvantaged individuals. The principal sources of data for this chapter were discussions between committee members and SBIR/STTR program managers and staff from each of the NIH ICs that issues SBIR/STTR awards. Each discussion followed a similar protocol (see Annex 3-1 at the end of the chapter) and lasted approximately 60–90 minutes.² Additional data and background information were obtained from the NIH websites,³ from discussions with representatives from NIH’s Small Business Education and Entrepreneurial Development (SEED) Office, and from discussions with SBIR and STTR awardees and medical technology entrepreneurs.

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¹ After a prepublication version of the report was provided to NIH, information in this chapter was edited to clarify processes and procedures NIH uses to administer its SBIR/STTR programs and the methodologies used by the committee in its analysis. Edits include correction of factual errors, updates due to recent changes, descriptions of detailed aspects of the outreach, application, review, and selection processes, differences across the 24 ICs, and additional detail on terminology and data sources.

² After a prepublication version of the report was provided to NIH, anonymized quotes from individual program managers were removed because use of these quotes was not authorized by NIH. When necessary, the content was paraphrased to preserve the relevant information.

³ Information in the report that is based on the NIH SBIR/STTR program websites may not in some cases be consistent with the current sites, which were revised in November 2021, after the committee had completed its assessment. This footnote was added to the text after a prepublication version of the report was provided to NIH.

OVERVIEW OF THE SBIR AND STTR PROGRAMS AT NIH

NIH invests more than $1 billion per year in the SBIR and STTR programs, making it among the largest operators of SBIR/STTR programs in the federal government, but in many ways these programs function as a collection of smaller programs that vary in size. Although the two programs’ application and centralized review processes are generally consistent across all 24 ICs, each IC has an individualized approach to conducting outreach, selecting awardees, and supporting awardees during their program participation. This chapter lays out the general processes that apply to all ICs and then details differences across the ICs in their outreach, selection, and support processes.

NIH releases omnibus solicitations for the SBIR and STTR programs, each with three application cycles per year. Most SBIR and STTR applicants apply electronically through the omnibus solicitations, also known as Omnibus/Parent Funding Opportunity Announcements or simply Parent Announcements. The most recent Parent Announcements for the SBIR/STTR programs were released on July 8, 2021, with the three application cycles ending September 5, 2021; January 5, 2022; and April 5, 2022.⁴ Applications received in response are then sent to a centralized review center, the Center for Scientific Review (CSR), which is responsible for soliciting reviewers and convening panels to discuss the reviews. The review scores and the summary statements are then sent to the appropriate IC and the applicants. After receiving the CSR scores, each IC’s advisory council or board reviews the applications it receives, and the IC director makes the final selection of applicants. If an application is not funded, applicants may address reviewer concerns and resubmit the application. For the September 2021 cycle, the advisory council review is scheduled for January 2022, with the earliest start date for selected projects expected to be in March 2022.

The approximate time frames for each of these processes are detailed in Figure 3-1, although, as discussed later in this chapter, the actual time frames appear to be much longer. Most other agencies are directed to review applications and notify applicants within 90 calendar days of the close of the solicitation and to finalize funding agreements within 180 days of the solicitation’s close; however, NIH is directed by law and the Small Business Administration (SBA) to notify applicants within a year of the solicitation’s close and to make awards within 15 months of that closing date.⁵ Five percent of awards in fiscal years (FY)

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⁴https://grants.nih.gov/grants/how-to-apply-application-guide/due-dates-and-submission-policies/due-dates.htm.

⁵ 15 USC Section 638(g)(4), (o)(4); SBIR/STTR Policy Directive, Section 7(c)(1)(i) (SBA, 2020). The act and directive require the NIH and the National Science Foundation to notify applicants no more than 1 year after the closing date of the solicitation. The directive recommends that the two agencies issue awards no more than 15 months after the closing date of the solicitation. The SBIR/STTR Policy Directive defines a funding agreement as “any contract, grant, or cooperative agreement entered into between any Federal Agency and any SBC [small business concern] for the performance of

2016–2018 were not awarded within the 15-month time frame (GAO, 2019, p. 43).

Variations across Institutes and Centers

As introduced in Chapter 1, the NIH SBIR and STTR programs offer several other types of awards beyond the standard Phase I and II awards, and the types of available awards and the award amounts, even for standard Phase I and II awards, vary by IC. As described in Chapter 1, Phase I SBIR and STTR awards are intended to determine feasibility and provide proof of concept, while Phase II awards are intended to provide further support for research and development (R&D) efforts initiated in Phase I. Although Phase I awards are generally about $260,000 for 1–2 years, each IC may offer Phase I awards in different amounts, in some cases based on the topic area of the project’s research. Likewise, Phase II awards are about $1.7 million for 1–3 years, but each IC has its own internal guidelines for award amounts.⁶ In some cases, these guidelines may be lower than the levels allowed for the programs generally, but many ICs have received waivers from SBA to offer larger Phase I and II awards.

Opportunities for other types of awards are substantial and vary by IC. For companies interested in SBIR but not wishing to participate in Phase I, ICs offer the opportunity to apply for Direct-to-Phase II awards. ICs also offer Fast-Track awards for which both Phase I and II applications are submitted and reviewed as a single application, which can reduce or eliminate the funding gap between phases. In addition, some ICs offer Phase IIB awards, which provide Phase II awardees with follow-on funding of up to $1 million per year for up to 3 years. Finally, some ICs offer Commercialization Readiness Pilot Program (CRP) awards following Phase II, which may provide up to an additional $3.4 million to Phase II and IIB awardees. The CRP program is not subject to the same restrictions that apply to other SBIR and STTR awards. The funds may be used for intellectual property strategy, Food and Drug Administration (FDA) approval documents, clinical studies, and manufacturing and regulatory costs. The program

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experimental, developmental, or research work, including products or services, funded in whole or in part by the Federal Government.” (SBIR/STTR Policy Directive Section 3[r] [SBA, 2020]).

⁶ National Institutes of Health, Webinar, “2021 HHS Small Business Funding Opportunity Announcements,” August 12, 2021, https://sbir.nih.gov/sites/default/files/2021_HHS_Small_BusinessFundingOpportunityAnnouncementsWebinar_Slides.pdf.

allows for subcontracting to other institutions, such as contract research organizations, and it is exempt from any normal partnering requirements of other awards. The vast majority of NIH SBIR and STTR awards are made in the form of grants, and this study is focused on this form of award.

Role of the SEED Office

In addition to the individual ICs’ SBIR/STTR program managers, these programs are supported by NIH’s Small Business Education and Entrepreneurial Development (SEED) Office. The SEED Office is tasked with leading initiatives designed to develop relationships between NIH and universities, research institutions, small businesses, trade associations and societies, angel investors, and strategic partners. Housed in the Office of Extramural Research, SEED is divided into three teams focused, respectively, on supporting academic innovators in the early stages, supporting small businesses through the SBIR and STTR programs, and providing broad-ranging support to innovators working to navigate the commercialization and regulatory environment. In addition to providing information to applicants about NIH’s SBIR and STTR programs, the SEED Office offers webinars on the omnibus solicitations and other requests for proposals issued by NIH. The SEED Office also hosts regular meetings with IC SBIR/STTR program managers, although the committee’s discussions with program managers indicated that sharing of best practices occurred on an ad hoc basis. The SEED Office is responsible as well for implementing NIH’s Technical and Business Assistance (TABA) programs, discussed later in this chapter, and overseeing some of the entrepreneurial training programs and resources across NIH, such as the Entrepreneurs in Residence program. The SEED Office manages and recently updated the NIH SBIR/STTR website, which, among other things, includes illustrative “success stories” about SBIR/STTR awardees and wide-ranging information resources about the program.

The SEED Office is funded through NIH’s pilot administrative funds. This pilot program, which is authorized through 2022, allows agencies to use up to 3 percent of their SBIR/STTR funds to pay for some of the activities of program administration. About one-third of these funds at NIH, amounting to about $10 million in FY 2018, is used to support the SEED Office.

The Academic Innovation Team in the SEED Office coordinates a nationwide network of proof-of-concept centers to help “academic innovators to validate the potential health impacts of promising scientific discoveries and advance them into healthcare products and services.”⁷ These centers were authorized in the 2011 SBIR/STTR Reauthorization Act, which allows NIH to use STTR funds for pilot proof-of-concept centers (P.L. 112-81). This consortium of centers includes the NIH Centers for Accelerated Innovations (NCAI) and the Research Evaluation and Commercialization Hubs (REACH).

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⁷ Small Business Education and Entrepreneurship Office website, https://grants.nih.gov/aboutoer/oer_offices/seed.htm (accessed September 3, 2021).

