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Mr. Obama, do you want more return for your ARRA investment? Put your bet on small to medium biotech!

Dear President Obama,

If you want to find the best place to put your stimulus dollars to work, don’t bet on big banks and big companies. And you’re probably better off avoiding the academic sector too. You should put your money where it will go to work immediately, yielding returns in the form of jobs and new medicines for improving human health. You should put your bet on biotech, and put the stimulus dollars to work in the small to medium biotech sector.

ARRA grant funding through the NIH and NSF was designed to stimulate the economy but it reveals a dangerous slant towards big universities.[1] The most recent report, published this month, shows that universities reaped vast amounts of ARRA funding (hundreds of millions per university), while small companies are few and far between on the list (averaging only a few hundred thousand per award and per company).

Why should you be concerned about this discrepancy, Mr. Obama? Because the report also shows that midsized biotech companies win over universities, in terms of number of people hired per ARRA dollar, hands down.

The ARRA report reveals that universities received 10 times more funding than biotech companies did through the ARRA act.[2] Despite receiving more funding, the universities only hired one person per award, while biotech companies hired two persons per award, on average. In short, biotech was able to do twice as much hiring than academic centers for ARRA funded programs.  Thus, small to mid-sized biotech companies (those eligible for NIH funding) win hands down in terms of rate of return per dollar on ARRA funding.

Why the discrepancy? Universities simply cannot respond to increases in funding in a rapid fashion. I know this, because I have experienced it. I am the part-time director of a university institute that received ARRA stimulus funding (the Institute for Immunology and Informatics, which can be found at http://www.immunome.org), and I have yet to be able to use the much of the funding I received due to my university’s painfully slow hiring practices. In contrast, I also received ARRA funding as a Biotech CEO at EpiVax, and that project is well under way, people have been hired, and we have tangible results. I’m not sure anyone has looked, but it’s my bet that the ARRA funds invested in universities are slow to turn into jobs, as it is likely that all university research teams face the same delays putting ARRA funds to work that I have experienced.

Biotech companies are a great investment for a number of reasons beyond hiring. Biotech has been growing steadily, despite the economy. That’s because biotech companies take the long view, knowing that it takes years to get a medicine to market, and that the return on investment is excellent. Biotech jobs are high value jobs, creating a ripple effect on the local economy whenever a hiring takes place. We’re also a great investment because we’re tried and true experts on fiscal responsibility  (unlike academic centers and large companies, we can only “eat what we kill”). And yet small to mid size biotech companies have benefited the least from the “stimulus” packages delivered to date.

It’s even more urgent to invest in the biotech sector because banks have put the squeeze on lending. Small biotech companies have been watching the economy deteriorate over the past few months with increasing concern. While we are often considered the most innovative sector of the economy, and have made many contributions that keep the country on the leading edge of research,  we also have many projects sitting idle due to constraints on funding – a situation only made worse by the credit crunch.

Mr. President, how can you quickly invest in small to midsize biotech? There’s a very easy way to get your ARRA dollars to start working. You can use the SBIR Phase I and Phase II grant mechanism to “reach back” and fund more projects that were deemed ‘meritorious’ by peer review but that did not reach the scoring cut off for funding. Doing so, you’ll be using the peer-review mechanism to sort wheat from chaff, and your funding will go to established small companies that can quickly hire and expand, while investing in translational research projects that will benefit human health.

So, if want to get the economy going again, Mr. Obama, put your bet on small biotech. If you put the funding where it can be acted on quickly, in the midst of the innovation engine, small to mid-sized biotech companies will be sure to act. We can hire quickly and we’re sitting on projects that we can’t support – every small biotech company probably has a whole list of grants that they’ve submitted and have been peer reviewed but fell just under the funding line – meaning that innovative ideas are sitting idle, while ARRA funded academic centers struggle to hire. Those idle ideas are also the ones most likely to translate into real gains for human health.

Mr. President, we’re standing ready to improve the economy. Invest your ARRA dollars in small to midsized biotech.

Annie De Groot M.D.

For a slide set describing the results of our analysis, click here: files.me.com/anniedg/tsw7di

CEO, EpiVax, Inc.

Providence, Rhode Island.


[1] This analysis was performed on the ARRA report of September 20th, 2010, for NIH grants awarded to institutions starting with A, a convenience sample. See

http://www.recovery.gov/FAQ/Pages/DownLoadCenter.aspx to download the entire database.

[2] As best I can tell, since the report has more than 300,000 entries and companies are not separated from universities, so the tallying has to be done by hand count.  I’d welcome a more detailed comparison!