WITH SENATE ACTION, MBC MEMBERS WITH VC BACKING EDGE CLOSER TO QUALIFYING FOR SBIR GRANTS AGAIN

July 30, 2008

After five years of frustration in Congress, biotechnology companies with significant venture capital backing are on the verge of once again qualifying for SBIR (Small Business Innovation Research) grants, thanks in large measure to the persistent advocacy of MBC and its members.

On July 30, the Senate Small Business and Entrepreneurship Committee - chaired by John Kerry of Massachusetts - approved legislation that will allow companies with majority venture capital fund ownership to compete for a portion of SBIR dollars, including NIH funding. Such companies have been totally barred from SBIR participation since 2003.

The Senate action follows House passage of language even more favorable to biotechnology companies. Senate and House versions will now have to be reconciled.

MBC President Robert Coughlin said that although MBC will continue to push for less stringent SBIR limits on its venture backed members, MBC was generally pleased with the progress made on the issue in Congress thus far this year.

"These votes represent a big win for MBC member companies in need of capital for development of innovative new medicines," said Coughlin. "This is a clear indication that our Congressional leaders recognize that the SBIR program is perfectly suited to help MBC members in their pursuit of solutions for unmet medical needs, and that our members deserve to compete for SBIR funding."

SBIR grants had been an essential source of early stage funding until 2003, when a rules changed prohibited companies with 51% or more venture fund ownership from program participation. Knowing that most early stage biotechnology companies rely heavily on venture funding, MBC has been working to overturn that ruling ever since, advocating for the industry position on Capitol Hill, discussing the issue in depth with members of the state's Congressional delegation, and undertaking an intensive member-driven informational outreach campaign.

Under the Senate Small Business Committee version approved July 30, majority venture backed companies would be eligible to compete for a pool of dollars equivalent to 18% of NIH's total SBIR budget, 8% at all other federal agencies. The House set no such limits, and MBC will work to increase the venture company carve-out in the final legislation.

The Senate bill also proposes an increase in Phase II grants to $150,000 (up from $100,000), with Phase II going to $1 million from $750,000. The rules change is part of overall SBIR reauthorization legislation, which has to be approved before Congress adjourns in late September or else the program will be unfunded next year. The Senate version proposes a 14 year reauthorization, compared to the House bill which only reauthorizes the program for 2 years.

Members with questions about the pending SBIR legislation should contact the MBC Policy and Public Affairs Department.

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