NCAI, established in 2013, consists of three centers focused on innovations of interest to the National Heart, Lung, and Blood Institute (NHLBI). Innovations of trans-NIH interest are the focus of the eight REACH centers, the most recent of which were established in 2019. These public–private partnerships provide support in the form of funding for proof-of-concept studies and wide-ranging expertise and support for academic innovators. The NCAI and REACH centers provide coaching to entrepreneurs based on technology originating from the university (or set of universities) associated with the center. These centers provide coaching and application assistance, with expected outcomes including the formation of a startup ready for SBIR or STTR submission.⁸ Some, such as WE-REACH, use the National Science Foundation’s (NSF’s) I-Corps program for training.⁹ Finally, the centers work with the STTR Regional Technology Transfer Accelerator Programs for Institutional Development Award (IDeA) states that were established by the National Institute of General Medical Sciences (NIGMS) to develop education, training, and support in certain underrepresented states.¹⁰ Collectively, these centers provide support for innovators at more than 70 institutions across the United States. Because the committee was not given information on academic partners for STTR or SBIR applications, it was unable to conduct any analyses of the effectiveness of these programs.

DIFFERENCES ACROSS NIH INSTITUTES AND CENTERS

The heterogeneity across NIH’s SBIR and STTR programs across ICs can be seen in the programs’ size, mission, and organizational structure. Each IC has different budget amounts and time frames for Phase I and II awards, offers different types of awards, has different ways of using centralized scores, and uses different programs to aid commercialization for awardees. The SBIR and STTR programs are funded as a fixed percentage of each IC’s extramural budget, thus the annual budgets differ substantially across the 24 ICs that offer SBIR and STTR awards.

While the overall budget of the NIH SBIR and STTR programs is about $1 billion each year, the annual IC budgets range from more than $140 million for the largest institutes to just over a $1 million for the smallest (see Table 3-1). The missions of the IC programs are quite diverse—from supporting projects focused on a single disease or set of diseases, to those focused on a particular part of the body, to those focused on a particular constituency. In addition, some ICs’ missions are tied to advancing particular technologies, while others are crosscutting or are intended to support NIH’s general research community or mission.

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⁸https://www.ucdenver.edu/sites/spark/spark-award#ac-expected-outcomes-7.

⁹https://www.washington.edu/we-reach/training/biomedicalbootcamp.

¹⁰ The IDeA program was established by Congress in 1993 to broaden the geographic distribution of NIH funding. NIH Revitalization Act of 1993, P.L. 103-43. For a list of IDeA-eligible states, see https://www.nigms.nih.gov/capacity-building/division-for-research-capacity-building/institutionaldevelopment-award-(idea).

TABLE 3-1 NIH Institutes and Centers (ICs) with SBIR and STTR Programs

SOURCE: NIH institute/center websites and RePORTER database.

The ICs also differ substantially in how they implement their SBIR and STTR programs. For instance, a few ICs have centralized their programs, with staff dedicated to only serving program applicants. Other ICs have integrated the programs into their other funding activities, with responsibility for the portfolio of SBIR and STTR awards spread across many staff members who are also responsible for other extramural research programs. The size of an IC’s SBIR/STTR programs does not determine whether they are administered separately or integrated into other activities. For example, the National Cancer Institute (NCI) has centralized its SBIR/STTR programs with a dedicated staff, but the National Institute of Allergy and Infectious Diseases (NIAID) and NHLBI use a more integrated approach. On the other hand, the key staff responsible for SBIR/STTR activities across the ICs have similar educational and work backgrounds. Almost all these key staff (21 of 24) have life sciences doctorates and substantial experience working at NIH. Only two have business degrees, and only a small number have commercial experience in addition to NIH or federal government experience.

Preaward Processes

This section highlights some of the differences in outreach and application processes used across the 24 ICs. While all IC program managers mentioned to the committee conducting outreach through attendance at scientific meetings, a wide variety of outreach approaches are used across the ICs to reach potential SBIR/STTR applicants.

Applications and Solicitations

The NIH SBIR/STTR process is perhaps most uniform in its omnibus solicitations. Those solicitations are accompanied by NIH, CDC, and FDA Program Descriptions and Research Topics, which provides additional information and links related to individual IC interests and available funding opportunities.¹¹ The enormous size of NIH; the number of ICs; and the great variation across the ICs with respect to the omnibus solicitation, requests for applications (RFAs), and requests for proposals (RFPs) provide a window into the NIH SBIR/STTR process, which is organized but difficult to navigate. Over time, ICs have improved their calls for proposals and are now able to give applicants more direction by prioritizing long lists of topics in Notices of Special Interest (NOSIs). Although NIH’s SBIR and STTR programs are generally investigator initiated, each IC has the opportunity to offer more top-down solicitations. Applications submitted in response to omnibus solicitations in any one of the three

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¹¹ U.S. Department of Health and Human Services, Omnibus Solicitation of the National Institutes of Health, Centers for Disease Control and Prevention, and Food and Drug Administration for Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Grant Applications: NIH, CDC, and FDA Program Descriptions and Research Topics, PHS 2020.

application cycles offered each year are required only to address the institute’s mission. ICs can offer specific guidance by issuing a Program Announcement with Set-Aside Funds (PAS) or a Program Announcement with Special Receipt, Referral, and/or Review Considerations (PAR). The PAS specifies that funds have been allocated for the IC’s funding of selected applications, often on a particular topic, and the PAR provides greater flexibility in the application review criteria by either allowing an IC to administer the peer review meetings in the first level of review rather than the centralized NIH CSR or to issue specified review criteria for evaluation of proposals. ICs can also provide guidance to applicants through a NOSI, which provides information on specific research priorities or scientific topics of interest that will be considered for applications responding to the omnibus solicitation. And ICs can issue RFAs for grant applications addressing a defined research topic. The RFA defines the scope and objectives of the research, generally in more narrowly defined areas that may have set-aside funds, and applications may be peer reviewed by a panel that is convened by the IC rather than CSR. Finally, cooperative agreements are used when NIH scientific or program staff are involved in the research and assist, guide, coordinate, or participate in project activities.

Some ICs participate in the SBIR contract solicitation. This is offered only once per year (compared with the thrice-yearly application cycles under omnibus solicitations for SBIR/STTR grants) when an IC identifies specific need areas. Only a few ICs issue SBIR contracts. According to the NCI SBIR/STTR program manager, SBIR contracts account for about 15–20 percent of the NCI SBIR allocation. NIAID uses a similar process to seek SBIR contract ideas and targets about 20 percent of its SBIR/STTR funding for contracts during emergency events.

ICs have formal and informal processes for developing SBIR/STTR NOSIs, PASs, PARs, RFAs, and RFPs, although both are essentially the same except for the first step. Formal processes involve issuing a call for applications on new topics. Informal processes involve program managers collecting and discussing emerging technology ideas throughout the year through reading, attending meetings and conferences, and talking to applicants and grantees and contacts at other ICs or federal agencies. Program managers discuss their ideas at different levels internally, addressing the question of what might be suitable for the product development pathway. If an idea gains traction, it culminates in an executive staff review, and if funds are set aside for the topic, it is presented to council members to discuss and vote on the idea. If approved, the idea can be developed into a funding opportunity announcement.

Generally, ICs receive most applications—80–90 percent of all applications—through the omnibus solicitations. The remainder come in response to targeted solicitations such as RFAs. The quality and number of applications received through targeted solicitations versus the omnibus solicitations varies across ICs, but targeted solicitations seem to attract more new applicants in some ICs.

Examples of targeted solicitations include those funding awards related to emergency events, supporting research on rare diseases, funding cross-NIH initiatives, and creatively bridging topics or disciplines. For example, NIAID used targeted solicitations when the Zika virus epidemic occurred in 2015–2016 and in response to the COVID-19 pandemic in 2020–2021. The National Institute of Arthritis and Musculoskeletal and Skin Diseases (NIAMS) uses targeted solicitations to support research in rare diseases, rotating RFAs in alternating years, since the community in this area is small. Many ICs will participate in a targeted solicitation if the topic is cross-cutting—for example, the “lab to bench,” stem cell, or tissue engineering initiatives or major cross-NIH initiatives, such as The Helping to End Addiction Long-term^SM (HEAL) Initiative¹² or The Brain Research through Advancing Innovative Neurotechnologies^® (BRAIN) Initiative.¹³ The National Institute on Drug Abuse (NIDA) uses targeted solicitations to implement new types of non-SBIR/STTR awards focused on developing the biomedical, behavioral, and clinical research workforce; examples here include “Growing Great Ideas: Research Education Course in Product Development and Entrepreneurship for Life Science Researchers”¹⁴ and an RFA focused on the intersection of science and social science in relation to the development of digital technologies to address the social determinants of health.¹⁵ In another example, the National Institute on Deafness and Other Communication Disorders (NIDCD) develops RFAs infrequently, but when it does, it brings together researchers and people from business to discuss ideas. An example of resulting RFAs is the implementation of parallel RFAs for R01 and SBIR awards. The R01 RFA is focused on developing novel acoustic signal processing algorithms for speech enhancement to improve future generations of hearing aids, cochlear implants, and other devices.¹⁶ The parallel SBIR RFA likewise targets the development of and support for open-source portable acoustic signal processing tools to improve speech enhancement software and thus accelerate the translation of research to the market.¹⁷

In summary, NIH uses various mechanisms to promote the SBIR/STTR programs and award their funding to address a range of needs. Omnibus solicitations support investigator-driven research guided by NIH topics and priorities (a bottom-up approach), while targeted funding opportunities, contracts, and (to a lesser extent) cooperative agreements focus on the development of research, technologies, and approaches to address specific and more immediate challenges (a top-down approach). Even as such diversity of approaches provides a wide variety of choices for NIH’s SBIR and STTR programs, it adds complexity to the process and confusion for applicants who may be interested in applying to multiple ICs.

