NIH Programs Have $556 Million for Innovative Research

NIH Programs Have $556 Million for Innovative Research

by Jon Benninger

With the scarcity of research dollars among the top issues in the natural products industry, there are two government programs available through the National Institutes of Health (NIH) that offer great funding possibilities. Combined, these programs have more than $550 million in grants available for small businesses (defined as fewer than 500 employees).

SBIR Program

The Small Business Innovation Research (SBIR) program provides grants to small businesses for research and development (R&D) of innovative techniques, products and programs that address public health concerns. The governments goal is for companies to successfully commercialize ideas developed with SBIR money.

There are a few eligibility requirements. First, companies must be organized as for-profit U.S. businesses. They must also be located in the United States, and be at least 51 percent American-owned, independently operated and have 500 or fewer employees. Finally, the principal investigator (the person leading the project) must have primary employment with the company receiving the SBIR grant.

The SBIR program works in three phases. Phase One focuses on the feasibility of the idea, technology or product. Applicants approved for a Phase One SBIR grant typically receive $100,000 for a six-month feasibility study, though some applicants have received significantly more.

When a company submits a grant application, the NIH Center for Scientific Review assigns the application to an appropriate NIH institute or center. The assigned center then provides the application to an independent review group to evaluate the scientific merit of the grant application. After this, the application is reviewed by an advisory council. After this two-tier review, the applicant company receives copies of the critiques from the reviewers, as well as an overall numerical score. This process generally takes about six months.

The NIH review criteria for Phase One SBIR applications include:

• Significance: Does the idea address a real problem that affects real people?
• Approach: Is the research or idea feasible?
• Innovation: Is the idea new or improved?
• Investigators: What are the credentials of the primary investigator and the project team?
• Environment: What are the qualifications of the facilities and resources to be used?

Other considerations include the protection of human subjects, animal welfare and the project budget.

The entire process generally takes seven to nine months from application deadline to the allocation of the grant. Application deadlines are April 1, August 1 and Dec. 1.

Phase Two of the SBIR grant program is focused on full R&D of the technique, program or product studied for feasibility in Phase One. Applicants approved for a Phase Two grant generally receive $750,000 to $1 million per year for two years.

The review process for Phase Two applications is similar to that of Phase One, with a few additions. First, the applicant must have demonstrated the feasibility of the idea during Phase One. The Phase Two application must also clearly explain how it plans to turn the idea into a profitable enterprise. The application is judged on the ideas degree of commercial potential. The timeframe and deadlines for the Phase Two application process is similar to that of Phase One.

The ultimate goal of the SBIR program is to reach Phase Three, where an idea is commercialized. There are no grants for this phase. A company turns the original idea developed through Phase One and Phase Two into a commercially profitable venture. Not all program participants make it to this phase successfully, and the NIH expects this to be the case. Not all innovative ideas turn out to be commercial successes.

STTR Program

The Small Business Technology Transfer (STTR) program is similar to the SBIR program, but the STTR program emphasizes cooperative R&D between small businesses and U.S. research institutions. The STTR program is intended to stimulate scientific and technical innovation through cooperative research and to foster technology transfer between small business and research institutions. The end goal is to develop commercially viable ideas, just as it is with the SBIR program.

The STTR program also has eligibility requirements. The applicant must be a small business (500 or fewer employees). Unlike the SBIR program, the STTR program requires a formal cooperative R&D agreement between the applicant applying and a U.S. research institution. At least 40 percent of the R&D work must be performed by the company, and at least 30 percent must be performed by the research institution. A U.S. research institution is defined as a college or university, other nonprofit research organization, or a federal R&D center. The program also requires that the parties have in place an intellectual property (IP) agreement defining IP rights, rights to carry out follow-up research and commercialization terms.

The application process, deadlines and award levels for STTR grants are identical to those of the SBIR program phases.

Budgets and Use of Funds

Grants through the SBIR and STTR programs can be used for direct costs of the project, a percentage of indirect costs (facilities and administrative) of the project, and a fee or profit calculated as 7 percent of the budgeted costs.

Direct costs are those easily identified with a specific project, such as direct salaries and wages, materials and supplies, consultants and subcontracts. Indirect costs are those not easily identified with the project, such as fringe benefits, overhead and general/administrative costs. The percentage of indirect costs that can be paid by the grant must be negotiated with the NIH Indirect Cost Branch.

There are many other requirements within these programs, such as recordkeeping, mandatory audits for grants exceeding $300,000 per year and annual progress reports. However, the potential is great, and the commitment from NIH is present.

Any company that is committed to science and innovation should learn more about these grant programs and consider applying. Additional information is available at http://grants1.nih.gov/grants/funding/sbir.htm.