As 2023 comes to a close, it’s an honor to share some trends we’ve observed in the life sciences grant and equity markets with a particular focus on the last 12 months that inform the next 12 months and beyond.
Of all the dynamics at play, the biggest are the positive impact is ARPA-H that is more than offset by the chilling equity markets. On the favorable side, and with billions to spend and a focus on revolutionary advancement versus evolutionary impact, the program has been active and seen significant traction, though nowhere near reaching total spending goals. We’ve been very busy supporting Abstracts and, more selectively, full submissions. The Agency is now essentially fully staffed with their mission offices and is a growing source of SBIRs and larger awards for academics and companies alike.
Source: SVB, JP Morgan
The VC equity markets have course-corrected in a significant way in the last 18 months. If it feels like the decline since the most recent heyday on record is the worst in over 20 years, you would be correct. While the total dollars remain high(er) than 24 months ago, the decline is worse than the dot-com crisis and the Global Financial Crisis (GFC). What’s a CEO to do? Preserve dry powder and pursue non-dilutive funding.
The SBIR program remains the gold standard for economic impact and leading innovation that preserves equity for founders and early-stage management teams. The benefits of the SBIR program are renowned and notable as government programs go. SBIR waters are choppier than ever due to a down-to-the-wire reauthorization in March, budgets that are hamstrung by congressional deadlock, and increases that don’t keep pace with inflation. However, that is all behind us now. If you keep above the fray, America’s Seed Fund (SBIR), programs like ARPA-H, and selective large contracts from NIH and DoD all remain the most significant programs driving innovation leadership and economic security for the United States across all government programs.
These benefits are recognized, and as a result, it’s getting tougher to get an Award, on average. Longitudinal trends show lower success rates for all NIH SBIR/STTR programs, driven by a greater volume of submissions and a higher quality of average submissions. The total average success rate for the most recent 10 years was 18% versus 23% in the 10 years prior to that, despite 2023 showing a slight uptick after dropping significantly during COVID. Similar trends exist for the last five years. It’s worth noting that Grant Engine’s win rate increased during these time periods.
The “Big Five” institutes (NIAID; NCI; NIA; NHLBI; NIGMS) continue to hold the lion’s share of funding from the NIH SBIR program, granting out 65% of the total $1.3 billion in 2023. Select segments of NIH SBIR funding are showing better than average funding increase per annum for the last 5 years, including the National Institute of Mental Health at 11% (combatting suicide, Autism, other mental health conditions); National Institute of Aging at 10% (Alzheimer’s, digital health), and NIDA with an 8% increase per year (opioid sparing, combating addiction). Average annual growth across institutes was 4%, with many trudging along at 2% or less over the last 5 years.
What to expect in 2024 and beyond:
Anticipate stable or slightly declining average success rates. If the trend of increasing submission volumes continues, we’ll see a further decrease in success rates, necessitating more competitive and innovative proposals and your historic similar win rates.
High-impact innovation wins if you know what you’re doing. A tried and true aspect of the SBIR/STTR program is that profound breakthroughs will receive funding. Whether it’s immunoncology, CRISPR or gene editing, continued progress in precision medicine, or clinical applications of genomic sequencing, the product classes that are pioneering big advancements and entering the commercialization phase will consistently garner funding.
The leading innovations that will gain momentum in 2024 and beyond include Synthetic Biology, Microbiome, RNA-based Therapies, Precision Medicine, and Cell and Gene Therapy Manufacturing Innovations. Another noticeable trend is the surge in grant submissions focusing on telehealth and remote patient monitoring technologies that are clinically relevant. Driven by COVID-19 social distancing dynamics and underpinned by an aging demographic, the acceleration of the adoption of telehealth services spotlights the need for scalable and secure health-related communication tools. Life sciences startups are responding with solutions that not only offer remote care but also utilize advanced analytics to improve patient outcomes and personalize care.
2024 is sure to be a roller coaster ride, as most election years tend to be. We’re here to support you if you’re focused on non-dilutive funding and are serious about playing to win. Reach out to us if you’d like to talk.