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¹²https://heal.nih.gov.

¹³https://braininitiative.nih.gov.

¹⁴https://grants.nih.gov/grants/guide/rfa-files/RFA-DA-17-007.html.

¹⁵https://sbir.nih.gov/nida/RFA%3ASocial_Determinants.

¹⁶https://grants.nih.gov/grants/guide/rfa-files/RFA-DC-16-001.html.

¹⁷https://grants.nih.gov/grants/guide/rfa-files/RFA-DC-16-002.html.

Outreach to Promote the SBIR/STTR Programs

While there are some cross-NIH approaches to outreach for the SBIR/STTR programs, supported primarily by the SEED Office, most outreach to promote the programs is carried out by the individual ICs. Centralized outreach through SEED Office initiatives includes road tours, both by NIH and in collaboration with SBA; an NIH SBIR/STTR website that provides program information, videos, and tutorials; and annual NIH national and regional SBIR/STTR meetings. Overall, the NIH SBIR/STTR website appears to be complete and well presented.

Outreach efforts vary widely across ICs. One major determinant of the amount of outreach carried out by an IC is the size of its SBIR and STTR budget. NCI, the largest IC, has an active outreach program. Its SBIR/STTR program managers report attending 30–40 events a year around the country. The program managers organize 1-day SBIR workshops to describe the program, discuss different funding opportunities, and provide insight into how to write a robust application. A good part of the day is spent meeting one-on-one with individual applicants. Potential applicants share their project ideas, and program managers provide immediate feedback on whether they think an idea is a good fit for SBIR/STTR. NCI outreach is often focused on attracting junior scientists and postdoctoral fellows, so many of the mentoring aspects of the NIH Pathway to Independence Award (K99/R00) program are built into Phase I STTR awards.¹⁸ NIAID and the National Institute of Biomedical Imaging and Bioengineering (NIBIB) conduct a smaller number of 1- and 2-day workshops using a similar format and appear to focus more systematically on reaching underrepresented groups.

The IC SBIR/STTR websites also vary. Nineteen IC’s SBIR/STTR websites are housed on their respective IC domains. Of these, only 6 provide an events page, and these appear to contain a mix of grant funding announcements, webinars about different facets of the application process (e.g., “Understanding the NIH Peer-Review Process”), and specific events (e.g., SBIR/STTR Bioscience Company Showcase or Entrepreneur Workshop Series: Opportunity Assessment). Not all the IC websites link back to the main NIH SBIR/STTR website, which appears to have more resources available to applicants.

Other examples of outreach at the IC level range from outreach that is relatively less time-intensive for program managers (internal low-touch activities), to outreach that is more time-intensive (internal high-touch activities), to activities external to NIH (see Table 3-2).

Low-touch internal outreach involves email blasts, listservs, newsletters, social media, and IC-specific web pages. Although program managers may provide content for these outreach venues, these low-touch outreach efforts generally rely on IC communication officers or marketing firms to do the actual work of preparing the communications.

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¹⁸https://grants.nih.gov/grants/guide/pa-files/PA-20-188.html.

TABLE 3-2 SBIR/STTR Outreach Activities

SOURCE: Based on the committee’s discussions with NIH institute/center SBIR/STTR program staff and may not reflect all outreach activities conducted by ICs. 63

High-touch internal outreach includes the use of email, phone calls, and virtual online tools (e.g., Zoom) to interact with potential applicants. In addition, the main NIH SBIR/STTR website encourages applicants to talk to program managers: “Applicants should speak with an HHS SBIR/STTR program manager BEFORE submitting an application. Program managers discuss the IC interest in the proposed technology and can offer application-specific advice.”¹⁹ The committee’s discussions with program managers revealed that a significant amount of time is spent talking to applicants. The discussions focus on teaching applicants about SBIR/STTR requirements; learning about their ideas; providing guidance on the fit for the IC; and pointing them to other program managers or ICs if their ideas align better with another IC’s mission. Program managers noted that applicants who do not talk to them through the application process tend to be less successful. The demands placed on SBIR/STTR program managers by these activities leave little time and few resources for a more strategic approach to outreach to new applicants, especially those in underserved communities. Many SBIR/STTR program managers in the ICs deal with grants and contracts for R&D other than those of the SBIR and STTR programs. Even among ICs that have centralized their SBIR/STTR portfolios, program managers appear to devote the bulk of their time to working with current applicants, leaving little time for outreach to new applicants.

Additional internal high-touch outreach activities include conducting webinars (NIA, NINDS), working with the NIH SEED Office to extend an IC’s geographic reach (NIBIB), and holding office hours to discuss ideas and answer questions. Office hours—generally lasting about an hour—are used to answer questions about the Applicant Assistance Program (AAP) (described below) and when the SBIR application deadlines are approaching. For example, one IC (NHLBI) uses this mechanism to bring together an SBIR program manager and experts on regulatory affairs and business development to take calls and answer questions about the program’s application process.

External outreach includes such high-touch activities as attending and speaking at scientific conferences about the NIH SBIR/STTR programs; having an NIH SBIR/STTR booth at conferences to meet potential applicants; and partnering with local incubators, local biotechnology innovation associations, and key cancer centers (NCI). In addition, program managers often present at meetings or institutions when invited. The following are promising examples of external outreach activities carried out by one or two ICs:

• NIGMS sponsors the Science Education Partnership Award (SEPA)²⁰ program to fund prekindergarten to grade 12 (P–12) science, technology, engineering, and mathematics (STEM) and informal science education projects. The program provides $2 billion in grants with the ultimate goal of supporting the

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¹⁹https://sbir.nih.gov/funding.

²⁰https://nihsepa.org.

• development of a diverse biomedical, behavioral, and clinical research workforce and teaching young people about NIH research programs, such as the SBIR/STTR programs. Since 2019, the program has awarded funds to 129 projects, with 27 of them under the SBIR/STTR programs. The awards range from $150,000 to $750,000, as waivers allow NIH to exceed the $250,000 cap.²¹ Since its inception, the SBIR/STTR-funded companies accounted for $9.6 million of the $30.4 million provided to all SEPA awardees.²²
• NIEHS SBIR/STTR program managers conduct town hall meetings so that applicants can gain an understanding of specific topics. A recent town hall meeting, for example, was on the “Development of New Approach Methodologies to Reduce Animal Use in Toxicity Testing.” The town hall brought together speakers from NIEHS, the FDA, and the Environmental Protection Agency.²³

Some initiatives are designed to take a more systematic approach to outreach; an example is the AAP, described below. In addition, one IC issued a targeted solicitation using non-SBIR/STTR funds to create an Entrepreneurship Program, with the goal of developing and implementing an integrated curriculum in entrepreneurship, innovation, and product development targeting academic bench life scientists.²⁴ Although not done systematically, other program managers stay in touch with university professors and postdoctoral fellows because their research is of interest to the IC, and the IC wants to encourage them to apply for SBIR/STTR grants. These initiatives, in combination with the AAP program, have the potential to reduce the amount of time program managers spend navigating applicants through the application process, allowing them to focus on a strategic outreach approach to improve and diversify the applicant pipeline.

Outreach to Improve and Diversify the Applicant Pipeline

Efforts to increase the diversity of awardees at NIH do not appear to have been successful, and there appears to be little systematic centralized outreach to potential NIH SBIR/STTR program applicants in underserved communities, including woman-owned small business owners, socially and economically disadvantaged small business owners, and small businesses in historically underutilized business zones. Outreach to potential SBIR/STTR applicants relies on individual IC program managers’ initiative and engagement.

As discussed in detail in Chapter 4, since 2012, the percentage of woman-owned small businesses receiving an SBIR or STTR has remained steady,

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²¹https://www.nigms.nih.gov/Research/DRCB/Pages/DRCB-SEPA-Interactive-Portfolio-Dashboard.aspx?awardsby=subprogram&subprgm=SEPA%20-%20SBIR/STTR.

