NIH Small Business Innovation Research (SBIR) Conference
A Summary

On January 22, 1997, NIH held a conference to discuss ways to strengthen and enhance the SBIR program. In her welcome, Dr. Wendy Baldwin, Deputy Director for Extramural Research, indicated that this was a meeting to hear the views and suggestions of the community, and that additional suggestions are welcome after the meeting and can be sent by e-mail to DDER@NIH.GOV. Dr. Baldwin pointed out that NIH is but one of 10 federal agencies engaged in an SBIR program that is coordinated, statutorily, by the Small Business Administration (SBA). The single goal of the conference was to look at strategies the NIH could effect for strengthening the SBIR program across the NIH.

The NIH SBIR program consists predominantly of grants, with a minority of the awards being contracts. Slightly less than one third of the dollars awarded go to Phase I awards, with the majority of money being expended on Phase II awards. The majority of the applications are reviewed by the Division of Research Grants in Special Emphasis Panels designed to review SBIR applications only.

Note: Data slides are available in PDF format.

    FY 1996 SBIR Applications by Review Group (PDF)

SBIR awards are concentrated in eight major topical areas, including biomedical equipment, method development, drug design/synthesis/production, computer software/hardware development, and biomaterials, bioassay, diagnostic test and model development.

      FY 1995 SBIR Awards by Scientific Category (PDF)

Since SBIR projects are frequently an extension of an investment in basic research, it is not surprising that many states which receive large amounts of regular research project grant dollars from NIH also receive substantial amounts of SBIR support. The states that are proportionally more successful in obtaining SBIR support may be doing an especially effective job in interfacing the two types of support for scientific research.

      States with Greatest NIH R01 and SBIR support, FY 1996 (PDF)

Dr. Baldwin also outlined some recent NIH policy changes. The general policy limiting all applications to no more than two revisions (amendments) within a two-year period from the receipt date of the initial, unamended application now pertains to the SBIR program. The limit of two revisions allows applicant small business concerns and principal investigators sufficient time to consider new findings in the area of research and to make a fresh start on their research plans. Another change is the administrative review of selected applications exercised by her office to ensure that the strongest projects are funded and the best use is made of the investment in the SBIR program.

Dr. Baldwin tracked a cohort of 2,995 phase I applications received in FY 94 through review and funding, of which 557 actually received Phase I funding; 345 of these applied for Phase II and 138 actually received Phase II funding. These figures indicate the highly competitive nature of the NIH SBIR program.

      SBIR Phase I and Phase II Applications and Awards, FY 1994 (PDF)

While NIH does not have the administrative resources to do a great deal of one-on-one outreach, every effort is being made to use the World Wide Web to provide timely and accurate basic information on the program, thus preserving staff time to respond to more specific questions. The NIH home page provides the entry into information about grants and contracts; the SBIR program specifically is a feature of NIH's "Small Business Funding Opportunities" home page.

Mr. Dan Hill, Assistant Administrator, SBA, addressed the group. He indicated that he and Dr. Baldwin have been meeting and intend to continue to do so on a regular basis. Mr. Hill explained the uniqueness of his office, whose mission is to provide consistent policy oversight and guidance to the multiple government agencies that participate in the SBIR program, as well as to perform commercialization studies. The agency with the best record in the most recent commercialization study was NIH, and early returns appear to reflect the same pattern in the current study. Mr. Hill stated that the frequent communication between him and Dr. Baldwin has resulted in a strong working relationship, and that they intend to engage in formal joint outreach activities across the country that will include conferences such as this one where public input is solicited.

Three NIH Institutes presented vignettes on ways the SBIR program fits with their broader scientific programs and goals. Dr. Bettie Graham, from the National Human Genome Research Institute (NHGRI), presented information on one of the smallest SBIR programs at the NIH. Over the past five years NHGRI has funded an average of nine projects per year, with a success rate equivalent to that for their regular research project grants (R01s). Dr. Graham spoke of four successful grantees who had produced equipment which either increased the productivity of other researchers, decreased the cost of specific aspects of genetic research, or both. Not only NHGRI but the scientific community they serve has benefitted from these SBIR projects, and one of the SBIR principal investigators now holds a $5 million regular research project grant which grew out of his early SBIR work.

Dr. John Watson of the National Heart, Lung, and Blood Institute (NHLBI), which has one of the largest SBIR programs at NIH, pointed out that SBIR applications address not only hypothesis-driven research but also design-directed research, for development of both products and methods useful in further research efforts. An NHLBI grantee, Dr. Robert Kung of Abiomed, Inc., presented three products his company has developed for enhancing the public's health and which have been commercialized successfully: a swallowable electrode used for cardiac monitoring, a temperature-sensitive screening device for periodontal disease, and a non-invasive method of detecting lead in human bones. These products have also contributed to the knowledge base, as they have been used in research and are cited in multiple professional publications.

Ms. Joanne Goodnight, of the National Cancer Institute, pointed out that NCI has the largest SBIR program at NIH and discussed how this program interfaces with the overall research mission of the Institute through research activities benefiting portfolios beyond SBIR. This was emphasized by one NCI grantee, Dr. Nam Kim of Geron Corporation, who described development of the TRAP Assay for detecting telomerase activity in the diagnosis of and screening for certain malignancies, including breast cancer. Dr. Kim underlined the importance of close collaboration with other researchers and with clinicians in developing and testing the product. Interestingly, much of the stellar work presented was conducted under SBIR Phase I support.

