SBIR/STTR at the National Institutes of Health (2015) / Chapter Skim
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8 Findings and Recommendations
8 Findings and Recommendations
Pages 233-272
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From page 233... ...
, in technological innovation; and (4) increase private sector commercialization of innovations derived from Federal R/R&D, thereby increasing competition, productivity and economic growth.3 The parallel language from the SBA's STTR Policy Directive is as follows: 1 See Box 1-2 and the discussion of the Committee's task in Chapter 1 (Introduction)
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From page 234... ...
This is followed by findings concerning the participation of women and minorities in the program. The third and fourth sets of findings address how well the NIH SBIR/STTR programs are stimulating technological innovation and fostering innovative companies.
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6 1. Sales are reported by a substantial fraction of the survey respondents: Forty-nine percent of SBIR and STTR respondents reported some sales or licensing revenues at the time of the survey, and a further 25 percent expected sales in the future, according to the 2014 Survey.7 This is simi lar to the rates reported in the 2005 Survey (46 percent and 19 percent, respectively)
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About 80 percent of 2014 Survey respondents reported additional invest ment funding.15 2. The most likely source of additional funding (other than their own company and personal funds)
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2. However, while 80 percent of respondents surveyed reported that they raised additional investment funds, only 10 percent reported that the funding included funds from venture capitalists (VCs)
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As a result, about one-half of the NIH SBIR/STTR awardees face a major funding challenge before they can reach the market. • NIH has no dedicated mechanism to fund clinical trials.
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• The 2014 Survey indicates that Black-owned small businesses ac counted for only 0.7 percent of all respondents; Hispanic-owned small businesses, about 1.7 percent.29 • Seven percent of survey respondents indicated that the Principal Investigator on the surveyed project was from a minority. However, more detailed analysis indicates that 0.5 percent were Black Ameri can, 1.6 percent Hispanic, and 0.2 percent American Indian.
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Furthermore, trends are an especially important indicator: declining participation rates are especially a matter of concern.36 34 A discussion of women and minority participation and NIH's limited efforts to address the issue is provided in more detail in the section, "Summary: Woman and Minority Participants in the NIH SBIR/STTR Program," in Chapter 6. 35 See Figures 6-8 and 6-9.
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However, with both the recent shift toward more targeted contracts at the National Cancer Institute (NCI) and the general increase in more targeted fund ing opportunities, this hitherto central characteristic of the NIH program may be eroding.
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1. Faculty and student participation: For the SBIR program alone, 63 per cent of survey respondents reported a link to some kind to a research institution.
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Peer-reviewed publications: Publication of peer-reviewed articles re mains the primary currency of scientific discourse, and despite the need to protect ideas in the commercial environment of small businesses, the 2014 Survey shows that SBIR/STTR firms continue to pursue and achieve scientific publication. • Seventy-nine percent of SBIR respondents and 85 percent of STTR respondents indicated that an author at the surveyed company had published at least one related scientific paper.49 • Forty-two percent reported publishing three or more related apers.50 p Many of the companies interviewed for case studies made a point of indicating that they take a great deal of pride in the number of peer reviewed publications developed by their scientists and engineers, both within and outside of the SBIR/STTR programs.51 D. The NIH SBIR/STTR programs fund projects with social benefits that may not be attractive to commercial sources of funding.52 The NIH SBIR/ STTR programs fund some projects that are high risk, socially desirable, and market oriented but that are unlikely to generate the high returns needed to attract venture-type funding.
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Avanti Lipids has become a core provider of ipids to the research market.55 Another company, Invitrogen, has l now become the world's largest provider of genetic testing to the research community.56 IV. Fostering Innovative Companies A The NIH SBIR/STTR programs support the foundation of new innova tive firms: Many of the survey respondents reported that SBIR/STTR fund ing was instrumental in the founding of the company.
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NIH funding has -- according to respondents to the 2014 Survey -- helped a number of companies suc cessfully make what are often difficult changes that are hard to fund. C. The NIH SBIR/STTR programs have supported the development of small innovative companies in the United States.
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246 SBIR/STTR AT THE NATIONAL INSTITUTES OF HEALTH BOX 8-1 Different Ways in Which SBIR/STTR Awards Helped to Transform Companies Unique Source of Seed Funding • rovided first dollars P • unded areas where venture capital and other funders were not interested F • rovided funding during downturns in the business cycle P • reated new companies and kept companies in business that would not exist C without SBIR/STTR funding • upported projects with longer time horizons/long sales cycles S Introduced New Stakeholders • pened doors to many potential stakeholders in specific technologies, including O agencies, prime contractors, investors, suppliers, subcontractors, and universities • timulated international collaboration S • ave companies added credibility because SBIR/STTR research is peer reviewed G Opened New Markets • elped address niche markets too small for major players/funders H • upported adaptation of technologies to new uses, markets, and industry sectors S Funded New Technologies • unded technology development F • unded disruptive technologies F • unded proof of concept F • upported feasibility testing for high-risk/high-payoff projects S • rove researchers to focus on technology transition D Reduced Risk and Costs • nabled projects with high levels of technical risk E • educed technological risk R • elped address needs that require high tech at low volume and relatively low cost H Allowed Job Growth and Firm Expansion • iversified expertise and allowed hiring of specialists D • ttracted and developed young researchers A • edirected company activities to new opportunities R • unded researchers to enter business full time F • ransformed company culture to become more market driven T • rovided the basis for spin-off companies P • ncouraged R&D companies to transition into manufacturing E • rovided significant mentoring especially for new businesses P SOURCE: Analysis of company responses to the 2014 Survey. For each bullet multiple responses indicated its existence and importance for surveyed projects and firms.
