Is Non-Dilutive Funding the Key to Extending Runway in Biopharma and Biotech?

Since venture investment in life science companies began to slump in 2021, biopharma companies have tightened their belts notch by notch to squeeze more utility from each cent and extend their runways. In this environment, non-dilutive funding has become ever more important, especially for small and mid-sized companies.

As coffers have diminished, life science companies respond in a variety of ways. Many, like Mereo, lay-off staff. Some, like X4 Pharmaceuticals, put important side projects on ice. Some pivot away from developing platforms, which requires significant initial investment, and toward developing products, where they can target specific R&D goals with their capital and they’re more likely to see near-term ROI. Some sell regional licensing rights to fund operations through their next R&D inflection point. And so on.

Each strategy may keep the company alive but also entails a trade-off that reduces expectations for future gains. And in some cases, there is no way forward but to make such a compromise. However, in many cases, non-dilutive funding from US federal agencies such as NIH, NSF, FDA, BARDA, and DOD, has allowed companies to avoid making painful compromises.

At FreeMind in 2022 we have helped dozens of companies with $10-50 million in existing capital to win federal grants and contracts of $1-6 million each. These non-dilutive awards have allowed them to extend their runways by 10-20%, to retain their talent, to keep side projects which otherwise would have been cut, to continue developing platforms, and to avoid deals which will compromise their valuation in the future. Non-dilutive funding awards have been impactful, enabling companies to pursue their long-term plans and maximizing their future potential. (Recall that Milken Institute study which found that every $1 a company received in NIH investment, it received $8.38 in private sector investment within 8 years.)

Of course, the non-dilutive funding market is competitive. While the Biden administration has increased the amount of available funding, the number of grant applications has also increased. Based on available data about NIH applications, at FreeMind we estimate that grant applications to NIH will number about 59,000 and that SBIR applications to NIH will exceed 8,000. The result will be success rates below 20% for NIH grant applications overall and below 15% for NIH SBIRs. Compare these to the overall success rates during the years 1997-2003, when they exceeded 30%!

As such, companies must enter non-dilutive funding competitions well-prepared. They need:

  1. Outstanding science
  2. Thorough knowledge of the full range of non-dilutive funding opportunities available to them
  3. A long-term multi-submission granting strategy
  4. Excellent applications.

If you wish to learn more about how FreeMind can help your company with items 2, 3, and 4, drop us a quick message.