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Asuragen's groundbreaking research funded with help from grants program Unlocking the code for federal research grants

Awardee Story Asuragen's groundbreaking research funded with help from grants program Unlocking the code for federal research grants

Source: bizjournals ( click here to go to the source)

Matt Winkler wants to grow his Austin biotechnology company without giving up any more equity, which rules out new venture capital.

Winkler's funding solution has been a mixture of sources that includes a heavy dose of federal grants made specifically to small businesses to support research with potential for commercialization.

Since 2006, his molecular-diagnostic company, Asuragen Inc., has received more than $11 million in such funds, known as Small Business Innovative Research grants.

The SBIR program, involving 11 federal departments and administered by the U.S. Small Business Administration's Office of Technology, is designed to ensure that small businesses are part of federal government research and development efforts. Asuragen's grants have come from the National Institutes of Health, which like other agencies in the program, must set aside a percentage of its research budget for small business.

Asuragen's funding levels have consistently placed it first or second in the ranking of Texas companies receiving such grants, Winkler says. Last year, among its grant awards, was one to help develop diagnostic tests for several types of cancer.

Competition for the grants has heated up as the climate for private fundraising has chilled, says Fred Patterson, president of Commercialization Funding Coach Inc. of Flower Mound, Texas. About 10 percent of SBIR applications receive funding, says Patterson, who works with companies trying to win grants.

To win its funds from the SBIR, Asuragen takes a long-term approach, Winkler says.

It enlists a grant coordinator to assist scientists and researchers in writing grant applications and shepherd the application process, which can take a full year. But that's not all.

Once awarded, SBIR grants require the company to file accounting reports outlining financials. Asuragen scientists must file annual reports detailing their research, Winkler says.

"Some companies look at SBIR as free money. We don't," he says. "It's control; the SBIR furthers the corporate goals of the company. Our strategy is not to apply for any grant we wouldn't fund ourselves."

Last year, Asuragen and sister company Mirna Therapeutics Inc. received $3.8 million in SBIR grants.

Winkler, a serial entrepreneur, has founded or co-founded three biotechnology companies.

His first, Ambion Inc., grew to nearly 400 employees and $57 million in revenue before Applied Biosystems Group acquired it in 2006 for $273 million.

Ambion's research-products division, which developed products for the study and analysis of RNA, was spun off and acquired by Winkler and other investors for $45 million.

Winkler says his biggest risk has been selling a profitable and fast-growing company in the "research tools" space to try to do something significant about cancer.

Today, Asuragen continues its work with RNA, the central molecule used in gene expression and regulation. It specializes in molecular diagnostics for cancer and genetic diseases.

In 2008, when Mirna was getting closer to identifying lead micro-RNA candidates - molecules that are essential in cell regulation - Winkler decided to spin off the company from Asuragen. Mirna has since won a $5 million award from the $200 million Texas Emerging Technology Fund - one of the largest in the ETF's history - to continue its micro-RNA work.

Mirna plans to seek an additional $15 million in private funding next year.

Jessica Hanover, bioscience director at the Austin Technology Incubator, says during the recession SBIR money has become especially crucial to early-stage companies. It enables them to develop proof of concept without diluting ownership.

But grant recipients are still held accountable for the capital they receive, Hanover says.

"All money you get has something attached to it," she says. "People want to know how the money was spent and if it has created value."

Winkler says he has learned that a therapy company attracts a different kind of investor than a diagnostics company.

"Diagnostics makes widgets," he says, "They sell them and have revenues." By comparison, a therapeutics company is a longer-term investment, depending on approval of the drug under development by the Food and Drug Administration.

In 2007, Asuragen closed on an $18.5 million Series B round of venture funding from PTV Sciences, Telegraph Hill Partners and Growth Capital Partners. Last year, in addition to SBIR funding, it received grants from Small Business Technology Transfer and American Recovery and Reinvestment Act funded initiatives of the NIH.

Winkler says meeting NIH requirements has enabled Asuragen to flourish while charting its own course without the demands of increased venture capital.

"It's a good program, and it helps us grow," he says. "It's also a great deal for the government because it creates jobs and high-value companies and generates new technology for the treatment of diseases."

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