²²https://www.nigms.nih.gov/Research/DRCB/Pages/DRCB-SEPA-Interactive-Portfolio-Dashboard.aspx (accessed November 20, 2021).

²³https://www.niehs.nih.gov/research/supported/translational/sbir/townhall/index.cfm.

²⁴https://grants.nih.gov/grants/guide/rfa-files/RFA-DA-17-007.html.

while the percentage of socially and economically disadvantaged firms receiving an award has increased only slightly. This lack of change is surprising given the NIH initiatives to fund more awardees from underrepresented groups described in the Ginther et al. (2011) article.²⁵

Variation Across ICs

Program managers appear to spend much of their outreach effort working one-on-one with applicants, yet they do not plan systematically and creatively to reach out to specific groups, especially underrepresented groups. During discussions with committee members, many IC program managers mentioned NIH-wide diversity and inclusion efforts or delegation for responsibility for reaching underserved communities to NIH as a whole. Some program managers had made efforts to direct their outreach to underrepresented populations, while others appeared unaware of or did not see the need to reach out to these groups.

The NIH and IC SBIR/STTR websites do not present a consistent outreach approach to underrepresented groups. Seven of the websites mention diversity, followed by a link to the NIH Women-Owned and Socially and Economically Disadvantaged Businesses webpage²⁶ for more information. The remaining websites do not mention diversity outreach:

• The NIH and NCI website statements are identical: “Our goal is to diversify the SBIR community by engaging and supporting unique demographics. Resources range from application assistance to grant supplements to hire women and minorities.”
• The National Institute on Aging (NIA) highlights its research needs related to Alzheimer’s disease and dementia, followed by a statement stating, “We strongly encourage proposals from applicants who represent women-owned and/or socially and economically disadvantaged small businesses.”
• The National Institute of Child Health and Human Development (NICHD) and NIBIB each state that one of their program goals is to “foster and encourage participation in innovation and entrepreneurship by socially and economically disadvantaged persons.”
• The National Institute of Nursing Research (NINR) talks about diversity in the “How to Apply” section: “One of the goals of the SBIR and STTR programs is to encourage participation in innovation and entrepreneurship by socially and economically disadvantaged small businesses (SDB) and women-owned small

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²⁵ The authors did find that proposals with excellent priority scores were equally likely to be funded regardless of race.

²⁶https://sbir.nih.gov/about/women-owned.

• businesses (WOSB).” This is followed by a link to the NIH Women-Owned and Socially and Economically Disadvantaged Businesses webpage for more information.
• The National Institute of Diabetes and Digestive Kidney Diseases (NIDDK) does not have a statement but provides a link to “Women’s Business Centers” in its section for regional, state, and local resources.

One IC has a systematic approach for reaching out to underserved populations, having created a team with each member assigned to a different facet of outreach. The regulatory affairs manager partners with Golden Seeds,²⁷ a group of investors that seeks to fund high-potential, woman-led businesses and other women-focused groups. Two SBIR/STTR program managers conduct outreach to historically Black colleges and universities (HBCUs). The business development manager focuses primarily on investor events oriented toward minorities. They also attend conferences, such as the Life Science Women’s Conference and the Conference of Women in Bio, working with the conference organizers to speak or conduct a webinar. Yet while this approach is relatively systematic, it is relatively labor intensive, and staffing such outreach may be problematic.

One promising avenue for reducing program managers’ time spent helping applicants with the proposal process is the Applicant Assistance Program (AAP), created by NCI, NHLBI, and the National Institute of Neurological Disorders and Stroke (NINDS). These ICs created the program to help small businesses apply for Phase I SBIR/STTR funding, and 10 ICs are currently participating (NCI, NHLBI, NINDS, NIA, the National Center for Advancing Translational Sciences [NCATS], the National Institute of Environmental Health Sciences [NIEHS], the National Center for Complementary and Integrative Health [NCCIH], NINR, NICHD, and the National Institute on Alcohol Abuse and Alcoholism [NIAAA]).²⁸ AAP is a 10-week coaching program designed to help applicants develop their proposals. NCI contracts with Eva Garland Consulting to implement the program at no cost to the applicants. Applicants submit a questionnaire to compete for a spot in the cohort. The program is offered once each standard funding period (i.e., three times a year).

One of the goals of the AAP is to increase participation in the SBIR/STTR programs by businesses owned or controlled by individuals who are traditionally underrepresented in the biomedical sciences. The program is open to any applicant who has not received an NIH SBIR or STTR award in the last 10 years. The program offers a mechanism for new applicants to learn about the programs and provides feedback on applicants’ proposals and budgets. The participating companies can receive a needs assessment, small business mentoring, support for preparation of their Phase I application, application review,

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²⁷https://goldenseeds.com/who-we-are.

²⁸https://sbir.cancer.gov/programseducation/aap.

and support and guidance throughout the process.²⁹ The program started in 2018 and now trains up to 40 companies per cohort.³⁰ In addition, the participating ICs highlight the AAP when meeting with groups in IDeA states or Hispanic-serving institutions and HBCUs.

Few IC program managers mentioned the Diversity Supplement Program,³¹ which provides administrative or research funds for recruiting and supporting students, postdoctoral fellows, and eligible investigators from underrepresented groups in health-related research or the SBIR/STTR programs. This supplement opportunity is also available to PIs of research grants who have or acquire disabilities and need additional support to accommodate their disability in order to work on the research project. Administrative supplements must support work within the scope of the original project.

Progress Since Earlier Policy Recommendations

The committee discussed a number of diversity and inclusion initiatives recommended in the 2014 SBA SBIR/STTR Interagency Task Force Report³² to improve outreach to socially disadvantaged groups and underserved areas. That report defined underserved areas as the 27 states/federal districts/territories with the lowest rates of success in the SBIR/STTR programs.³³ The committee found that NIH has made progress on some of these initiatives, and as listed in Table 3-3, many of them have been implemented. However, they were not mentioned in any discussions with program managers about expanding outreach to woman- and minority-owned firms.

The committee finds that more could be done to overcome barriers to minority and women applicants to the SBIR and STTR programs, and to link NIH-wide diversity and inclusion measures to NIH’s SBIR/STTR programs. Evidence suggests that programs that provide mentoring of applicants, including by expanding the existing AAP, could be particularly helpful at increasing the diversity of both the applicant and awardee pools (Dworkin, et al., 2012; Shavers et al., 2005). In addition, a recent workshop on improving diversity in the SBIR/STTR programs highlighted the potential to improve outreach to disadvantaged groups by partnering with existing networks that serve these populations, such as the Society of Women Entrepreneurs, the Society of Women

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²⁹https://sbir.cancer.gov/programseducation/aap.

³⁰ There were two pilot rounds of the AAP in 2018 (run by Dawnbreaker) and 2019 (run by Eva Garland Consulting). NIH then initiated the current 5-year AAP, starting in September 2019.

³¹ Administrative Supplements to Promote Diversity in Research and Development Small Businesses-SBIR/STTR (Admin Supp Clinical Trial Not Allowed), https://grants.nih.gov/grants/guide/pafiles/PA-18-837.html; Research Supplements to Promote Diversity in Health-Related Research (Admin Supp) https://grants.nih.gov/grants/guide/pa-files/PA-16-288.html.

³² Small Business Administration, SBIR/STTR Interagency Policy Committee Report to Congress: Outreach, 2014.

³³ 2014 SBA SBIR/STTR Interagency Task Force Report.

TABLE 3-3 Diversity and Inclusion Initiatives Suggested by 2014 SBIR/STTR Interagency Policy Committee: Related Initiatives Mentioned by IC Program Staff

NOTE: IC = institute/center.

SOURCE: Based on Small Business Administration, SBIR/STTR Interagency Policy Committee Report to Congress: Outreach, 2014, and committee discussions with NIH IC SBIR/STTR program staff and may not reflect all initiatives conducted by ICs.

Engineers, the Society of Hispanic Professional Engineers, and other local and regional small business development centers (NASEM, 2015).

NIH SBIR/STTR Awards Process

NIH’s complex multistage process for reviewing SBIR/STTR grant applications and making funding decisions reflects the agency’s complex organization. Although many aspects of the process function similarly to and are run in parallel with NIH’s research grants processes, the specialized commercialization knowledge required to evaluate the merit of SBIR and STTR applications may necessitate additional expertise and steps. At the same time, a two-stage review, first through CSR and then through each IC’s advisory council or board, adds time to the selection process, which may inhibit or discourage potential biotech innovators from applying to the SBIR or STTR program. This

section details NIH’s two-stage review and other procedures for selecting from among SBIR/STTR grant applications received through omnibus solicitations (see Figure 3-2), which account for roughly 85 percent of the grants administered through the two programs.

