Biotech industry organizations are lobbying the U.S. Small Business Administration to loosen up its interpretation of Small Business Innovation Research (SBIR) grant rules.
The rules say grants can only be awarded to businesses that are 51 percent or more owned by one individual or individuals who are American citizens. This precludes many biotech firms whose majority owners are venture capital firms from receiving SBIR grants.
The biotech organizations claim the SBA recently became stricter in its interpretation. The SBA says the rules are 21 years old and nothing has changed. However, SBA officials admit that in the past some grants were improperly awarded due to “misunderstanding” of the rules.
Some of the most promising biotech firms, especially biopharmaceutical firms developing new drugs, are backed by venture capital. That’s because the cost of completing product development and clinical trials is expensive. Institutional venture funding is often times the only way these companies can get off the ground and make it through to successful FDA approval. But if the SBA sticks to its strict interpretation of the rules, there won’t be any SBIR grants for startups whose ownership is primarily in the hands of venture capital interests. This may limit the benefits of the SBIR grant program for biotechs and particularly biopharms.