[Congressional Record Volume 151, Number 80 (Thursday, June 16, 2005)]
[Senate]
[Pages S6758-S6759]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BOND:
  S. 1263. A bill to amend the Small Business Act to establish 
eligibility requirements for business concerns to receive awards under 
the Small Business Innovation Research Program; to the Committee on 
Small Business and Entrepreneurship.
  Mr. BOND. Mr. President, the United States biotechnology industry is 
the world leader in innovation. This is due, in large part, to the 
Federal Government's partnership with the private sector to foster 
growth and commercialization in the hope that one day we will uncover a 
cure for unmet medical needs such as cystic fibrosis, heart disease, 
various cancers, multiple sclerosis, and AIDS.
  However, the industry was dealt a major setback last year when the 
Small Business Administration--SBA--determined that venture-backed 
biotechnology companies can no longer

[[Page S6759]]

participate in the Small Business Innovation Research--SBIR--program. 
Prior to the SBA's decision, the SBIR program was an example of a 
highly successful Federal initiative to encourage economic growth and 
innovation in the biotechnology industry by funding the critical 
startup and development stages of a company.
  Traditionally, to qualify for an SBIR grant a small business 
applicant had to meet two requirements: one, that the company have less 
than 500 employees; and two, that the business be 51 percent owned by 
one or more individuals. Now, according to the SBA, the term 
``individuals'' means natural persons only, whereas for the past 20 
years the term ``individual'' has included venture-capital companies. 
As a result, biotech companies backed by venture-capital funding in 
Missouri and throughout our Nation, who are on the cutting edge of 
science, can no longer participate in the program.
  The biotech industry is like no other in the world because it takes 
such a long span of time and intense capital expenditures to bring a 
successful product to market. In fact, according to a study completed 
by the Tufts Center for the Study of Drug Development, it takes roughly 
10-15 years and $800 million for a company to bring just one product to 
market. As you can imagine, the industry's entrepreneurs are seeking 
financial assistance wherever they can find it.
  For the past 20 years, the SBIR program has been a catalyst for 
developing our Nation's most successful biotechnology companies. In 
addition to these important government grants, venture capital funding 
plays a vital role in the financial support of these same companies. 
The strength of our biotechnology industry is a direct result of 
government grants and venture capital working together.
  However, some have argued that a biotech firm with a majority venture 
capital backing is a large business. This is simply a bogus conclusion. 
Venture capital firms solely invest in biotech start-ups for the 
possibility of a future innovation and financial return and generally 
do not seek to take control over the management functions or day-to-day 
operations of the company. Venture capital firms that seek to invest in 
small biotech businesses do not, simply by their investment, turn a 
small business into a large business. These are legitimate, small, 
start-up businesses. Let's not punish them.
  Instead, we must work together to avoid stifling innovation. Let me 
be clear. Our impact today will foster cures and medicines tomorrow 
that were once thought to be inconceivable. However, the industry 
cannot do it alone. We must nurture biotechnology and help the industry 
grow for the future of our economy and for our well-being.
  This bill that I am introducing today will do just that. It will 
ensure that the biotechnology industry has access to SBIR grants, as it 
has had for 20 years. It will level the playing field to ensure that 
SBIR grants are given to small businesses based on fruitful science and 
nothing else. This is still a young and fragile industry, and we are on 
the cusp of great scientific advances. However, there will be profound 
consequences if biotechnology companies continue to be excluded from 
the SBIR program.
  Mr. President, I ask unanimous consent that text of the bill be in 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1263

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Save America's Biotechnology 
     Innovative Research Act of 2005'' or ``SABIR Act''.

     SEC. 2. ELIGIBILITY FOR PARTICIPATION IN SMALL BUSINESS 
                   INNOVATION RESEARCH PROGRAM.