First Level of Review: CSR Review and Scoring

As illustrated in Figure 3-2, once CSR has received grant applications from the Division of Receipt and Referral, it assigns each application to one of the five CSR divisions. The directors of each CSR division then further assign each application to an Internal Review Group (IRG) and then to a specific scientific review officer (SRO) within that group, who is tasked with assembling a review panel. To that end, the SRO identifies and recruits panelists with relevant expertise, a process that typically takes a few weeks and differs from the recruitment of panelists for R01 grants in that at least some reviewers are expected to have relevant business expertise or experience. Unlike reviewers for R01 grants, who have incentives to foster strong relationships with NIH, reviewers with the commercialization expertise needed to review for applications for the SBIR and STTR programs may not have a relationship with NIH and may have few incentives to review outside of a desire for public service.³⁴ Although SROs are embedded in relevant scientific networks, they are less likely to be embedded in the entrepreneurial ecosystem and may have limited networks through which to identify and recruit new reviewers with relevant business expertise. In a sample of rosters for review panels evaluating SBIR and STTR applications, the majority of reviewers were white, male, and from academic institutions.³⁵

Once reviewers have been given the applications they are asked to review, they have 4–5 weeks in which to complete their review before the review panel convenes to discuss and score applications. For each application, three reviewers are designated as assigned reviewers (each reviewer in a given panel will perform this function for different applications). The primary reviewers score

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³⁴ It was difficult for the committee to obtain copies of study rosters because only the last 3 cycles are maintained on the CSR website. Using the Wayback Machine, the committee analyzed available rosters from 2004 to 2012 and found that the vast majority (73 percent) of SBIR and STTR reviewers were academic scholars.

³⁵ These are committee calculations based on rosters available on the Wayback Machine, which reflect review panels for just over half of the applications in the 2004–2012 time period. The committee used genderize.io (https://genderize.io) to predict the reviewer’s gender based on their first name, and ethnicolr (https://ethnicolr.readthedocs.io/ethnicolr.html#) to estimate race and ethnicity. Using the available rosters, the committee calculated that the average review panel was composed primarily of male reviewers (75 percent). In addition, the committee found that 75 percent of reviewers were white, 3 percent were Hispanic, and 16 percent were Asian. Data for Black scientists are not reported because of the unreliability of the algorithm in identifying African American or Black scientists. Data from CSR indicates that the majority of reviewers in 2021 are white, male, and from academic institutions, although these data are not broken down to distinguish SBIR/STTR study sections from others. https://public.csr.nih.gov/AboutCSR/Evaluations.

the application, and the average score is calculated. The priority scores awarded range from 10 to 90, with 90 being the worst. The top applications are discussed with the entire panel and given priority scores, while the bottom are typically not; however, each reviewer can make a case for including any proposal among those discussed. In discussing each application, and in subsequent scoring, five criteria are applied: significance, investigator(s), innovation, approach, and environment. According to the NIH SBIR/STTR website, the questions listed in Box 3-1 are used to determine scores for each of those criteria.

Notably, these are the same five criteria used for evaluating NIH’s R01 grant applications. NIH’s current system for reviewing SBIR and STTR applications is based on its system for evaluating R01s and is heavily focused on the science behind the proposals.³⁶ This is the case because NIH classifies SBIR and STTR applications as research grant applications based on the SBA SBIR/STTR Policy Directive.³⁷ Peer review criteria for all of NIH’s research grant applications and R&D contract projects are dictated by Section 492 of the Public Health Service Act³⁸ and the federal regulations promulgated under this act. NIH’s classification of SBIR/STTR grants as research grants may not be appropriate for these programs, in which the applicants are small business owners rather than academic researchers.

As discussed in Chapter 2, the goals of the SBIR and STTR programs include increasing private-sector commercialization of innovations derived from federal R&D funding. The skills needed to translate research into products and to commercialize those products are different from the skills needed for research. NIH’s use of the same criteria (and similar reviewers) for review of SBIR/STTR and R01 applications means that little attention is paid to the commercial impact of an SBIR/STTR project. No additional criteria related to commercialization or market are scored in the review process, except to the extent that a commercialization plan is to be considered in the review process for Phase II applications.

After the panel of reviewers has met, CSR sends the applicant and IC the summary statement as input for the selection process. Applications that are

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³⁶ The five review criteria are the same and the questions posed under those criteria are similar for SBIR/STTR applications as for R01 applications. Under the “Significance” criterion, reviewers of SBIR/STTR applications are asked the following additional question: “Does the proposed project have commercial potential to lead to a marketable product, process or service? (In the case of Phase II, Fast-Track, and Phase II Competing Renewals, does the Commercialization Plan demonstrate a high probability of commercialization?)” See Box 3-1.

³⁷ After providing the prepublication version of the report to NIH, this paragraph was edited to clarify the legislative authorities governing the classification of SBIR and STTR grants. The SBA SBIR/STTR Policy Directive states that “The statutory purpose of the SBIR program is to strengthen the role of innovative SBCs [small business concerns] in Federally-funded research or research and development (R/R&D).” At the same time, the Policy Directive notes that the specific program purposes include increasing private sector commercialization of innovations derived from federal R/R&D. SBIR/STTR Policy Directive, Section 1(c) (SBA, 2020).

³⁸ 42 USC Section 289a.

discussed receive a priority score, and information on the three individual primary reviewer scores is provided for those applications not discussed.

Second Level of Review: IC Advisory Council Review

Once the ICs have received the scores and reviewer comments for the applications reviewed, their advisory council or boards review the applications, and the IC director makes the final funding decisions. The ICs appear to use the information provided by the CSR priority scores in a wide variety of ways. It is the committee’s observation, based on discussions with program managers, that the ICs appear to use one of three approaches in making funding decisions, which the committee is calling payline, payline+, and internal review, while noting that variations in approaches are, in fact, on a continuum and may vary within an IC based on topic, program, or phase. High-level traits of these funding approaches are laid out in Table 3-4 and described in further detail below.

Payline Decisions

In ICs that use a payline approach, funding decisions are made by funding the lowest-scoring proposals (recall that lower scores are better), typically in order or near order, until the budget for that cycle or fiscal year has been met, whether or not the IC has a pre-established payline. A payline is defined as the score above which an application will not be considered for funding. In many cases, there is no hard cutoff for considering applications for funding; rather, applications with scores within a “zone of consideration”—a narrow band of scores—are considered. ICs’ reliance on the CSR priority scores to determine

TABLE 3-4 IC Approaches to Making Funding Decisions

NOTE: This typology is based on the committee’s discussions with NIH institute/center SBIR/STTR program staff. IC = institute/center; PI = principal investigator.

application quality is often due to resource constraints. Using a payline approach does not mean that the applications and reviewer comments are not read and considered, but that the priority score is considered a strong indicator of application quality on which funding discussions are centered. The paylines are not all published on NIH websites, but were found from a non-NIH source: in 2019, NCI reported a payline of 29 (28),³⁹ NIAID reported a payline of 34 (34), NHLBI reported a range of 10 to 40 for both SBIR and STTR (29 for SBIR Phase I), and NIAMS reported a payline of 30 (29) for SBIR (or STTR) awards.⁴⁰ As discussed below, ICs without a payline indicated that they do not rely strictly on scores and/or do not have an official payline. Some ICs said they would fund projects with higher scores that were important for meeting their mission.

Payline+ Funding Decisions

In ICs that utilize a payline+ approach to funding decisions, lower-scoring applications are considered first, providing a rough payline or zone of consideration. However, applications above the payline are also examined in making funding decisions. As with the payline decision process, the payline+ process is anchored in the priority scores, but is adapted to meet the needs of the IC to ensure that the applications that best meet those needs receive funding.

Professional judgment is factored in through two primary mechanisms. First is an effort to reconcile priority scores that vary across reviews. Many program managers mentioned variation in the scores of different reviewers and review sections and indicated that they considered this variation when making funding decisions, taking into account when there are differences across reviewers.

Second, some ICs read the reviews provided by the review sections with an eye to whether a PI might be able to address the concerns raised. In some cases, they reach out to the PIs asking them how they might address reviewer concerns and then factor in this response when making funding decisions.

Although there is considerable variation in the size of ICs that use the payline+ approach, program managers from a few smaller ICs mentioned that they may not receive many applications or may not have many that are discussed. Thus they needed to look at applications with higher priority scores to find good proposals to fund.

Internal Review Decisions

ICs that use an internal review approach to making funding decisions may use priority scores as one factor in their decision process, but they often conduct extensive additional review and due diligence before making award decisions. Additional review allows ICs to focus on aspects of applications not

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³⁹ During discussions with program managers, NCI reported that they don’t adhere strictly to paylines.

