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Dialing for federal dollars
Having shunned them when the economy was running hot, local biotech companies, both public and private, are turning to federal grants to fund programs that investors deem too risky for a down economy.
Allison Connolly Boston Business Journal Staff
And despite state and federal budget woes, public money is likely to remain available to local biotech companies in 2003, as the threat of war has spurred new funding for innovative technology.
Budget requests for the National Institutes of Health and the National Science Foundation, two major grant donors to Massachusetts biotech companies, are expected to be about double those of years past. And President George W. Bush has dedicated a substantial portion of the new Office of Homeland Security’s 2003 budget to fund technology that addresses bioterrorism. Increases are also expected for the Small Business Innovation Research program, which funds early-stage science that has commercial potential.
And the budget of the Advanced Technology Program, which awarded nine of its 40 grants this year to companies in Massachusetts, should be sustained by the National Institute of Standards and Technology.
Massachusetts companies continue to earn an outsized share of federal grant money, second only to California. So far this year, local biotech companies have received SBIR grants worth $75 million, up from $68 million in 2001, according to the Massachusetts Technology Collaborative in Westborough. That trend is expected to continue in 2003, said Robert Kispert, director of federal programs at MTC.
"When money is tight, you see (biotech firms) tapping federal support any way they can," he said.
And there is expected to be sufficiently plentiful grant money in 2003. Of the $37.7 billion budget proposed for the Homeland Security agency in 2003, the White House has asked that $5.9 billion be devoted to "defending against biological terrorism," an increase of $4.5 billion — or 319 percent — from 2002. Another $2.4 billion is proposed for research and development in bioterrorism, with $1.75 billion earmarked for the NIH and $600 million for the Department of Defense, of which more than $400 million is to be doled out to scientists developing anti-terror technology.
The NIH budget could increase 15.7 percent to $27.3 billion as part of a five-year effort to double the agency’s budget from 1998 levels, when it was nearly $14 billion. Congress also has proposed doubling the budget of the National Science Foundation by 2007, with annual increases of between 13 percent and 15 percent, beginning with a budget of $5 billion for 2003. And for its 2003 budget, the agency has requested that $221 million be dedicated to nanotechnology research and another $268 million go to information technology.
Yet, as these granting agencies enjoy growing budgets, the process of receiving those grants is becoming more competitive for private startups, which have traditionally sought such grants to sustain themselves, because they now vie for the money with publicly traded companies.
One such public company, Lion Bioscience AG of Heidleberg, Germany, and Cambridge, in June received the largest-ever ATP grant for a bioinformatics program, $11.7 million. Lion Bioscience CIO Reinhard Schneider said the company and its partner, Research Triangle Park, N.C.-based Paradigm Genetics Inc., went after the grant because he knew the program wouldn’t have appealed to market-conscious investors.
"Some of the (other) risky stuff, we wouldn’t touch right now," he said.
Another public company, Needham-based Avant Immunotherapeutics Inc., has long used grant money to fund more early-stage programs. And most recently, the vaccine company has benefited from federal money being dedicated to the war effort: Avant received an SBIR grant of $125,000 to develop an anthrax vaccine.
Avant CEO Una Ryan says it takes more time to apply for grant money, and it comes in smaller amounts compared with what the company gets from investors. But in some cases, she said, it is better to use grant money for certain projects, especially when investors think something is too early-stage.
"You can do it without losing rights to the product, unlike when bringing pharmaceutical companies on board," she said.
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