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JUNE 20, 2001

Good Afternoon, I am Jo Anne Goodnight, Coordinator of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs at the National Institutes of Health (NIH). Our mission is the conduct of biomedical and behavioral research to improve the health of the nation. On behalf of NIH, I am pleased to have the opportunity to testify before you today on the reauthorization of the Small Business Research and Development Enhancement Act of 1992, which was reauthorized by the Small Business Reauthorization Act of 1997.

This act is the enabling legislation for the STTR Program. The STTR and SBIR Programs are important components of the NIH extramural research portfolio. Within the Department of Health and Human Services (DHHS), the NIH constitutes about 98 percent of the Departmentís entire SBIR program and 100 percent of the HHS STTR Program. In addition, the NIH budget now constitutes the second largest amount of SBIR and STTR funding available across the Federal government. Each year, NIH exceeds its statutory set-aside requirements for both the SBIR and STTR Programs. In FY 2000, the NIH awarded 1629 SBIR awards (including R&D contracts) amounting to $353.4 million and 138 STTR awards amounting to $21.8 million. In FY2001, we expect to award 1,800 SBIR awards and 145 STTR awards for a total of more than $435 million. NIH has a real stake in the success of these two Programs.

We have clear evidence that the technologies funded through our SBIR and STTR Programs have resulted in significant improvements to the health of the nationís people. We also find evidence that the NIH STTR Program serves as an important complement to the SBIR Program by providing an effective mechanism for supporting commercially viable innovations that originate in our nationís research institutions.

As you know, the SBIR and STTR Programs share a number of common features. Both are structured as a three-phase process; both focus on stimulating and fostering scientific and technological innovations; and, both provide an effective means for commercializing innovations derived from Federally-sponsored research. The Programs, however, differ in two very important aspects. First, to be eligible for an STTR award, a small business must establish a formal collaborative relationship with a non-profit research institution; under the SBIR program this is not required. Second, under the STTR Program, the primary employment of the PI is not stipulated, but under the SBIR Program, the Principal Investigator (PI) must have his/her primary employment with the small business concern.

In this testimony, my comments will focus on some of the evidence on the effectiveness of the NIHís STTR Program and ways in which the NIH uses the STTR Program to help us meet our mission. I also will describe some of our recent efforts toward streamlining and enhancing the Programs to better serve the needs of the small business community. Because of the similarities between the STTR and SBIR Programs, my comments are not solely limited to the STTR Program.

Effectiveness of the NIH STTR Program

Like the NIH SBIR Program, the STTR Program is well-integrated within the overall scientific programs and goals of the NIH. It has proven to be successful in the small business research community and in enhancing collaborative efforts with the academic research community. Though a much younger program than the SBIR Program, projects that have received NIH STTR funding are resulting in the development of products, processes and services that are improving human health through better detection, diagnosis, treatment and prevention of diseases and disabilities. These outcomes have also resulted in speeding the process of discovery, increasing productivity of other researchers, and decreasing the cost of some areas of research.

The NIH is pleased that results of previous studies conducted by the General Accounting Office and the Small Business Administration indicate that the NIH SBIR program has one of the highest rates of commercialization. Other program goals are being met as well, including using STTR to meet federal research and development (R&D) needs, increasing small business participation in federal R&D, and fostering participation by women, minority and disadvantaged persons in technological innovation. Even those projects that have not realized the goal of commercialization have generated information for the equally important purpose of contributing to the knowledge base of science through peer-reviewed publications. We believe that studies of the NIH STTR Program will achieve similar results.

The success of our STTR and SBIR Programs may be attributed to several factors, the most significant of which is flexibility in our administration of the Programs. What have made our Programs so appealing are the opportunities for firms to propose R&D initiatives with truly revolutionary outcomes rather than restrict their ideas to projects that can only be conducted under a prescribed amount of time and money. Our experience is that the conduct of certain types of biomedical and behavioral research, such as nanotechnology, clinically-related studies, vaccine development, and drug discovery, does not routinely lend itself to prescribed maximum time and dollar levels. These are anomalies, but such projects can be important steps in integrally involving small businesses in some of the most exciting, cutting-edge research.

A second example of administrative flexibility is that while we issue grant solicitations for projects on specific topics, we also encourage investigator-initiated, mission-related and commercially-viable research projects by small businesses. In addition, because of the similarities between the two grant solicitations, both in research topics and in application instructions, NIH now issues a single solicitation for SBIR and STTR applications for multiple receipt dates throughout the fiscal year (FY). The advantages of multiple receipt dates are numerous. If an applicant misses a deadline, the researcher need wait only four months, not a year, for the next submission date of a Phase I (feasibility study) or Phase II (full R&D) application. Applicants may also submit up to two revised applications on any of the receipt dates. Also, a small business with multiple core technologies can use the multiple receipt dates to stagger submissions of applications rather than dedicating all of its resources to just a single project. As our budget has increased, so have our opportunities to become more innovative in the administration of both the SBIR and STTR programs.

