It comes as no surprise that federal grants for innovative research or technology transfer have become a lifeline for many early stage life sciences startups in the San Diego area.
What may be surprising, though, is the extent of such funding, and the number of local biotech and medical device companies that have gotten Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) grants over the past decade.
Since 2005, the multi-agency National Institutes of Health alone has awarded more than $364 million in grants to at least 230 life sciences companies in the San Diego area, according to a review of innovation grant data by Xconomy and GrantIQ, a Santa Monica, CA, startup that aggregates public information on federal research and innovation funding.
Casting a wider net to include funding from other federal agencies (Congress authorized 12 agencies to award innovation grants), GrantIQ reports that over $570 million has been awarded to companies throughout the San Diego area through 1,905 innovation grants.
At my request, GrantIQ developed a public report for Xconomy that lists the 230 San Diego life sciences companies that received SBIR or STTR grants from the NIH. The interactive report, available online here, enables users (who can register for a free trial period) to search for information about grants awarded to each of the 230 companies over the past decade. GrantIQ operates SBIRsource.com, a subscription-based website that provides data, analytics, and insights about innovation funding.
The list is a trove of unsung startups that represent a coming wave of life sciences innovation in San Diego, led by Prognosys Biosciences, a next-generation genome sequencing and analytics company that has been operating in stealth mode for 10 years.
Other up-and-coming startups on the list are Genalyte, a startup developing photonic technology on a chip to perform as many as 128 diagnostic tests on a single drop of blood; Epigen Biosciences, a collaborative startup applying a host of drug discovery tools to reach proof-of-concept faster; Novoron Bioscience, a two-year-old startup developing new drugs for nerve regeneration; Aspyrian Therapeutics, an anti-cancer startup that uses near-infrared light to activate antibody conjugates; and Sirenas Marine Discovery, a four-year-old startup identifying new small molecule drugs from marine organisms.
CEO Darren Rush said he co-founded GrantIQ with Chris Jones, director of strategic technology development at Bedford, MA-based iRobot, in 2012. “We leveraged a lot of Chris’s program knowledge, as he led iRobots’ SBIR efforts until the point they no longer qualified as a ‘small’ business, CEO Darren Rush said. GrantIQ’s customers “are more and more, larger organizations who use the SBIR programs as a hunting ground for new technologies to license, acquire, or partner,” Rush said.
Altogether, federal agencies dispense roughly $2.5 billion each year through innovation grants. On its website for the program, the NIH says it will invest over $780 million through innovation grants this year to early stage life sciences companies. A key objective is commercializing promising research and technologies, “so that life-saving innovations reach consumer markets.”
Such grants “were absolutely essential” to the formation of Targeson, a San Diego startup developing a variety of contrast agents for use in medical imaging and diagnostics, says CEO Jack DeFranco. Since 2009, when Targeson was founded, the NIH has awarded the company over $4.4 million through 11 NIH innovation grants, according to GrantIQ data.
DeFranco explained that Targeson initially was founded as a limited liability corporation with technology licensed from the University of Virginia, but the early stage startup couldn’t raise enough money from angel investors to fund proof-of-concept studies. “We got grants that actually allowed us to build products,” DeFranco said. That, in turn, enabled Targeson to commercialize the technology, which is one of the primary objectives underlying the SBIR program.
Some of the life sciences companies on GrantIQ’s list are led by bootstrap-minded entrepreneurs like Scott Thacher, who made SBIR grants a key part in his “frugal business model” at San Diego’s Orphagen Pharmaceuticals.
Some, like Crinetics Pharmaceuticals, gained momentum when co-founders Steve Betz and Frank Zhu joined Crinetics CEO Scott Struthers amid a wave of layoffs in 2009 at Neurocrine Biosciences (NASDAQ: NBIX), where all three had worked together. “We joined Scott in getting Crinetics off the ground (corporate strategy, writing proposals, finding lab space and equipment, etc.) and opened our first lab in January 2010,” Betz wrote in a recent e-mail.
Others prefer to operate below the radar, or at least maintain radio silence.
Prognosys Biosciences, for example, is at the top of the list as the biggest recipient of NIH-based innovation grants in the San Diego area. According to GrantIQ, the NIH has awarded 44 innovation grants to Prognosys Biosciences over the past decade, with total funding (including two recent grants this year) amounting to more than $18.9 million.
Prognosys was founded in 2005 by Mark Chee, an expert in nucleic acid analysis and oligonucleotide array technology who was previously a co-founder and former vice president of genomics at San Diego-based Illumina (NASDAQ: ILMN). But Prognosys discloses very little information on its corporate website, and Chee did not return my phone calls or e-mailed inquiries about his company’s use of government-funded innovation grants.
Based on recent grant awards, however, Prognosys appears to be focused on commercializing new technologies for use in biomedical research and in the emerging field of personalized, or precision medicine. The company has been developing innovative approaches to multiplexed analyses of biomarkers and new ways of analyzing protein-coding segments of the human genome.
On its Facebook page, Prognosys lists job openings for scientists working in bioinformatics and in next-generation genome sequencing, genome-wide assays, and biomarker discovery. A few years ago, the company announced on its Facebook page that it had developed “cloud-based data analytics for RNA sequencing.”
No. 2 on the most-funded list is San Diego’s Mapp Biopharmaceutical, which gained fame during the Ebola crisis in West Africa last year as the little biotech led a global effort to develop ZMapp, an experimental anti-viral drug intended for Ebola-infected patients. Mapp Bio has received nearly $15.7 million through 30 innovation grants, including 27 awarded through the NIH since 2005.
Mapp Bio has done much of its R&D through SBIR grants: “We have preferred to rely on non-dilutive funding,” Mapp Bio president Larry Zeitlin wrote in an e-mail Tuesday. “We find this allows us to follow the science where it leads, as opposed to being obligated to focus on a return on investment for shareholders.”
Yet Mapp Bio is not the nation’s biggest recipient of innovation grants for R&D work on Ebola. A search for Ebola-related funding on SBIRsource.com shows that Worcester, MA-based Microbiotix has received more than $49 million in innovation grants for work on the deadly virus, and the site lists Gaithersburg, MD-based GenVec, Huntsville, AL-based Streamline Automation, Salt Lake City, UT-based Navigen, Beverly, MA-based BioHelix, and Ann Arbor, MI-based DNA Software as other major recipients of innovation grants. The results also show 10 recently awarded grants to companies in San Diego (Mapp Bio and Arisan Therapeutics), as well as Massachusetts, Colorado, Texas, Pennsylvania, Utah, and Iowa.
At San Diego-based Electronic BioSciences, CEO Geoffrey Barrall says innovation grants have been crucial to the company’s efforts to commercialize new technologies for making very low-noise measurements through nanopores and nanopore DNA sequencing.
“When you are looking to start a technology [company] from a pretty early stage and need to get it to feasibility, SBIRs are excellent,” Barrall said.
Could Electronic BioSciences have gotten private funding to do the same work?
“Maybe some,” Barrall said. “But I don’t think it would have been as significant, and we wouldn’t have been able to get as far as we have.”
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