Frequently Asked Questions for the Accelerator Loan Program

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Accelerator Loan Program

What is the Massachusetts Life Sciences Center?

The Massachusetts Life Sciences Center (Center) is a quasi-public agency of the Commonwealth of Massachusetts that is tasked with implementing the Massachusetts Life Sciences Initiative, a $1 billion initiative that was signed into law in June of 2008. The Center’s mission is to create jobs in the life sciences and support vital scientific research that will improve the human condition. This work includes making financial investments in public and private institutions that are advancing life sciences research, development and commercialization as well as building ties between sectors of the Massachusetts life sciences community. For more information, visit www.masslifesciences.com.

Why has the Massachusetts Life Sciences Center made small businesses a priority?

Over 99 percent of all U.S. employers are small businesses, according to the U.S. Small Business Administration.  Small business growth is essential to overall job growth, a central part of the Center’s mission.

What other programs does the Massachusetts Life Sciences Center have for small businesses besides the Accelerator Loan Program?

  1. Cooperative Research Matching Grant Program, launched in 2008. This program, while not directly for companies, supports research projects that companies contribute to:
  • Provides matching grants to academic institutions for industry-sponsored research with near-term commercialization potential.
  • Industry sponsors matched the grants that the Center provided to successful research Twelve grants totaling $6.76 million have been provided.

While industry sponsors were not limited to small businesses, the majority of the grantees were small businesses.

  1. Small Business Matching Grant (SBMG) Program, launched in 2010. This program is for:
  • Early-stage life sciences companies that have received a Phase II, post Phase II, or equivalent small business innovation research (SBIR) grant.
  • Early-stage life sciences companies that have received a Small Business Technology Transfer (STTR) grant from federal agencies such as the National Institutes of Health, the National Science Foundation, or the Department of Defense.
  • The Center has awarded $4 million in grants to eight companies under the SBMG Program. The dates for the next round of the SBMG program have not been established.
  1. Internship Challenge Program, launched in 2009. This program is:
  • A workforce development program focused on enhancing the talent pipeline for Massachusetts life sciences companies by creating hundreds of new paid internship opportunities for college students each year.
  • The Center reimburses small businesses (100 or fewer employees in MA; 250 worldwide) up to $7,200 for each intern’s stipend.  Internships can be full or part time and take place throughout the year.
  1. Milestone Achievement Program (MAP), was run in 2015. This program was for:
  • Early-stage life sciences companies with a critical business or technology milestone to complete
  • Companies that applied to this program had raised a minimum of $50,000, and had no exceeded other financial thresholds, such as $1 million in equity or convertible debt, $5 million in grants, and $100,000 in convertible debt.
  • MAP awardees may apply to the Accelerator Loan Program if they meet the eligibility requirements.
  1. Universal Partnerships (UP) Program was run in 2015. This program was for:
  • Massachusetts companies to support R&D collaboration with a non-U.S. organization (such as: a company, research institution, or university).
  • Projects lasted up to one year and focus on a specific R&D milestone within the context of an overall project.
  • Grants through this program were awarded up to $200,000 and funded life science projects selected through a year round application.
  • UP awardees may apply to the Accelerator Loan Program if they meet the eligibility requirements.

What is the Life Sciences Accelerator Loan Program?

The Accelerator Loan Program is a funding program intended for early-stage life sciences companies in Massachusetts.  Accelerator loans bridge the gap in a company’s capital-raising lifecycle, providing the company with time and resources to advance to a point at which it would become a good candidate for private investment.

This round of the Accelerator Loan Program will provide up to $750,000 per company in an unsecured loan and include a warrant which will give the Center the right to purchase equity in the company at a specific price within a certain time frame.

Applicants are early-stage life sciences companies with a high potential for technology commercialization, rapid growth, and private equity financing. For therapeutics[1] companies, the applicants should not have raised more than $15 million in total equity financing. For non-therapeutics companies, the applicants are companies that have raised no more than $7.5 million in total equity financing. The Center recognizes that many companies struggle to address the significant financial investment associated with the long life sciences R&D cycle and the high cost of translating research into a commercially viable product. This program is designed to help sustain these companies through a critical stage of development and to leverage additional sources of capital in order to bring cutting edge innovation to the marketplace.

