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Venture Funding and the NIH SBIR Program
would use it to discover other applications for their lead product. This supports the case study analysis which suggests that venture capital-funded companies tend not to use SBIR for lead product support.
BIO provided six case studies. We can summarize this evidence as follows:
Two are now apparently funding the excluded research from venture capital or other funds. One of these received substantial funding from the venture arm of Novartis, a large pharmaceutical company.
Two have been acquired (and hence may no longer be eligible for the SBIR program on other grounds).
Two reflect only the information provided by BIO, which claims that the NIH-funded research has been abandoned. It is worth noting that for both, the abandoned research was not the primary product line.
ANALYSIS OF BIO EVIDENCE
The Case Studies
The six case studies are all designed to show that promising lines of early-stage research have been abandoned or delayed as a result of the ruling. They do not provide counterfactual evidence based on products that were funded prior to the SBA ruling, which would have been excluded by the ruling. This would have added power to the cases.
The six companies do not provide a clear picture of the ruling’s impact. Two firms appear to be using venture capital funding to continue the research—in one case, funds were at least partly provided by Novartis Venture Funds. Two have been acquired. The remaining two did not appear to be working in the affected areas any more—which may be a direct result of the ruling.
As BIO claims, it also appears to be true that for five of the firms, the affected research did not involve their lead product. This raises questions about the likelihood that this research would have led to any commercial result, if only because data from the NRC survey and NRC case studies indicates that such outcomes are less likely than commercialization of lead products.
The surveys provide a somewhat more compelling picture. They suggest that a large majority of responding biotech companies would apply for NIH funding absent the ruling, and that most would not use the funds for their lead product.