Three speakers addressed reinvention or innovative activities affecting the SBIR program. Dr. Elliot Postow of the NIH's Division of Research Grants (DRG) outlined the referral and review process for SBIR applications. He emphasized that special attention is now given to multiple Institute/Center (awarding component) assignments for SBIR applications, thus providing greater opportunities for funding these applications. He also described the review process, including the formation of Special Emphasis Panels which are assembled anew from a relatively stable pool of reviewers, specifically to address the areas of science and technology found in that group of applications, and include representatives from the small business community. Beginning with the next review cycle, streamlining of SBIR review will be implemented. This process, already in use for regular research project grant applications, allows greater discussion of the more competitive applications, those determined to be in the lower half are not scored but do receive written critiques. Dr. Postow was followed by Dr. Greg Milman of the National Institute of Allergy and Infectious Diseases, who described the "Fast-Track" parallel review option designed to expedite the decision and award of Phase II funding. Under this option, those who satisfy the criteria may concurrently submit Phases I and II of the project, thus passing through the peer review process at the same time with the intent of reducing or eliminating the funding gap between phases. (We note here that routine, non-"Fast-Track" procedures allow SBIR Phase I grantees to submit Phase II applications -- on any of the three annual SBIR receipt dates of April 15, August 15, December 15 -- either during or after expiration of the Phase I budget period.) Mr. Terry Bibbens, The Entrepreneur in Residence at the SBA, then described a secure, Internet-based approach to linking potential investors with small businesses to help bridge the "capital chasm". He also discussed recent action by the Securities and Exchange Commission that would permit investment across state lines. (More information is available through the SBA home page).

In the afternoon session a panel of SBIR grantees presented their views on strategies to ensure that the program elicits the best applications and provides the best review and administrative support for their future success. Dr. Armando Cuervo, from Sweet Dreems, Inc., discussed the development of his own SBIR project and the need that he sees for applicants to have access to successful grantees, who are familiar with the best approaches for communicating their ideas to scientific review groups. Ms. Anne Eskesen of Innovation Development Institute, brought the perspective of someone who has worked with a broad array of small business investigators in Massachusetts. She stressed the importance of NIH providing adequate outreach and support for small businesses seeking to work with the NIH. Dr. Kathy Mullinex, Synaptic Pharmaceutical Corporation, talked about the importance of a small business' ability to raise capital and how SBIR funding had been a small but critical part of her business' overall success; Synaptic had been able to convert to Phase II awards all of the Phase I awards that they thought were commercially viable. Mr. Peter Linsert, Martek Biosciences Corporation, described using the success of an NIH SBIR grant for development of a project which enabled them to raise venture capital for commercialization. He emphasized the importance of familiarity with government requirements and the need for strong grant- writing skills.

Another topic of considerable concern but for which there is no simple solution is the difficulty presented by the gap in funding between SBIR Phase I and Phase II support. Providing an opportunity to submit a Fast-Track application may facilitate research applications from some firms with well-developed projects. While Fast-Track provides a mechanism for reducing or eliminating that gap, it is not a mechanism that will be appropriate for all types of work or for all applicants. While all NIH funding components will accept Fast- Track applications this year, no one expects this to become a prominent strategy. Other ways for Phase I grantees to minimize the funding gap are by submitting the Phase II application before Phase I has been completed (as described earlier) or by stretching the period of Phase I support (generally six months) through an extension in time. More generally, NIH reinvention activities are addressing the general question of how to shorten the time required for processing applications, including SBIR applications. Also, through the SBA homepage, SBIR grantees can access small business support services available in their states; these services may be able to provide some development assistance for projects that are not yet ready for Phase II support.

The SBIR program may attract applicants who are new to the system, who may have limited knowledge of or experience with the peer review system and who are putting together an application for the first time. These novice applicants may lack the mentoring network that exists is many universities, and it would be helpful if there were mentoring opportunities available from the SBIR community. Several of the small business-oriented organizations that were represented indicated that they would be willing to help in this and in other outreach activities.

Outreach is a critical activity for the NIH, but one where resources are limited. We have an obligation to get accurate information out to our many constituencies and we are making increasing use of the Internet to do so. Outreach is another area that is likely to benefit from linkages between the NIH and small business groups to ensure that we provide appropriate links to groups that can be helpful, including state organizations that can provide technical advice and sometimes be a source of partial financial support as well.

The heart of a strong, successful extramural program is peer review. Some small business representatives commented on the value to them of having passed the rigorous NIH peer review process. As streamlined review comes to the SBIR program, there will be an adjustment phase, but the process will help ensure adequate discussion time for the most competitive projects. While there was discussion of the need to have small business expertise on the review groups (presently the average is three per group), it was recognized that increasing that number might increase the potential for conflicts of interest. The review group must continue to include reviewers who understand the scientific aspects of applications. With a new DRG director there is the opportunity to open a dialogue about the instructions provided to reviewers to ensure that they are familiar with the requirements of the program.

While the information presented in the vignettes clearly identified interesting commercial and scientific advances from the SBIR program, there are considerable challenges in analyzing the ultimate outcome of commercialization. Many speakers pointed to the often lengthy period between SBIR funding and commercialization, a time period that routinely extends well beyond the period of NIH support, as a reason that commercialization is not necessarily the best metric for judging program success. While the SBA and the General Accounting Office have undertaken analyses of commercialization of SBIR projects (NIH typically has the highest rate of any government agency), these are not simple to conduct. Small companies may be bought by larger companies and even bought again during the relevant time period, making tracking difficult. Other measures such as published papers, use in other research projects, etc., are also indications of the impact of the program and should be considered.

In concluding the conference, Dr. Baldwin made it clear that the NIH is committed to the goals of the SBIR program and will continue to explore opportunities to further strengthen the program.

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