⁴⁰https://grantengine.com/sbir-sttr-paylines-by-nih-institute.

evaluated or captured in the CSR review, such as commercial potential, novelty of technology, and fit with the IC’s overall grant portfolio.

In explaining the need for additional review within the IC, some program managers expressed skepticism about reviews and reviewers from CSR adequately assessing commercial potential, while conversely emphasizing their ability to assess science.

Like the payline+ decision process, the internal review approach explicitly recognizes variability across reviewers and review sections. Conducting additional review allows ICs to ensure that the strongest applications are funded even when they believe reviewers have not adequately recognized their potential. It may be that reviewers are hesitant to give scores of 10 or 20 so these applicants are likely to be very good; however, applications scoring in the 30–50 range are more difficult to distinguish based solely on score. Internal review allows ICs to fund applications they view as likely to be overlooked or not well understood (in terms of commercial prospects) during the CSR review process.

The internal review process also allows program managers to draw on the expertise of their staff, whom they view as having a better view of the trajectory of the field than that of reviewers. IC staff can also help identify funding opportunities that fill gaps in the IC’s portfolio and collect additional information needed to analyze commercial potential. These additional insights can then be used along with the priority scores to make funding decisions. Some program managers felt that the applications for technology development rarely score well.

Less Common Decision Processes

During discussions with program managers other, infrequently used selection processes were also mentioned. The first was off-cycle funding of grants, where an IC holds promising applications between cycles in case the grants in the next cycle are weaker. A potential benefit of this approach is that it may result in funding a promising application, but a downside is that the firm does not get a funding decision for a long time. In some cases, a motivation for this approach is a relatively small budget and the desire to ensure that stronger applications get funded, even if they are submitted later in the year.

A second less common practice is the transfer of grant applications between ICs, which might occur when an IC receives a promising application it is unable to fund. For example, the program manager of a smaller IC may reach out to their counterpart at another IC, typically one with a larger SBIR/STTR budget and with overlapping interests, and ask that this IC fund the application.

Differences between SBIR and STTR Applications

Other than legislatively required differences between SBIR and STTR applicants, most IC SBIR/STTR program managers indicated that they do not differentiate between SBIR and STTR applications, and that the total number of awards was simply determined by the budget. One program manager noted that

their IC had difficulty attracting STTR applicants, while another said that because the pool of funds for SBIR was so much larger than that for STTR, their IC encouraged some STTR applicants to apply for an SBIR award.

Timeliness of NIH’s SBIR/STTR Selection Processes

While a core competency of NIH is the ability of its staff and reviewers to understand the state of the art of biomedical science, as well as its trajectories, the timeliness of the selection process described above may not be adequate for many biotech startups. The endorsement represented by the receipt of NIH funding is an important and unique signal for young firms that their work has scientific and technical novelty. But it may be possible for this core competency to be better connected to the commercial prospects of young firms. Many, if not most, private investors in small firms lack the ability to assess the scientific and technical development of such firms. They do however, have expertise in assessing the potential fit between a firm’s products and potential customers and the potential size of the market, and in helping firms to professionalize and grow. There may be changes to NIH’s SBIR and STTR programs that would help bridge the gap between its core competencies and the investors that will be needed by the majority of biomedical firms to bring their products to market.

Overall, the NIH SBIR/STTR process, from application to funding, averages about 9 months, although a number of applications take much longer than that to make it through the review, selection, and funding steps in the process. The Government Accountability Office (GAO) data indicate that the NIH’s mean award notification time is 201 days and mean award issuance time is 263 days (see Table 3-5). While these time frames are within the statutory requirements of 12 months to notification and 15 months until issuance, they are much longer than those of most other agencies. And although the bulk of awardees are notified within 9 months, a large number of applicants have not been notified a year after the solicitation closed or have not received funding 15–18 months after the solicitation closed (see Table 3-6).

NIH’s lengthier time frames are out of alignment with the needs of newer small businesses focused on innovation that lack the resources of more established firms. Access to financing is an important component of the growth of small business (Bernanke, 2010), and shorter time frames for selection and funding may have a positive impact on a firm’s employment and growth (Barrot and Nanda, 2020). Congress has noted the need for more timely selection and award processes in some agencies. For example, the John McCain National Defense Authorization Act for FY 2019 requires the Department of Defense to establish a pilot program aimed at reducing the time for SBIR and STTR awards.⁴¹ Congress could call for NIH to establish such a pilot program. NIH could choose how best to implement such a pilot, but initiatives at other agencies may offer some ideas for accelerating

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⁴¹ P.L. 115-232 Section 854(b).

TABLE 3-5 Number of SBIR/STTR Awards and Mean Times to Award Notification and Issuance, by Agency (fiscal years 2016–2018)

SOURCE: GAO, 2019, pp. 9–10 (Table 2) and 15–16 (Table 4).

^a Table 2 in the Government Accountability Office (GAO) report reports this figure as 6,224.

^b Table 2 in the GAO report reports this figure as 46.

TABLE 3-6 Distribution of NIH SBIR/STTR Award Notification and Issuance by Number of Months (fiscal years 2016–2018)

SOURCE: GAO, 2019, p. 43.

the selection processes. For example, NSF requires applicants to submit a Project Pitch before filing a Phase I application, which allows small businesses to receive quick feedback on whether their proposals are a good fit for the program. Similarly, the Department of Energy requires Phase I applicants to file a Letter of Intent. In both of these cases, the agencies get a better sense of which reviewers will be needed before the application cycle closes, which may help speed up the review process.

Adequacy of Review Criteria and Staff and Reviewer Expertise

It would be appropriate for the criteria for evaluating applications for the SBIR/STTR programs to be different from the criteria used for other extramural research awards, and IC missions might be better served by allowing greater flexibility in the selection process. Changing the review criteria would allow the selection process to consider the commercialization potential of applications more explicitly, and except for those relatively rare cases in which an IC uses a PAR, the CSR review does not appear to address IC needs and priorities. As described in detail in Chapter 5, the SBIR/STTR awards provide a signal of scientific validation, but if they are to achieve their congressional objectives, review criteria and expertise for selection decisions need to address the translation of science into marketable products and services.

As discussed earlier in this chapter, the evaluation of NIH SBIR/STTR applications is carried out in accordance with Section 492 of the Public Health Service Act⁴² and the federal regulations promulgated under this act pertaining to research grant applications and R&D contract projects. This is the case because NIH has classified SBIR and STTR grants as research grants rather than small business innovation or commercialization grants. As a result, the review criteria applied to SBIR/STTR applications are identical to those applied to R01 applications as part of the two-tiered review process and scoring process described here. If the NIH director were to reclassify SBIR and STTR awards as something other than pure research grants, the ICs would have more flexibility in the criteria and processes used to evaluate these applications in a manner better suited to their role in the biotech innovation system. Alternatively, if NIH determines that the director does not have the authority to make this reclassification, Congress could consider waiving the peer review criteria laid out in the Public Service Health Act for SBIR and STTR applications.⁴³ Such flexibility could allow ICs that are able to conduct internal reviews of SBIR/STTR applications to opt out of CSR scoring, or it could allow NIH to change the criteria for selection used by both the ICs and CSR. Some researchers have found that selection decisions may be affected by the sequence in which they are undertaken, and this may be another reason to be

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⁴² 42 USC Section 289a.

⁴³ After a prepublication version of the report was provided to NIH, this sentence was moved from a footnote to the body of the text to emphasize that there is a legislative alternative to NIH’s reclassifying the SBIR/STTR grants. Similar language was added to Recommendation 3-5.

concerned about the effects of the current two-stage process (Criscuolo et al., 2021).

The expertise on review panels used by CSR may not be sufficient to meet the statutory purpose of the program with respect to increasing private-sector commercialization of innovations derived from federal R&D. In addition to addressing this issue, increasing the number of SBIR/STTR program managers with biotech startup or industry experience might help ICs better evaluate the commercial potential of applications. It is also important for both reviewers and staff to understand the needs and readiness steps for product development; quality systems; regulatory requirements; critical manufacturing; and the packaging, delivery, and storage of a clinical product, all of which must be addressed ahead of a product’s commercialization. Important as well is for reviewers and staff to understand the needs of small businesses, which differ from those of larger companies. For example, small businesses often require different implementation paths from those of larger corporate entities, such as virtual collaboration and outsourcing.

As shown in this chapter, NIH SBIR/STTR program staff and reviewers of SBIR and STTR applications tend to lack small business or startup experience. To attract program managers and scientific reviewers with relevant experience, the NIH director might wish to introduce rotating of SBIR/STTR program managers, similar to NSF’s use of temporary workers under the Intergovernmental Personnel Act or Visiting Scientist, Engineer, and Educator programs.