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Most projects at most companies do not proceed directly from Phase I to Phase II to commercialization.68 • About 80 percent of Phase II survey respondents reported at least one additional SBIR/STTR Phase II award related to the surveyed project.69 • About one-third reported at least two additional related Phase II awards.70 • As noted above, more than 60 percent of Phase II respondents reported additional investment funding related to the project subse quent to the SBIR/STTR award.71 65 See Chapter 7 (Insights from Case Studies and Survey Responses)
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B. The NIH application review system can be improved: Case studies, survey responses, and discussions with agency managers all indicate that although the NIH application review system is highly regarded and has many positive char acteristics, it is not serving the SBIR/STTR community as well as it could.73 1. NIH's commercialization review is overly weighted toward the views of academic reviewers.
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• Grants at NIH are reviewed against standard NIH criteria includ ing innovation, defined as "novel theoretical concepts, approaches or methodologies, instrumentation, or interventions."74 However, "novelty" in the context of an academic grant application is not the same as "innovation" for SBIR/STTR. The latter includes all of the steps necessary to reach the market, many of which have no "novelty" in academic terms.75 • The result is that the SBIR/STTR Phase II applications may be subject to misapplied innovation criteria.
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Some agencies use pre-review screenings as triage to remove obviously fatally flawed and highly deficient proposals. C. Survey data shows that the NIH Phase IIB program supports the accel erated commercialization of SBIR-funded research through the provi sion of funding for clinical trials.
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• The NCI Bridge program is based on the NSF Phase IIB matching funds model. • It differs from NSF's Phase IIB, in that it is focused -- as with other Phase IIB programs at NIH -- on providing support for clinical trials.
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the number of Phase IIB awards has not increased.84 D. The flexibility of award patterns at NIH helps address the diverse needs of small innovative companies in the biomedical sector.
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Fast Track awards. NIH is increasing the number of Fast Track awards (combined Phase I and Phase II)
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Key features include:95 • Dedicated full-time consulting and advisory staff for SBIR/STTR applicants and winners, and for NHLBI program staff. • New pre-SBIR activities aimed at improving and expanding the pool of applicants through new accelerators/hubs located at univer sities and through innovative use of social media for outreach.
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Initial results are positive, and expansion is planned.98 3. The new management models at NCI and NHLBI are encouraging but require data tracking and analysis.99 NIH and the participating Institutes should be commended for experi menting with promising new ways to manage the SBIR/STTR programs.
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More generally, commercialization may come years after an award, and may involve multiple awards plus considerable additional funding. All this makes it difficult to assert that any specific outcome "re sults from" an SBIR/STTR award, particularly if developments are tracked for only a limited time.
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It provides support to selected Phase II awardees.104 According to the 2014 Survey about one-third of respondents reported that they had been through commercialization training.105 • The NICHE program, operated by a different third-party provider (Foresight) , provides market research to a limited number of Phase I awardees.
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• Seventy-eight percent of STTR survey respondents report that the PI was a faculty member of the partnering research institution. 112 • Only 1 percent of STTR awards had no research institution linkage, compared to 35 percent for SBIR respondents.113 109 Seesection on "Funding Gaps and Award Timelines" in Chapter 2 (Program Management)
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.115 6. STTR projects report receiving additional investment from venture firms at essentially the same rate as SBIR respondents.116 B. The STTR program at NIH is administered as an adjunct to the much larger SBIR program.
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The final three sets of recommendations address how NIH can improve the operation of their SBIR and STTR programs. They examine the Phase IIB and other funding mechanisms beyond Phase I/I; ways to improve the monitoring, assessment and reporting on the programs; and overall changes in management practices to improve program operations.
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4. Track related program operations: Metrics should also track related program operations including outreach efforts (See below)
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II. Improving Commercialization Outcomes The NIH SBIR/STTR programs are focused on commercialization, and findings of this report indicate that it is doing so with considerable success despite the substantial barriers facing the commercialization of biomedical research. However, it is worth considering possible improvements.
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While preliminary evidence suggests that Phase IIB is working to support companies through clinical trials, NIH should consider whether adjustments are warranted.124 2. NIH should provide improved support for awardees in dealing with the FDA.125 • NIH should seek to provide ongoing expert consulting to awardees in relation to FDA requirements.
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III. Phase IIB and Other Funding Mechanisms Beyond Phase I/II A. NIH should continue to operate the Phase IIB program and consider expanding its size within the context of a more flexible approach.
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• It could also provide more effective support for more demanding projects. • As the cost of clinical trials varies substantially by project, it seems unnecessary to constrain support to an exact amount.
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1. NIH should improve data collection and organization: • NIH should collect outcomes data and improve program evaluation, management, and outcomes.
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This knowledge is currently not systematically included in internal program evaluation by NIH's SBIR/STTR programs. • NHLBI efforts to use social media may provide a worthwhile tem plate for expanding activities already under way through the NIH Program Office.
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By collecting more and better data on outcomes and participation, NIH will be positioned to underake regular analysis -- either internally or with third-party help -- t on key program management issues, such as: • What is the long-term impact of commercialization training, part nership programs, and other commercialization supports? • Is Phase IIB simply picking successful companies or is it at least, in part, causing companies to be successful?
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V. Improving Program Management The following recommendations are designed to improve program operations in ways that should enhance the program's ability to address some or all of its objectives.
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• More agile approaches to review that would streamline the process sufficiently to provide timely debriefs for resubmission at the next deadline. • Better pre-review briefing for all panelists to ensure that they fully understand the SBIR/STTR programs.
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Some survey respondents indicated that they thought success in applying for Fast Track was essentially impossible, but the awards data suggest otherwise.
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Although understandable, we believe that the NIH SBIR/STTR programs should remain primarily grants-based (i.e., investigator initiated) and that the use of contracts should be limited.
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