[1] Therapeutics companies: defined as companies whose business goal is to develop a target compound that will be commercialized; may also be called “drug discovery” or “biotechnology”

What constitutes “life sciences”?

For purposes of the Program, “life sciences” means advanced and applied sciences that expand the understanding of human physiology and have the potential to lead to medical advances or therapeutic applications including, but not limited to, agricultural biotechnology, bio-generics, bioinformatics, biomedical engineering, biopharmaceuticals, biotechnology, chemical synthesis, chemistry technology, diagnostics, genomics, image analysis, marine biology, marine technology, medical devices, nanotechnology, natural product pharmaceuticals, proteomics, regenerative medicine, RNA interference, stem cell research and veterinary science.

If you are uncertain whether your company is engaged in “life sciences”, please contact us by email at accelerator@masslifesciences.com.

Moving forward, we will be asking companies for our programs to define what sector they are in during the application process. Here are definitions of the sectors:     

Agricultural Biotechnology

-Companies that develop biotechnology-based solutions for agricultural improvements.

Bioinformatics/Software

-Companies that develop software for use in solving genetic-related problems (bioinformatics).

CRO/CMO

-Companies (CROs) that provide support services for developing and evaluating new medications.

-Companies (CMOs) that support clients in transition from R&D to manufacturing (e.g. from prototype to clinical scale production).

Diagnostics

-Companies that develop a product or technology that provides information about disease states for use in patients (human or animal).

Drug Discovery

-Companies that develop and intend to commercialize medications for patients (human or animal).

Medical Devices

-Companies that develop implantable or non-implantable products for patients (human or animal).

Regenerative Medicine

-Companies that utilize scientific approaches to enable cell/nerve/tissue regeneration.

Professional Services

-Companies that provide services such as: management consulting, product development consulting, and other business services (e.g. legal, regulatory, reimbursement, etc.)

Technology for Life Sciences

-Companies that leverage technology to create tools for use in the development of pharmaceuticals, medical devices, diagnostics, regenerative medicine and manufacturing advances.

What are the objectives of the Accelerator Loan Program?

This Program, which ran for the first time in 2009, reflects the Center’s ongoing commitment to provide financing to early stage life sciences companies that will grow employment opportunities, promote manufacturing and commercialization, and stimulate innovation across the Commonwealth.

The objective of the Accelerator Loan Program is to support the growth and commercialization of life sciences technologies in Massachusetts by:

  • Providing direct and flexible capital to early-stage companies for life sciences research and development; and
  • Leveraging additional sources of capital to reduce investor risk and facilitate companies in gaining access to private capital.

How many companies have received Accelerator Loans?

In 8 fiscal years, thirty-eight companies were selected to receive funding; thirty-one of these companies have received or are in the queue to receive funding of $21.7 million. These companies are engaged in a variety of life sciences endeavors including the treatment of cancer and spinal cord injuries; the development of injectable plugs to occlude blood flow; instrumentation to analyze molecular structures; a wound closure system that does not require anesthesia or sutures; and the provision of quality assay, formulation, and process development for biotech and pharmaceutical companies.

What stage of company does the Accelerator Loan target?

The Accelerator Loan Program is geared toward companies that with our funding, would be able to achieve critical value-creating activities, or would be significantly de-risked, making them attractive to a larger source of funding (i.e. Strategic partner, corporate investor, or venture capitalist).

What is the loan interest rate?

Accelerator loans bear a ten-percent (10%) interest rate per annum compounding annually based on a 365-day year and determined on the date of the loan closing.

When are the loans due?

Accelerator loans are due and payable upon the earlier of five (5) years from the date of issuance of the Note, or a financing event of $5 million or more in any consecutive 12 month period. No penalty will be enforced on companies that repay the loan early. Please see the Sample Loan Agreement for more details.

Why are therapeutics companies allowed to have raised no more than $15 million while non-therapeutics no more than $7.5 million?

Due to the required investment for therapeutics companies to achieve initial pre-clinical and clinical data, the allowed at-risk capital for therapeutics companies is $15 million.

What is the difference between the Accelerator Loan Program and the SBMG Program?

