The 2009 U.S. American Recovery and Reinvestment Act (ARRA) has many life science tool companies abuzz with anticipation of new research funds helping their firms reverse the damages of the economic recession. The 2009 economic recovery bill contains $10.4 billion dedicated to the U.S. National Institutes of Health (NIH).
The ARRA funding marks the first significant increase in the NIH budget since the doubling of funds from 1998 to 2003. The $10.4 billion has been allocated to several priorities, including:
- $7.4 billion split among institutes, centers, and the Common Fund for
scientific research projects
- $0.8 billion to the Office of the Director for research priorities, including Challenge Grants
- $0.3 billion for shared instrumentation and other capital equipment
- $1.0 billion for extramural construction, repairs, and alterations
- $0.5 billion for NIH buildings and facilities
- $0.4 billion for Comparative Effectiveness Research
Of greatest interest to life science vendors are the research-directed awards ($7.4 and $0.8 billion) and instrumentation grants ($0.3 billion), which total $8.5 billion (Figure). With an estimated 15 to 25% of research grants used for purchasing reagents and equipment and 100% of capital equipment grants being spent on instrumentation, life science vendors can expect researchers to spend roughly $1.5 to $2.4 billion on products over the next two to three years. With grant application deadlines nearing, market participants are asking the $2 billion question: Which companies will benefit most?
The $8.2 billion directed toward the institutes, centers, Common Fund, and Office of the Director for research priorities will generate the greatest revenues for life science vendors. Companies can expect between $1.2 to $2.1 billion of these funds to be spent on reagents and instruments. Therefore, both life science reagents and instrument providers will benefit. Companies offering complete workflows in key research areas are expected to experience the greatest gains.
In addition to research-directed funds, the National Centers for Research Resources (NCRR) will distribute $300 million in ARRA funds dedicated to helping researchers purchase instrumentation. NCRR will divide its instrumentation funding into two categories: high-end instrumentation grants for a single item that costs at least $600,000 and a maximum of $8 million, and the shared instrumentation grant program for equipment in the range of $100,000 to $500,000.
NCRR listed several examples that fell into the high-end instrumentation category, including structural and functional imaging systems, macromolecular NMR spectrometers, high-resolution mass spectrometers, cryoelectron microscopes, and supercomputers. NCRR also listed instruments that may fall under the shared instrumentation grant program for equipment in the range of $100,000 to $500,000. These suggestions include confocal and electron microscopes, biomedical imagers, mass spectrometers, DNA sequencers, biosensors, cell sorters, x-ray diffraction systems, and NMR spectrometers among others.
While certain product portfolios lend themselves to attracting stimulus fund grantees, perhaps even more important is a company’s history with academia and government institutions as customers. Life science vendors enjoy a mixed customer base, including academic and government labs, biotechnology and pharmaceutical companies, clinical research labs, hospitals, clinical diagnostic companies, forensic laboratories, food testing and agricultural labs, as well as other applied testing and niche fields.
However, those companies that have established relationships in academia and government institutions and generate a majority of their revenues from those customer bases will have an advantage over vendors catering to private industry. While grantees may alter their vendor preferences to seek out new and previously unattainable instruments, they are unlikely to vary their loyalties for reagents. Therefore, companies that historically targeted the private industry may find that it is too late to make a presence in academia to influence purchasing decisions.