A third example of administrative flexibility relates to the formal collaborative activities that must be conducted under the STTR Program. These collaborations may be initiated either by researchers at the small business concern or the research institution thereby creating a fertile ground for scientists and engineers to capitalize on the innovations and intellectual talents of their organizations. Collaborative opportunities such as these are most likely to result in innovative projects that have the greatest commercial potential and societal benefit.

STTR Success Stories

NIH has numerous exemplary STTR projects that have achieved success and have resulted in significant improvements to our nationís health. I would like to discuss three in particular, two of which have partnered with the University of Alabama at Birmingham (UAB.)

Through STTR support, Vaxin, Incorporated (formerly Vaxin Pharmaceuticals, Incorporated) of Birmingham, Alabama developed a needle-less vaccine technology. Vaxin researchers discovered that certain recombinant viral vectors could be applied to the surface of the skin, resulting in an immune response to the genetic insert. Funding provided by an STTR Phase I grant funding resulted in the development of a novel tetanus vaccine. NIH has awarded a Phase II STTR grant to complete the pre-clinical development of a vaccine patch and begin the testing of the vaccine in people. Vaxin is currently developing similar vaccines against a wide variety of infections or cancers, all targeted toward painless, needle-less administration using a patch that can be simply placed on to the skin.

Another success story is the development of two distinct technologies, TransAssayTM and TranzVector TM, by Tranzyme, Incorporated, also of Birmingham, Alabama. These platform technologies supported through STTR funding have the potential to be applied to a diverse array of commercial applications, including cell-based assays for drug discovery and target screening, tools for functional genomics, and in vivo gene therapy for the treatment of cancer, ocular diseases, blood-related diseases, and Central Nervous System disorders.

A third example of a successful technology developed through NIH STTR funding is the development of a thermal cycler machine, called the LightCycler, which was developed by Idaho Technology (IT.) The LightCycler, which is tied to a process called polymerase chain reaction, can multiply and analyze strands of DNA and RNA 10 times faster than the equipment most research labs are using. In 1995, IT was a six-person niche player in the biotech business. Today IT employs 65 scientists and engineers and sells a growing range of instruments and reagents. IT company president, states, "The STTR program gets much of the credit for this growth. Without the initial Phase I grant, we would not have developed the product that has brought us commercial success. The STTR program benefited us primarily by providing the following: (1) Seed capital to prove principal on a high-risk project; (2) A structure for collaboration with The University of Utah; and (3) A requirement for formal project planning and a division of labor between IT and the University."

Mr. Chairman and Committee members, having provided an overview of how NIH has utilized the STTR Program and benefited from it, I would now like to address two important areas related to these Programs.

Importance of the STTR and SBIR Programs Given Their Similarities.

Although the Programs share some common threads, NIH believes that the STTR serves a very important function and one different than the SBIR Program. While SBIR is a vehicle for harnessing innovative ideas in the private sector, STTR taps a pool of technological innovations in our nations research institutions and provides a mechanism for academicians to partner with a small business concern to pursue a commercially-promising idea that would otherwise languish on the shelf. Scientists and engineers at research institutions who recognize the important commercial applications and societal benefits of their research have shown a heightened interest in partnering with the small business community. Regular research grants typically fund basic research. In addition, while academic researchers may play a consultant or collaborative role in an SBIR project, these entrepreneurial scientists/engineers cannot participate in the SBIR program in a significant way as long as their primary employment is with the research institution. It also helps to stimulate the legislative intent of technology transfer. Therefore, STTR makes a significant difference to a university professor who desires to be an entrepreneur but finds it unfeasible to leave the research institution to start a small business.

Recently, we have noted that the dynamics of the STTR and SBIR Programs are changing. Research institutions are working toward establishing an entrepreneurial environment to allow academicians to pursue commercial applications of their innovative technologies. Such efforts to blend two distinct cultures have resulted in the development of mutually beneficial and synergistic relationships whereby the research institution retains the intellectual talent and the researcher is permitted to pursue and capitalize on their entrepreneurial activities. A few examples of research institutions that have successfully created an entrepreneurial environment include Purdue University, the University of Wisconsin at Madison, The Ohio State University, and the University of Alabama at Birmingham.

NIH Efforts to Enhance and Streamline SBIR/STTR Programs

STTR is a highly promising program, and NIH supports its continuation. While NIH has been pleased with the success of both the STTR and SBIR Programs, we are taking steps to enhance and streamline the programs, particularly with regard to Phase I/Phase II gap funding, program data collection, and outreach.