The Accelerator Loan Program is targeted at earlier stage companies than the Center anticipates would apply for its Small Business Matching Grant (SBMG) Program.  Companies that apply for the SBMG Program must have received a Phase II, post Phase II, or equivalent SBIR or STTR grant from a federal agency to be eligible.  The Accelerator Program is a loan program, whereas the SBMG is a grant program.

What is the difference between the Accelerator Loan Program and the MAP?

The Milestone Achievement Program (MAP) is targeted at companies that may be too early to be eligible for the Accelerator loan program or too early to be competitive in the Accelerator loan program.  The Accelerator Program is a loan program, whereas the MAP is a grant program providing from $50,000 up to $200,000 to awarded companies.  For further information on the MAP, please see the Milestone Achievement Program page on the Center’s website.

What are the eligibility requirements for applicants to the Accelerator Loan Program?

If you meet any of the following criteria, you are not eligible to apply to this Program:

  1. You received an award under the Center’s Accelerator Loan Program
  2. You received an award under the Center’s Small Business Matching Grant Program
  3. You have raised less than $500,000 in at-risk capital
  4. You do not have at least one W-2 full-time employee (35 hours or more per week) that submits payroll tax to the Commonwealth of Massachusetts
  5. You have other Agreements with the Center and are out of compliance with any of the terms of those Agreements

If you meet any of the following criteria, and you are a therapeutics1 company, you are not eligible to apply to the Life Sciences Accelerator Loan Program:

  • You have raised $15 million or more in total equity financing.
      NOTE: If you reach the $15 million threshold prior to the closing and funding of the loan, you will become ineligible for an award under the program.
  • You are majority owned (50% or more) by a parent company that is an operating or holding company and
    1. Have raised $15 million or more in total equity financing, or
    2. Have received $15 million or more in debt/equity financing from your parent, or
    3. Have raised/received $15 million or more as a combination of 1. and 2. above.
  • You are majority owned (50% or more) by a parent that is an investment company, investment partnership, or investment fund and have received $15 million or more in financing from your parent
  • You are not able to issue your own equity (stock or units of ownership)
  • A majority (50% or more) of your board members also serves on the board of your parent company or is employed by the parent company
  • Any of Applicant’s management team is employed by Applicant’s parent company

If you meet any of the following criteria, and you are a non-therapeutics company, you are not eligible to apply to the Life Sciences Accelerator Loan Program:

  • You have raised $7.5 million or more in total equity financing.
      NOTE: If you reach the $7.5 million threshold prior to the closing and funding of the loan, you will become ineligible for an award under the program
  • You are majority owned (50% or more) by a parent company that is an operating or holding company and
    1. Have raised $7.5 million or more in total equity financing, or
    2. Have received $7.5 million or more in debt/equity financing from your parent, or
    3. Have raised/received $7.5 million or more as a combination of 1. and 2. above.
  • You are majority owned (50% or more) by a parent that is an investment company, investment partnership, or investment fund and have received $7.5 million or more in financing from your parent
  • You are not able to issue your own equity (stock or units of ownership)
  • A majority (50% or more) of your board members also serves on the board of your parent company or is employed by the parent company
  • Any of Applicant’s management team is employed by Applicant’s parent company

What threshold criteria must the Applicant possess before they get screened?

The following threshold criteria must be met for the Applicant to be taken into consideration:

  • The Applicant is a life sciences company registered to do business in Massachusetts and with operations in Massachusetts (or a life sciences company registered to do business in Massachusetts that will use any award proceeds received under the Program to establish and grow operations in the Commonwealth);
  • The Applicant has not exceeded the required financing levels;
  • The Applicant has at least $500,000 in at-risk capital, as defined in Section 1 of the Solicitation;
  • The Applicant is in good standing with the Commonwealth of Massachusetts;
  • The Applicant has developed credible employment, salary, revenue, and taxable income targets for the next five years and a reasonable plan for achieving such targets;
  • The Applicant has at least one full-time W-2 employee that submits payroll tax to the Commonwealth of Massachusetts; for purposes of this program, employees are considered full-time if they work 35 hours or more per week for the applicant company;
  • The Applicant has uploaded some form of data demonstrating feasibility (e.g. pre-clinical data, clinical data, or proof of concept)
  • The Applicant has submitted a complete Application.

What constitutes at-risk financing?