NIH SBIR/STTR Postaward Process

Many of NIH’s SBIR/STTR postaward programs originated in NCI and have been adopted by many other ICs over the past 20 years as they have recognized the need of small businesses for access to business resources and networks in order to advance their innovations toward commercialization. Today, along with NHLBI, NCI continues to be at the forefront of initiating programming for postaward SBIR/STTR programs. However, access to and engagement and interest in the commercialization programs vary widely across the ICs, reflecting individual IC resources and management interests.

Postaward Programs of ICs

The committee reviewed the postaward programs offered by ICs and characterized them as providing either assistance in business development or mentoring/networking. Table 3-7 provides an overview of many of the programs offered. Business development programs focus on developing markets and partnerships, and are provided through outside contractors. Mentorship and networking programs are highly curated programs with personalized coaching and mentorship, often provided by NIH staff. Both types of programs may provide

TABLE 3-7 Postaward Commercialization Programs

SOURCE: Based on NIH IC websites and committee discussions with IC SBIR/STTR program staff.

small amounts of funding to awardees and vary with respect to application processes and selectivity. The programs generally follow the traditional venture market–driven model, as opposed to exploring broader and innovative market paths for products with negligible markets but potentially high clinical impact.

While the general objective of these programs is to provide business training and networking resources for awardees, including, for example, regulatory mentorship, marketing support, access to an Entrepreneur in Residence, networking events, and consulting services, the programs are highly heterogeneous. The outreach, application, review, and selection processes differ from program to program and often across ICs. For instance, although I-Corps applications are submitted as an administrative supplement to a Phase I application, they are reviewed separately by IC staff. Applications for some of these mentoring/networking programs are submitted through the IC website and reviewed by program managers in consultation with industry experts. Similarly, applications to participate in such programs as CEO roundtables and Connecting Awardees with Regulatory Experts (CARE) are often submitted by email and reviewed by the IC program managers. Most of the IC program managers conduct outreach for potential applicants to these programs through direct contact. The mentoring/networking programs involve highly personalized processes, administrative interactions, and specialized domain expertise that deviates from NIH’s core capabilities. Therefore, only large ICs, such as NCI, that have sufficient resources to staff the programs can offer these services. NCI opens some of its programs to all ICs, but space is limited, and the focus is not always tailored to the needs of other ICs.

While federal agencies had previously been allowed to use some of their SBIR and STTR allocations to enable applicants to obtain technical assistance from external vendors, the John McCain National Defense Authorization Act for FY 2019 increased the amount of money available for this purpose and expanded use of the funding to include business assistance to awardees, such as assistance with product sales, intellectual property protection, market research, market validation, and development of regulatory and manufacturing plans.⁴⁴ This additional money for awardees is known as Technical and Business Assistance (TABA) funding.

Before TABA funding was available, many federal agencies provided this assistance to SBIR/STTR awardees through a number of vendors, such as Larta Institute, Dawnbreaker, and others. As before TABA, awardees can choose whether to use the agency’s provided vendor for services or request funding for use with their preferred vendor. In the latter case, the awardee must provide the name of the vendor, the services the vendor will provide, and a budget for the services when they submit their Phase I or II application. Phase I applicants can request up to $6,500 per year for TABA assistance, and Phase II applicants can

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⁴⁴ P.L. 115-232 Section 854(c)—August 13, 2018.

request up to $50,000 per award for TABA assistance.⁴⁵ According to the SEED Office website, for some ICs, these TABA funds may be in addition to the maximum award amount for a particular IC. For other ICs, no additional funding beyond the IC’s maximum Phase I or II award ceiling will be provided to cover TABA.

In 2020, NIH selected Vikriti Management Consulting as its vendor to provide TABA needs assessments for any Phase I or II awardee that has not requested TABA funding for its own vendor.⁴⁶ This TABA needs assessment replaces the Niche Assessment Program and the Commercialization Accelerator Program (CAP). The SEED Office website mentions that a new program, TABA Consulting Services, will also be available for Phase II and IIB awardees, but no information about that program was available at the time of this writing.

In addition to TABA, many ICs offer programs to aid product development after a Phase II award has been made. The most widely used of these programs are Phase IIB and the Commercial Readiness Pilot (CRP) program. These programs are multiyear awards often with sizable funding of at least $1 million per year. The programs are peer reviewed and may be part of the thrice yearly omnibus solicitations or RFAs. They are generally used to advance preclinical or clinical studies to an inflection point in value creation for potential partnerships or venture funding. Many awardees have acknowledged these programs as important to their company’s ability to obtain FDA approval.⁴⁷

The application, review, and selection processes for these programs follow the same merit process as that for the Phase I and II awards. Applications are limited to SBIR/STTR Phase II awards that ended not more than 36 months prior. In general, applications are accepted through the omnibus solicitation or specific funding opportunities. Most applications are reviewed in CSR review sections with academic and industry reviewers at a ratio of about 2:1.⁴⁸ During the committee’s interviews with program managers, some interviewees indicated that they expected the awardees to be alert to the solicitation calls instead of having to engage with them proactively to steer them to these opportunities.

There is less heterogeneity across NIH in the processes for these product development programs than is the case for other postaward programs offered by the ICs. However, some ICs do not offer Phase IIB, and other ICs (e.g., NCI, NINDS, and NHLBI) offer Phase IIB-specific RFAs.

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⁴⁵ Prior to P.L. 115-232, technical assistance was limited to $5,000/year for both Phase I and II awardees.

⁴⁶ See https://content.govdelivery.com/accounts/USNIHOER/bulletins/2cb9a8c. Vikriti received a contract for $11.5 million to provide TABA needs assessment consulting services for 5 years. https://www.fedhealthit.com/2020/10/nih-nichd-awards-11m-sbir-sttr-needs-assessment-consultingservices-contract.

⁴⁷https://sbir.cancer.gov/about/phase2bridgeawardees.

⁴⁸ Although the available data was limited, the committee found that the ratio of academic to industry reviewers was 3:1.

Awareness of Postaward Programs across NIH

Awareness of and access to the postaward programs discussed above remain limited. Conversations with SBIR/STTR program managers across ICs indicated that while most ICs are aware that NIH offers business development and networking programs, few are familiar enough with those programs to recommend or actively participate in them. During the interviews, for example, program managers from 11 ICs reported that their IC does not participate in the CRP program, and few appeared to be familiar with the training/networking programs as a whole. Some program managers expressed confusion about the role of the NCI or SEED Office programs.

There are many reasons for this lack of engagement, but two potential reasons stand out. First, the number and variety of the programs, combined with their short life cycle, confuse both IC program managers and awardees. It is difficult for program managers to keep track of all of the programs or to understand their value. Second, implementing and explaining the programs to potential applicants is time-intensive, making it very difficult for smaller ICs to participate.

The product development programs (Phase IIB, Phase IIB Bridge, and CRP), with their benefits and impact in advancing commercialization, mainly through clinical studies, are easier for program managers to implement given their commonalities with the Phase I and II awards. To a large extent, these programs are considered a success, having supported many projects in moving toward clinical validation.

Conversely, the impact of the training/networking programs is not clear. The success metrics offered by the programs are too general to be meaningful; they are reported as an aggregate number, such as deals made or money raised, but it is difficult to validate their individual impact. For example, one program claimed that it had resulted in more than $1 billion in fundraising and 10 IPOs⁴⁹ across awardees. Furthermore, it is difficult to assess the unique benefits of the NIH training programs compared with the many other high-quality programs readily accessible to the awardees in their local communities.

The heterogeneity across ICs with respect to these post-award programs presents a complex set of options for awardees and often duplicates established resources in the national innovation ecosystem, such as biotech incubators and accelerators. The national biotechnology and medical technology ecosystems have evolved over the past 20 years; almost every research university and state government has developed sophisticated biomedical hubs and accelerators as part of its economic development strategy. These hubs provide not only space but also robust training programs and networks for entrepreneurs.⁵⁰ Many private accelerators, such as BioLabs and J-Labs, franchised in multiple regions in the

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⁴⁹https://sbir.nih.gov/cap.

⁵⁰https://sbir.nih.gov/resources/lifescience-state-contacts and https://www.genengnews.com/a-lists/65-u-s-biotech-and-pharma-incubators.

United States (and Europe), offer top-of-the-line training, resources, and networking for early-stage biotech and medtech firms.

In conclusion, the postaward commercialization programs offered by NIH SBIR/STTR programs are duplicative, fragmented within the agency, and not distinctive relative to programs provided by regional and local biotechnology incubators and accelerators. These programs can also be administratively expensive and misaligned with current capabilities within the ICs and may detract from the IC missions.

Reporting, Monitoring, and Evaluation

To determine whether the current outreach, selection, and postaward processes of the NIH SBIR/STTR programs are meeting their goals, ICs need to have an understanding of the long-term impact of the funding on the commercialization outcomes of the awardees. It is also important for NIH to understand how the processes used by the ICs affect the demographics of applicants and awardees. While the NIH RePORTER website does an excellent job of providing summary statistics on application and success rates for different demographic groups, there are no summary statistics on the use of such programs as the AAP or any of the postaward commercialization programs discussed in this chapter.

