Biotech grants stretched thin

A $1 billion fund created as part of the health-care overhaul legislation was divided among thousands of biotechnology companies last week, including dozens in the Washington area, to spur research and development of new treatments for cancer and other often-fatal diseases.

But with so many companies applying for a share of the money, many firms got much smaller allotments than requested and said the financial boost won't go as far as they had initially hoped.

Rockville-based RegeneRx received three grants for work on therapies to repair tissue and organ damage, totaling just over $733,000. President and chief executive J.J. Finkelstein said the company sought $5 million, the most a single company was eligible to receive.

"We're really excited and pleased we got that amount of money," Finkelstein said. "We're obviously somewhat disappointed we didn't get the full amount we were eligible for because the program was so oversubscribed."

As part of the Qualifying Therapeutic Discovery Project Program, a biotech company with fewer than 250 employees could apply for a grant or tax credit to cover research costs incurred during 2009 or 2010 for projects that have the potential to prevent, diagnose or treat chronic or debilitating diseases.

The program amassed 5,600 applications by the July 21 deadline, all of which had to be reviewed and decided on by the National Institutes of Health and Internal Revenue Service no later than Oct. 29, per a congressional mandate. All projects that met the criteria outlined by Congress were awarded money, and ultimately 4,606 projects from 2,923 companies were deemed eligible.

"It was an indication of the great opportunity and interest that there were so many applications received," NIH Director Francis S. Collins said on a conference call with reporters. "Of course, with a $1 billion total amount of money available and with so many of the applicants being judged as entirely appropriate for this program, it was not possible to make awards as large as $5 million."

In fact, the most money a company could receive for any one project was $244,479.24. Companies that received more than that amount, such as RegeneRx, were given awards for multiple drug-development efforts.

Biotechnology and life science companies often struggle to secure financing, particularly in a down economy, because they present high-risk opportunities for investors. Research, clinical trials and regulatory reviews are cash-intensive and time-consuming with the promise of returns often years away.

"The companies that qualify for this credit can leverage those dollars to get access to more financing," Treasury Secretary Timothy F. Geithner said on the call. "It's our expectation this credit will give a particular boost to biotech start-ups, which typically have a more difficult time generating operating capital."

But some executives said they had hoped the program would have a more substantial impact on their balance sheets because of the potential to receive as much as $5 million. While any investment is helpful, they said, the amount matters.

"We would think of it more as a reimbursement for costs, so from that point of view everything helps," said Richard Garr, president and chief executive of Rockville-based Neuralstem, which develops therapies based on stem cells. "These are not enabling grants...these are for actual expenses you have already incurred or were committed to incur in the near future."

Finkelstein added: "The fair answer is: Does it have an impact? Yes. Is it the be-all, end-all? No."