For the purposes of this program, at-risk financing is considered invested equity, debt and convertible debt into equity. All debt or equity must have been exchanged for capital. Like-kind exchanges (such as employees’ deferred compensation), grants, advance licensing/royalty payments, revenues, vendor lines of credit and vendor payables incurred in the normal course of business are not considered at-risk financing for this program.

What documents may be requested to provide evidence of Founders’ Equity?

Documents requested may include agreements, copies of checks, and copies of bank statements reflecting funds deposited.

Why is pre-clinical data, clinical data, or proof of concept a requirement?

The Accelerator loan program is for companies that can clearly articulate their commercial direction. In order to do so, they should have some pre-clinical, clinical, or customer generated clinical data that provides evidence that their approach will have clinical utility. This evidence may have been evaluated by early investors or founders who have contributed at least $500,000 in at risk capital.

May a company that has already applied to the Accelerator Loan Program and did NOT receive an award re-apply?

Yes, provided it has not yet received an award under the Accelerator Loan Program or the Small Business Matching Grant Program. Companies that have applied in the past will be required to provide a summary update on the company’s progress since the last application.

However, in the future, to ensure that re-applications to the Accelerator Program are sufficiently different than a prior, unsuccessful, application, the Center anticipates limiting the frequency of re-application. For example, the Center’s presumption will be that an applicant may apply no more than once per year unless a compelling case is made that the company’s position has advanced significantly to warrant more frequent re-application.

Are applicants required to have Massachusetts operations?

Yes. Applicants must be engaged in life sciences research, development, manufacturing or commercialization in Massachusetts. Companies must be registered to do business in Massachusetts PRIOR to the time of submitting their Accelerator Loan application.  Companies must also have at least one full-time W-2 employee that submits payroll taxes to the Commonwealth of Massachusetts.

Are awardees required to be “Certified Life Sciences” companies?

Companies do not have to be certified prior to submitting an Accelerator Loan application, however, Life Sciences Certification is granted with the award of an Accelerator Loan due to funding under the Program only being available to a Certified Life Sciences Company in accordance with the Life Sciences Statute. Certification is valid for 5 years starting with the tax year in which certification is granted. A Certified Life Sciences Company must file an annual report with the Center detailing whether it has met the specific employment generation targets established in its certification proposal.

How much funding is available to applicants under the Program?

The Center’s Board of Directors allocated up to seven million dollars ($7,000,000) in funding for the FY2016 Accelerator Loan Program. This is the first round of the Accelerator program in FY2016. The Center envisions that recipients under the Program will receive a loan in an amount up to $750,000. The total amount requested by applicants must be matched by: (1) either at-risk capital or (2) a combination of at-risk capital and grants previously awarded in accordance with the parameters set forth below. The awardees will be determined by the quality of the proposals. The amount of the loan will be determined as follows:

  • No loans will exceed $750,000 per company.
  • 100% of the at-risk capital raised by applicant will count toward the level of funding for which applicant is eligible.

NOTE: The at-risk capital must be raised and received by applicant as of the February 5, 2016 at NOON EST deadline. Any at-risk capital received on a later date will not count toward the level of funding for which the applicant is eligible.

  • If the at-risk capital raised by applicant is less than $750,000 but at least $500,000 and applicant has been awarded grants, applicant may count such grant amounts (i.e. public and non-profit sources of funding) towards the requested level of funding.

Examples are provided below:

Example 1: Applicant that has raised $750,000 in at-risk capital financing is eligible for a $750,000 loan.

Example 2: Applicant that has raised no at-risk financing and been awarded $1 million in grants is not eligible for any loan.

Example 3: Applicant that has raised $500,000 in at-risk financing and been awarded $100,000 in grants is eligible for a $600,000 loan (i.e., $500,000 at-risk + $100,000 grant = $600,000).

Example 4: Applicant that has raised $500,000 in at-risk financing and been awarded $250,000 in grants is eligible for a $750,000 loan.

Is my company required to ask for the full loan amount we’re eligible for, or can we request less?

The at-risk capital and grant funding that a company has raised determines the loan amount that they are allowed to request. However, a company does not need to request the maximum eligible loan amount. The amount requested should reflect the activities that the loan will be used for as described in the business plan. We encourage companies to consider what loan amount will be the most beneficial to them. After a company submits their application, they may not change the funding amount requested.