In response to repeated echoes from the small business community to develop ways to reduce or eliminate the funding gap that typically occurs between Phase I and Phase II, NIH established a Phase I/Phase II Fast-Track option designed to expedite the decision and award of Phase II funding. Under the NIH Fast-Track process, applicants who satisfy certain criteria that enhance the probability of the projectís commercial success may concurrently submit Phase I and Phase II applications thereby passing through the peer review process at the same time with the intent of reducing or eliminating the funding gap between phases. Small business concerns are encouraged to obtain commitments of funds and or resources from third party investors for commercialization of the product, process or service resulting from the STTR/SBIR grant. To date (since FY 1997) the NIH has issued 124 Fast-Track awards at a cost of $16.2 million. We realize that the Fast-Track option is not appropriate for all types of research. NIH informs standard "non-Fast-Track awardees" of other ways to bridge the funding gap. These include extension in time without funds, extension in time with funds, and allowing Phase II applicants to submit on any of our three annual receipt dates. In addition, we encourage awardees to seek potential State matching resources.

A second area NIH is focusing on to improve the STTR and SBIR Programs is through the establishment of a project monitoring system to collect and maintain information about our awardees. Such a data tracking system will enable NIH administrators to better determine the outputs and outcomes from projects supported through the SBIR and STTR mechanisms. Clearly, commercialization is a major goal of the STTR and SBIR Programs. However, for NIH awardees, there is often a lengthy time of seven to ten or even 12 years before Phase III commercialization is realized, a period that routinely extends well beyond NIH support. Thus, commercialization may be one metric for judging program success, but other measures will be considered as indicators of success, such as published papers, patents, FDA testing/approvals of drugs and devices, and the use of the technology in other research projects.

A third area in which NIH has focused to enhance the STTR and SBIR programs is through our outreach efforts. Each year, NIH participates in three National SBIR/STTR Conferences, at least one of which is held in a rural state or a state that has not received a large majority of SBIR/STTR funding. On July 2 and 3, NIH will host its 3rd Annual SBIR/STTR Conference at which over 900 attendees are expected. In addition, NIH staff routinely participate in regional conferences to provide information about the NIH application, review and award processes and potential funding opportunities. Due to the heightened interest of research institutions to learn more about the STTR and SBIR Programs, we have incorporated sessions focused on STTR and SBIR funding opportunities. We will continue our efforts to raise awareness in States and research institutions within them to disseminate information related to the STTR and SBIR Programs. Efforts to broadly disseminate information about the SBIR and STTR Programs is also being accomplished through an NIH ListServe message system, encompassing over 8000 subscribers from the small business community, academia, State entities, and others. NIH established a separate ListServe of STTR and SBIR awardees only to inform them of important grant-related policies and procedures.

In recent years, several agencies participated in a SWIFT (SBIR -- Where Innovation Focuses Technology) Outreach Tour in which the Federal Program managers traveled by bus moving to a new State each day to inform small businesses and research institutions of STTR and SBIR funding opportunities. Last year, the SWIFT I "Field of Dreams" tour focused on the Midwest states where we covered Minnesota, Wisconsin, Iowa, Nebraska, South Dakota, and North Dakota. More recently, in May 2001, the SWIFT II "Patriot" Tour focused on northeast states, including: Massachusetts, New Hampshire, New York, Connecticut, Vermont, and Maine. SWIFT III, targeted for May 2002, is expected to cover a number of states in the southern part of our country.


In conclusion, NIH is very pleased with its involvement in the STTR and SBIR Programs. I would be happy to answer any questions that you may have regarding our participation in these programs.

Jo Anne Goodnight

SBIR/STTR Program Coordinator

National Institutes of Health

6701 Rockledge Drive, Room 6186

Bethesda, MD 20892-7910

Ms. Goodnight has 16 years of government service in which she currently holds the position as Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program Coordinator of the Public Health Service and the National Institutes of Health (NIH). For nearly five years (1994 until March 1999), she served in the Division of Cancer Biology (DCB), National Cancer Institute (NCI), NIH, as a Program Director for SBIR/STTR grants that supported studies in the field of cancer biology, cancer genetics, and cancer immunology. She also held the position of Special Assistant for the Director, DCB, NCI, NIH. In 1997, she was appointed the SBIR/STTR Program Policy Coordinator for the NCI. Ms. Goodnightís research background is in cancer genetics and cancer immunology. From 1989 until 1994, she worked as an intramural research scientist in the Laboratory of Genetics, Division of Basic Sciences (formerly the Division of Cancer Biology, Diagnosis, and Centers), NCI. She has published over 20 studies about the selective involvement of Protein Kinase C in differentiation and neoplastic transformation. She received a Bachelor of Science degree in Microbiology from Virginia Tech in 1983.

Contact Information: Phone: (301) 435-2688

Fax: (301) 480-0146



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Last revised: September 24, 2001