       (a) In General.--Section 9 of the Small Business Act (15 
     U.S.C. 638) is amended by adding at the end the following new 
     subsection:
       ``(x) Eligibility for Participation in SBIR Program.--
       ``(1) In general.--To be eligible to receive an award under 
     the SBIR program, a business concern--
       ``(A) shall have not more than 500 employees; and
       ``(B) shall be owned in accordance with one of the 
     ownership requirements described in paragraph (2).
       ``(2) Ownership requirements.--The ownership requirements 
     referred to in paragraph (1) are the following:
       ``(A) The business concern is--
       ``(i) at least 51 percent owned and controlled by 
     individuals or eligible venture capital companies, who are 
     citizens of or permanent resident aliens in the United 
     States; and
       ``(ii) not more than 49 percent owned and controlled by a 
     single eligible venture capital company (or group of 
     commonly-controlled eligible venture capital companies).
       ``(B) The business concern is at least 51 percent owned and 
     controlled by another business concern that is itself at 
     least 51 percent owned and controlled by individuals who are 
     citizens of or permanent resident aliens in the United 
     States.
       ``(C) The business concern is a joint venture in which each 
     entity to the joint venture meets one of the ownership 
     requirements under this paragraph.
       ``(3) Employee defined.--For purposes of paragraph (1)(A), 
     the term `employee' means an individual employed by the 
     business concern and does not include--
       ``(A) an individual employed by an eligible venture capital 
     company providing financing to the business concern; or
       ``(B) an individual employed by any entity in which the 
     eligible venture capital company is invested other than that 
     business concern.
       ``(4) Treatment of other forms of ownership.--
       ``(A) Stock option ownership.--For purposes of this 
     subsection, in the case of a business concern owned in whole 
     or in part by an employee stock option plan, each stock 
     trustee or plan member shall be deemed to be an owner.
       ``(B) Trust ownership.--For purposes of this subsection, in 
     the case of a business concern owned in whole or in part by a 
     trust, each trustee or trust beneficiary shall be deemed to 
     be an owner.
       ``(5) Exception for start-up concerns.--Notwithstanding 
     paragraphs (1) through (4), any business concern that is a 
     start-up concern shall be eligible to receive funding under 
     the SBIR program.''.
       (b) Definitions.--Section 9(e) of the Small Business Act 
     (15 U.S.C. 638(e)) is amended by adding at the end the 
     following new paragraphs:
       ``(9) The term `eligible venture capital company' means a 
     business concern--
       ``(A) that--
       ``(i) is a Venture Capital Operating Company, as that term 
     is defined in regulations promulgated by the Secretary of 
     Labor; or
       ``(ii) is an entity that--

       ``(I) is registered under the Investment Company Act of 
     1940 (15 U.S.C. 80a-51 et seq.); or
       ``(II) is an investment company, as defined in section 
     3(c)(14) of such Act (15 U.S.C. 80a-3(c)(14)), which is not 
     registered under such Act because it is beneficially owned by 
     less than 100 persons; and

       ``(B) that is not controlled by any business concern that 
     is not a small business concern within the meaning of section 
     3.
       ``(10) The term `start-up concern' means a business concern 
     that--
       ``(A) for at least 2 of the 3 preceding fiscal years has 
     had--
       ``(i) sales of not more than $3,000,000; or
       ``(ii) no positive cash flow from operations; and
       ``(B) is not formed to acquire any business concern other 
     than a small business concern that meets the requirement 
     under subparagraph (A).''.
       (c) Regulations.--Before the date that is 90 days after the 
     date of the enactment of this Act, the Administrator of the 
     Small Business Administration shall--
       (1) in accordance with the exceptions to public rulemaking 
     under section 553(b)(A) and (B) of title 5, United States 
     Code, promulgate regulations to implement the provisions of 
     this Act;
       (2) publish in the Federal Register a notification of the 
     changes in eligibility for participation in the Small 
     Business Innovation Research program made by this Act; and
       (3) communicate such changes to Federal agencies that award 
     grants under the Small Business Innovation Research program.
       (d) Effective Date.--The amendments made by this Act shall 
     apply with respect to any business concern that participates 
     in the Small Business Innovation Research program on or after 
     the date of the enactment of this Act.
                                 ______