How do companies apply for awards under the Accelerator Loan Program?

Companies interested in applying for awards under the Program should first review the Program solicitation and application, which will be available starting on December 21, 2015 on the Accelerator Loan Program page on the Center’s web site. After reviewing the program materials, companies may apply for the program by clicking on the “Apply Now” button and following the instructions within the online application portal. Each company may submit only one application to this round of the Accelerator program.

Applications may only be submitted online and the Center will not accept paper submissions.

What is the application deadline?

The application deadline for the Program is Noon (EST) on February 5, 2016.

When does the Center anticipate making award announcements?

The Center anticipates making the award announcements in May 2016 and contacting all applicants at that time.

Will the Center have any rights to intellectual property developed by the applicant by virtue of any award?

No. Awards under the Program are loans, and the MLSC will not have any claim to an applicant’s intellectual property solely by virtue of an award under the Program.

Should applicants submit confidential information as part of an application?

Any information submitted to the Center by the applicant in response or in connection with the Life Sciences Accelerator Loan Program Application is subject to public disclosure requirements as set for in the Massachusetts Public Records Act, M.G.L. c.66 (the “Public Records Act”), which governs the retention, disposition and archiving of public records, with the exception of information that may be eligible as trade secrets or commercial or financial information regarding the operation of any business (“Center Trade Secrets Exemption”).

If applicant believes that documents it submits to the Center may be proprietary in nature, applicant must comply with the public disclosure requirements and procedures for the handling and submission of documents in section 8.1 of the Life Sciences Accelerator Loan Program solicitation (the “Solicitation”), which can be found on the Center’s website: www.masslifesciences.com.

What are recipients’ contractual obligations?

Successful applicants will be required to execute a Loan Agreement and Warrant with the Center that sets forth the requirements of the loan and warrant and the terms and conditions of compliance. A copy of the standard loan agreement and warrant are available together with the Program Solicitation on the Center’s website (www.masslifesciences.com).

Awardees will be required to provide regular progress reports to the Center to provide information regarding the company’s progress in reaching its commercialization and job growth targets.

Can the terms and conditions of the Loan Agreement, Promissory Note, and Warrant be negotiated?

Generally no. The Center will only consider the modifications to the standard Agreement (which includes the loan agreement, promissory note, and warrant) which are technical in nature and not substantive. Applicants who are successful in receiving awards should advise their attorneys accordingly to minimize the cost of legal review.

 

What is the process for reviewing applications?

The review process will be transparent, competitive, and based on sound science and commercial viability. Center staff will conduct the initial administrative review of all applications to ensure that applicants are eligible for the Program.

This administrative review will be followed by a comprehensive peer review process comprised of Peer Reviewers that broadly represent the Commonwealth’s life sciences scientific and business experts.  Members of the Center’s Scientific Advisory Board (SAB) will then review the most competitive proposals and have a discussion with respect to the scientific and/or technological merits of each proposal. The Center’s staff will conduct corporate due diligence on the finalists that pass these reviews, and as a result, such finalists may be invited for in-person Q&A to the Board of Directors’ Investment Committee members. The SAB and Board of Directors’ Investment Committee will then make recommendations to the Center’s Board of Directors for approval.

What is the composition and role of the Scientific Advisory Board?

The Scientific Advisory Board (SAB) consists of a group of distinguished academic and industry researchers and investment professionals who conduct the scientific and/or technological review prior to forwarding their findings and recommendations to the Center’s Investment Committee and Board of Directors.  More information on the SAB can be accessed here: http://www.masslifesciences.com/about/sab/

Who will be making the award decisions?

The Center’s Board of Directors has final authority for approving all loans under the Program, taking into account the findings and recommendations of the Scientific Advisory Board and the Board’s Investment Committee.

If I am not awarded, will I receive feedback explaining why my application was rejected?

All applicants to the program are eligible for feedback. Applicants will receive an email informing them of their award status at the close of the program. At that time, the applicant is able to contact the MLSC to schedule feedback. Feedback is provided by phone call and based on the comments provided by MLSC reviewers. It is the sole responsibility of the applicant to contact the MLSC in a timely way and request feedback.

If you have any further questions that were not answered in this FAQ, please contact us at accelerator@masslifesciences.com.

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