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No strings attached: COVID-19 pandemic raises profile of non-dilutive funding for life science companies

By Jane Byrne contact

- Last updated on GMT

© GettyImages/Tanaonte
© GettyImages/Tanaonte

Related tags: BARDA, Nih, COVID-19, non-diluted funding, mRNA

US government non-dilutive funding has played a key role in the accelerated development of the COVID-19 vaccine.

Moderna, Pfizer and other companies have been able to develop COVID-19 vaccines in a fraction of the time because much of the research and development work around mRNA technology had already been conducted for Zika, and funded by US federal agencies, says the FreeMind Group, a consulting firm specializing in assisting life science companies secure non-dilutive funding.

In the past few years, Moderna’s mRNA vaccine technology has received millions of dollars from the US National Institutes of Health (NIH), and from Biomedical Advanced Research and Development Authority (BARDA), for example.

Such non-diluted funding, from both US government agencies and from private foundations, is a crucial part of scientific development, allowing for an ongoing development process of drugs, devices, vaccines and therapeutics. It has helped prepare the world for medical crises like COVID-19, says Ram May-Ron, managing partner at FreeMind, on a call with BioPharma-Reporter. 

“The importance of non-dilutive funding as a strategic source of capital has become even more important over the past few months. Looking into the solutions we have now against COVID-19, a question often asked, over the past 12 months, was how a company could put a vaccine together so quickly – well, the truth is, they didn’t. In fact, the mRNA-based vaccines were 12 to 13 years in the making.

“If you look into early stage support of all the work done around mRNA technology, you will see that the NIH, way back in 2008, was supporting the development of mRNA as a therapeutic approach; this was very early stage research, with some 452 projects funded, totalling around US$165m.

“If you look specifically into mRNA-based vaccine development work, the NIH supported 39 projects [to the tune of] US$48m.”

Overall, about US$50bn in non-diluted funding is awarded every single year in the US to support R&D work within the life sciences – for any field and for every stage of development – even early stage, exploratory type research and up to late stage clinical trials, he said.

“A lot of money can be won. And this money is complementary – it does not conflict with venture capital sources, or angel investment or private equity money.

“Moreover, while an investor typically looks for a return on that investment, with the money awarded to companies through the NIH or the US Department of Defense, the questions are primarily scientific, and that allows a great deal of flexibility for researchers to present their ideas, to push forward science and innovation that might not be supported through other means.”

No strings attached

Generally speaking, non-diluted funding is no strings attached, say May-Ron.

Non-dilutive funds allows founding teams and existing shareholders to retain company ownership and control. And, as many non-dilutive funding sources require approval from expert reviewers with deep knowledge of the field, this process also enables important validation of a biotech’s science, its technology.

“With NIH non-diluted funding submissions, for example, applications are put through two cycles of review by external assessors prior to a decision being made on funding.

“Having your early stage research, your science, validated by the top researchers in the world, in your field, with such experts determining to what extent your company’s technology is sound, that it makes sense, shows the value of this process, and that the benefits accrued often go beyond the actual funding amount received,”​ said May-Ron.

In summary, there are significant de-risking gains from going through this process, both for the companies themselves and for the investors supporting those entrepreneurs as well, he added.

Charting a course

FreeMind works with about 250 companies every year, helping them to navigate the non-dilutive funding landscape, with it supporting around 700 applications annually.

“Almost 70% of our clients are American, the remainder are primarily European and around 5% of our clients would be from other regions such as Israel, Canada and Australia. They are, in the majority, early to mid-stage life science companies, a lot of startups, companies involved in innovation in what is a very risk-orientated field.”

Why would they need a consultancy to guide them through this process?

“After more than 20 years of doing this, we know how to write an application.”

One of the major elements involved in submissions for non-dilutive funding is knowing which institute or program would be appropriate, and this is where an agency like FreeMind can step in, says May-Ron.

“Take Alzheimer's disease, for example, where there are multiple sources of non-diluted funding available in the US – five or six different institutes, with various programs - pockets of money - that support different elements of the research relating to this illness, ranging from the National Institute of Neurological Disorders and Stroke (NINDS) under the NIH, to the National Institute on Aging (NIA) to the CDMPR under the Department of Defense.

“We understand the ecosystem. We communicate with these funders. We can map out the opportunities for clients, as we know what is out there, and where to go, based on a life science company’s needs, and its strategy,”​ said May-Ron.

There is still a huge lack of awareness among CEOs and executive officers in life science companies though about non-dilutive funding, about how to access it, and the real value it brings, said the consultant.

A lot of startups, no matter the sector, tend to be overly focused on angel investment and venture capital as the go to funding sources, he added.

“Furthermore, life science companies, outside of the US, often believe they are not eligible for US government funding.”

The agency is trying to change that mindset, running educational webinars and a free event every year on non-dilutive funding where program officers and industry can interact.

Ayal Ronen, vice president, marketing, sales, and business development, FreeMind, said another value add that the consultancy brings is being able to put life science companies in a position whereby they can take “multiple shots at goal”,​ whereby they are able to execute up to 8-10 applications per year.  “A multi-submission approach is the best way to win awards.”

Key actions companies should consider when applying for US non-diluted funding:

  • Start by defining each of your R&D pipeline projects; current stage of development, specific aims, methodology, milestones, and budgetary requirements.
  • Identify and prioritize all relevant funding opportunities for each pipeline project. This could be multiple funding opportunities from a single agency and/or multiple agencies open to funding a specific area of interest.
  • Communicate with the agencies to establish relevance and interest.
  • Devise a long-term multi-submission granting strategy. Statistically, the more shots on goal, the higher the chances you will ultimately secure funding.
  • Execute the strategy over time meeting multiple deadlines throughout the year.
  • Learn from the process, improve from submission to submission, and thoroughly address comments from reviewers when required.
  • Invest the necessary time and effort required to maximize your funding potential from non-dilutive sources.

Source: The FreeMind Group 

Virtual summit – insights gleaned

Guy Har-Chen, vice president, client strategy, FreeMind, provided us with the key takeaways for the life science industry and for funding program officers from the company’s 16th Annual Non-Dilutive Funding Summit, held virtually on January 13, 2021.

“From the government agency standpoint, we see that they are really open to discuss issues with innovators, with companies. They want to interact with applicants pre-and-post submissions. They also shared thoughts in terms of future directions, with some of the agencies providing more specifics that others.”

The BARDA officials present mapped out what the agency is looking to fund, he said.

That agency will be focusing on funding innovation in logistics to facilitate optimal vaccine distribution. Sepsis is another area BARDA is keen to support; it is aiming to reduce the incidence, morbidity, mortality, and cost of sepsis by investing in key strategic areas. Moreover, the organization will be looking to fund efforts to optimize digital health technologies, such as ways to improve online interaction between physicians and patients.  

Ram May-Ron

Ram May-Ron is managing partner at FreeMind, leading both marketing and business development efforts, as well as managing its professional services activities. Ram has more than 15 years of experience as a leading strategic analyst, both in the business and political sectors. He has led a strategic consulting firm and has served as a top strategy adviser to several international organizations and elected political officials. Ram holds a Masters of Entrepreneurship and Innovation, International Business Management (MEI) from Australia’s Swinburne University of Technology. He also holds a Masters in International Relations, focusing on strategic decision making processes, from the Hebrew University of Jerusalem, winning the International Relations Department’s academic excellence scholarship.

 

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