WASHINGTON – The Small Business Innovation Research (SBIR) program is about to get a lot more competitive. And that should improve the quality of proposals and spur innovation in a program that provides much-needed funding to small biotechs, the Small Business Administration (SBA) said.
Under its proposed rule to implement the major program changes mandated by Congress late last year, the SBA expanded the eligibility criteria to include companies majority-owned by venture capitalists. It also loosened the definition of domestic ownership, which means more companies would qualify to compete for SBIR grants. (See BioWorld Today, Dec. 5, 2011, and Dec. 16, 2011.)
When Congress reauthorized the program last year, it stipulated that up to 25 percent of SBIR grants awarded by the National Institutes of Health, Department of Energy and the National Science Foundation could go to companies that are majority owned by multiple venture capitalists, private equity firms or hedge funds.
In proposing the rules to implement the changes, the SBA said it sought to simplify and streamline the SBIR ownership and affiliation criteria, providing bright-line tests to help companies, with 500 or fewer employees, determine if they're eligible to participate in the grant program. The proposed rule is open for public comment through July 16.
Currently, SBIR-eligible companies must be at least 51 percent owned and controlled by U.S. citizens, permanent residents or another "domestic" business, which is defined as one that is at least 51 percent owned and controlled by citizens or permanent residents.
The proposed rule reduces that percentage to 50 percent and allows majority ownership by multiple domestic venture capitalists, hedge funds or private equity firms. The rule redefines a domestic concern as one that:
• is for profit;
• has a place of business in the U.S.;
• operates primarily in the U.S. or makes a significant contribution to the U.S. economy through taxes or use of American products, materials or labor;
• is created or organized in the U.S., or under U.S. or state law.
The rule also would change the timing of eligibility to when a company submits a proposal. Under the current program, a company's size and eligibility is determined when the award is made. By providing a "date certain," the SBA said the change will ensure that only eligible small businesses are considered for SBIR funding and will help prevent fraud, waste and abuse of the program.
The SBA's bright line begins to fade in its definition of affiliations, which are counted in determining a company's size. Biotechs that are spinouts, joint ventures or owned by venture firms could be knocked out of competition where that line dims. The SBA considers companies with common management as affiliates. When one or more officers, managing members, general partners or board members of one firm also control management of another business, the two companies are deemed affiliates. That also could be a sticking point with some licensing agreements.
While no comments have been posted yet on the proposed rule, the Biotechnology Industry Organization (BIO) told BioWorld Today that it will seek clarification of some technical issues regarding how the SBA calculates ownership percentages. BIO also will recommend more consistent bright-line tests in determining ownership and affiliation to ensure the congressional intent of making SBIR funds available to small companies with majority venture capital ownership is carried out in the final rule.
House Tackles FDA Budget
While the House and Senate versions of the PDUFA package are still in line awaiting the attention of a conference committee to reconcile their differences, a few House committees spent last week playing catch-up with the Senate on the FDA budget and bills to stiffen the penalties for stealing or counterfeiting drugs.
The draft fiscal 2013 budget bill marked up by a House Appropriations subcommittee was somewhat in line with the FDA budget passed by the Senate Appropriations Committee in April, but both are considerably less than the $4.5 billion the FDA requested. (See BioWorld Today, Feb. 14, 2012.)
The House subcommittee proposal would give the FDA slightly more than $3.83 billion, with nearly $1 billion of that going to the Center for Drug Evaluation and Research (CDER) and $316.1 million targeted for the Center for Biologics Evaluation and Research (CBER). The proposal specifies that at least $52.5 million of CDER's budget must go to the Office of Generic Drugs.
The Senate bill would give the agency nearly $3.88 billion – about $44 million more than the House bill – but CDER wouldn't fare quite as well. It would receive $984.2 million under S. 2375, and CBER would get $331 .4 million.
In proposing its 2013 budget, the FDA asked for a 17 percent increase from its current budget of about $3.75 billion. All but 2 percent of the increase would be covered by new and expanded user fees, it said. The agency broke its request down by initiative, rather than by center. Under the Protecting Patients Initiative, for example, CDER would get $471.3 million and CBER would receive $209.5 million.
In other legislative action, the House Judiciary Committee passed H.R. 3668, which put the penalties for counterfeiting prescription drugs on a par with counterfeiting military goods. Currently, the penalty for counterfeiting drugs matches that of bootlegging a DVD or video.
Under the marked-up bill, individuals could face up to $5 million in fines and 20 years in prison for a first offense and $15 million with 30 years in prison for subsequent offenses. Businesses would face fines of up to $15 million for a first offense and $30 million for subsequent offenses.
The Senate passed a similar bill, S. 1886, in March. (See BioWorld Today, March 9, 2012.)
The House Judiciary Committee also approved the SAFE Doses Act, H.R. 4223, to stiffen the penalties for stealing drugs. The Senate Judiciary Committee approved its version, S. 1002, in March. (See BioWorld Today, March 5, 2012.)
Vertex Topic of SEC Letter
Vertex Pharmaceuticals Inc.'s explanation of why its executives sold shares during a spike resulting from an analysis oops isn't sitting well with at least one senator.
Citing a "potentially troubling issue for investors in the pharmaceutical industry and for the federal government," Sen. Chuck Grassley (R-Iowa) wrote to the SEC last week to "apprise" it of the incident. While Grassley stopped short of requesting an investigation, he did ask for a briefing should the SEC take action against the Cambridge, Mass.-based company.
Grassley isn't troubled by Vertex's misinterpretation, and subsequent correction, of Kalydeco (ivacaftor) trial data that sent the biotech's stock soaring. He's upset by reports that five executives and two directors sold off millions of dollars of shares during the spike in stock value that followed. (See BioWorld Today, May 30, 2012.)
Vertex claimed that most of those stock sales stemmed from pre-existing plans, 10b5-1s, that allow company officials to automatically exercise options and sell certain shares at regular intervals or set prices. Despite that explanation, Grassley said, "it could appear that these Vertex executives potentially took advantage of the spike in the stock knowing the news of the clinical data being overstated would be made public eventually, which in turn would negatively affect the stock value."
Celebrex Loses FAP Indication
The FDA is pulling its 12-year-old accelerated approval for Pfizer Inc.'s Celebrex to treat familial adenomatous polyposis (FAP), because the postmarketing study required to verify the clinical benefit was not completed. Celebrex (celecoxib) was approved for FAP in 1999. When the agency wrote to Pfizer in February 2011 requesting a voluntary withdrawal of the indication, Pfizer acquiesced the next day. The withdrawal, announced Friday, does not affect the approval of other Celebrex indications.