Phase I awardees use a comprehensive Research Performance Progress Report or Phase II application to describe their projects’ major goals, accomplishments, progress, impact, changes, and so on. SBIR/STTR Phase II awardees have an additional final reporting form that includes some specific information about the company, such as any name change, impact on public health, published and unpublished results, additional funding (e.g., angel, venture capital), clinical stage, intellectual property, number of employees, and enrollment data for clinical research. A final report is due 120 days after the end of the funding period; no other reports are required after that.

As discussed in Chapter 5, there is often a long lag between receipt of an SBIR/STTR award and commercialization outcomes. Long-term monitoring is critical to determine the impact of the funding and learn how to improve the efficiency of the programs in achieving their commercialization and demographic goals. At the same time, following firms after their final report has been submitted is challenging for program managers. The committee’s conversations with SBIR/STTR program managers revealed that fewer than half attempt to do so. The methods used by those who do vary significantly from IC to IC, reflecting their interests, resources, and personal connections. Of those that try to monitor long-term impacts, some hire external contractors, while others follow the firms informally during meetings. Many managers do some informal monitoring by calling past PIs or googling the companies when they have time. Only two ICs (NCI and NCATS) indicated that monitoring is a priority in their organizations. Both use a combination of methods to track awardees, including databases, personal interactions, and outsourcing of analysis and reporting.

Most IC program managers recognize the need for better monitoring, but few have the expertise or resources to meet that need; the administrative burden is too high for small and understaffed ICs. The SEED Office has a subscription to Global Data and Pitchbook, which is available to all ICs. However, few ICs mentioned using those resources. Global Data and Pitchbook data are also limiting. They provide company information but fail to follow individual innovations appropriately. Commercialization of biomedical products takes decades. Most often, both the companies and the innovations are acquired, undergo name changes, or receive additional rounds of funding, or the PIs leave, and none of these events are captured accurately in the existing databases. The variety of approaches to long-term monitoring across ICs also reflects the IC’s confusion regarding which indicators they should use.

Success Stories

Success stories inspire and serve as models for both potential applicants and the general public. They should also reaffirm the SBIR/STTR programs’ legislatively mandated mission and goals: contributions to technological innovation, fulfillment of federal R&D needs, participation in innovation and entrepreneurship by women and socially or economically disadvantaged persons, and contributions to the private-sector commercialization of innovations derived from federal R&D funding. For the STTR program, the mission also includes contributions to technology transfer through cooperative R&D between small businesses and research institutions.

SBIR/STTR success stories are displayed on the SEED Office and IC websites and were highlighted during the committee’s discussions with the program managers. The cited stories exhibit a balanced distribution of biomedical innovations: drugs, digital technologies, research tools, and medical devices. During the discussions, program managers mentioned different indicators for measuring success, reflecting the ICs’ priorities. The majority of the success stories mention reaching an “R&D milestone” as the most critical success metric, followed by “products in patients” and “commercial success” (see Annex 3-2). These success stories highlight the programs’ effectiveness in fulfilling their missions of stimulating technological innovation, increasing private-sector commercialization of innovations derived from federal R&D spending, and meeting NIH’s R&D needs to advance innovations in public health. On the other hand, the success stories miss the opportunity to highlight the broad public health benefits derived from SBIR/STTR-funded firms because of the strong focus on commercial milestones as a metric of success.

Few program managers cited advancing the public good (such as having a profound societal impact or serving neglected populations) or increasing participation of women or socially disadvantaged persons or partnerships as indicators of success. Among all 93 firms mentioned as success stories, 17 were founded by women, and only 11 were founded by underrepresented minorities.

The stories also lack geographic diversity, with 30 percent being located in California.

CONCLUDING THOUGHTS

While NIH accounts for among the largest SBIR/STTR programs within the federal government, its programs operate as a collection of smaller programs that vary in size from very large to very small. Each of the 24 ICs with SBIR/STTR programs has an individualized approach to conducting outreach (often with little to no focus on diversity), selecting awardees, and supporting those awardees, often leading to complexity and confusion for potential applicants.

One common factor across the ICs is a two-stage review—the first performed by the centralized CSR and the second by each IC’s advisory council or board. The end result is that the average time from application submittal to award issuance is far longer for NIH than for most other federal agencies. The recent reauthorization of the SBIR and STTR programs required the Department of Defense to pilot a program designed to shorten that department’s time to notification and issuance of SBIR and STTR awards. NIH would do well to design such a pilot program, which should also serve to make other program aspects, such as award size, duration, and budget, more uniform across the ICs. Such uniformity would be beneficial to both applicants and smaller ICs, which spend a great deal of time explaining the distinctive nuances of their programs. In addition to piloting of streamlined processes, NIH would benefit from reclassifying its SBIR and STTR programs to differentiate them from other extramural research grants so as to encourage commercialization.

Finally, while NIH spends a great deal of time and effort on networking, mentoring, and business development programs, the wide variety of such programs offered often results in duplication of existing biotech and medtech programs that are better connected to the investor community. Those efforts might be better applied to business development programs that are a better fit for NIH’s capabilities or to bridging the gaps between existing accelerators and incubators.

FINDINGS AND RECOMMENDATIONS

ANNEX 3-1
PROGRAM MANAGER INTERVIEWS: QUESTIONS, AND DATES AND ATTENDEES

Interview Questions

Introductory Questions

1. To begin, can you tell us a little about your tenure at your institute and the SBIR/STTR programs? How do you allocate your time between these and other programs you manage? Is there a dedicated SBIR/STTR manager or is that responsibility spread out?

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⁵¹ After a prepublication version of the report was provided to NIH, this sentence was added to the recommendation to emphasize that there is a legislative alternative to NIH’s reclassifying the SBIR/STTR grants as small business innovation awards, as discussed earlier in this chapter. The sentence is adapted from existing report language, as described on page 79, footnote 43.

Preaward Process

2. In what ways does your Institute reach out to solicit applications or educate the community about the programs? How are those efforts connected to the pilot administrative funding?
   1. Follow up questions in case response is incomplete. Do applicants talk to you before applying or reapplying for awards? Do you reach out to potential applicants or do they reach out to you?
      1. How do you decide which communities to conduct outreach with?
      2. Do you conduct roadshows (online and in-person), host conferences, workshops, or other research meetings?
      3. Do you attend academic conferences or industry conferences?
      4. Do you rely on the omnibus solicitations / when do you issue targeted requests for proposals?
   2. Do you do anything different compared to other Institutes you know?

Award Process and Evaluations

3. Please tell us your experience with the most recent SBIR/STTR award you made?
   1. Probing questions in case response is incomplete
      1. Was this a typical award? What attracted you to this award? How was the scoring rubric weighted to make this award?
      2. Can you think of an atypical award and why it was made?
      3. What other criteria do you consider in addition to the study/review section scores that come with the application?
      4. What parts of the rubric are most meaningful to you? Do you have discretion to overweight certain components of it? When might you do so? Do you have discretion to select a proposal below the payline?
   2. Do you share award decisions with other Institutes and why?

Commercialization and Success Metrics

4. Please describe the most impactful SBIR/STTR award you made. Why do you think this was impactful?
   1. Follow up questions in case response is incomplete
      1. Was it impactful based on technology, team, commercial potential, societal potential, PI’s reputation, track record of previous awards, minority- or woman-owned company, or match with Institute’s own program priorities?
      2. How did you learn of its impact (e.g., formal report, media report, personal network, awardee update, or follow-up application such as SBIR Phase II-B or Commercialization Readiness Pilot)?
5. Can you tell us about a time that you helped an awardee move toward commercialization? What was the firm trying to do and how did you help?
   1. Was the kind of help you describe unique for the firm, or is this something that happens often?
   2. What other ways have you seen awardees helped towards commercializing a product by your Institute?
   3. Are there other ways you’ve considered helping firms move towards commercialization?

Concluding Questions

6. Reflecting on the SBIR/STTR programs, do you have any thoughts about challenges and how the programs might be improved?
   1. Probing questions in case response is incomplete
      1. What have applicants and awardees told you are their challenges?
      2. What about colleagues at other Institutes?
      3. Tell us about a time in which you learned something that changed the way you implemented the programs or improved your Institute’s approach?

Dates and Attendees

NOTE: All discussions conducted via Zoom.

ANNEX 3-2 NIH SBIR/STTR Success Stories

NOTE: Woebot Health was previously known and Woebot Labs.

SOURCE: “Success Stories” page on the NIH SBIR/STTR website, https://sbir.nih.gov/successstories, and committee discussions with NIH institute/center SBIR/STTR program staff.

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