You Just Got Your NIH Phase I Award: What’s Next?

By Barbara Serafin, Chief Operations & Compliance Officer, BW&CO

A plain-English guide for new NIH SBIR and STTR Phase I awardees.

Who's Behind This Guide

I'm a compliance and submission specialist. My work lives in the parts of federal funding that most scientists would rather not handle: the registrations, the budgets, the reporting, and the quiet rules that determine whether an award functions the way it should.

Across more than 150 NIH SBIR and STTR engagements, I've seen what tends to happen after the award notice arrives. The difficulties are rarely scientific; they are almost always administrative. A registration lapses and freezes a drawdown. The books won't hold up to an audit. A reporting deadline passes that no one had tracked. None of it is difficult once you understand where the risks sit, and this guide is the concise version of what I wish every new awardee had in hand on day one.

First, congratulations. Winning a Phase I is a significant milestone.

A Phase I award, however, is not a lump sum deposited to your account. The funds are released through a federal payment system and must be drawn and spent under specific rules, and your compliance obligations begin on the award date, not the day you return to the lab. How you draw the funds, what you may spend them on, and what you must report (and when) are all manageable, and all too rarely explained. Below is the sequence I'd recommend.

Your First 30-60 Days: A Quick Checklist

Your Notice of Award (NoA) is the binding document for everything below. Read it closely: it states your budget, your reporting schedule, your indirect cost rate, and any award-specific terms or restrictions. Where this guide and your NoA disagree, the NoA wins.

• Read your Notice of Award in full. Find it in eRA Commons under Status. Note the project period, the approved budget by category, your reporting due dates, and any special terms of award.

• Confirm your federal registrations are still active. Your SAM.gov registration must be renewed every year, and a lapse will block your ability to draw funds. Confirm SAM.gov, eRA Commons, and your SBA Company Registry entry are all current.

• Get set up to receive funds. NIH pays through the HHS Payment Management System (PMS) on an advance-payment basis - you may draw funds before you have spent them, but only as you need them. Keep each draw to no more than three business days before you will disburse the cash. Make sure your organization is enrolled and the right person has access.

• Confirm who does what. Identify your Authorized Official / Signing Official, your PI, and whoever will handle drawdowns and reporting. Where you can, these should not all be the same person (more on that below).

• Save your PO and GMS contacts. Your Program Officer (scientific and programmatic questions) and your Grants Management Specialist (business, financial, and compliance questions) are named on your NoA. Add both to your contacts now; they are your first call before any change.

• Set up accounting to track the award separately. You need to show costs by award and by category, and to separate direct from indirect costs. A clean system now saves a painful cleanup later.

• Calendar every due date. Progress reports, financial reports, and invention reporting all have deadlines. Put them on a shared calendar the day you read your NoA.

• Calendar the 120-day closeout deadline. Your final reports are due within 120 days of the end of the project period. Note it at the outset so closeout is not a last-minute scramble.

Getting Paid - and Staying Compliant

NIH funds Phase I awards on an advance-payment basis through the HHS Payment Management System: you may draw funds before you have spent them. The constraint is timing. Federal cash-management rules expect you to draw only as the need arises - as a rule of thumb, no more than three business days before you actually disburse the funds - so that federal cash does not sit in your account. Drawing too early, or in larger amounts than you need, creates a cash-management problem and is exactly the kind of issue that surfaces in a review. A few habits keep this clean:

Spend only on allowable costs. For for-profit SBIR and STTR awardees, NIH applies the cost principles in FAR Subpart 31.2 - incorporated through Chapter 18 of the NIH Grants Policy Statement - rather than 2 CFR Part 200, to determine what you may charge to the award. Costs must be reasonable, allocable to the project, and consistently treated. Some everyday expenses, such as alcohol, lobbying, most entertainment, and bad-debt write-offs, are simply not allowable.

Document effort, not just dollars. One of the audit findings I see most often with small awardees is weak support for salary charges. If you charge a person's time to the award, you need records showing the effort actually went to the project. Set up timekeeping on day one, including for founders who pay themselves.

Understand your indirect (F&A) costs. Your award includes an indirect cost rate to cover overhead you cannot tie to a single project. The rate and basis are stated in your NoA - use that figure. If you do not yet have a negotiated rate, NIH has historically allowed small businesses to use up to 40 percent without one; the institutes are now handling this differently, however, so confirm what applies to your award with your Grants Management Specialist (GMS) before you build an internal budget.

Keep your paperwork. Keep receipts, payroll records, your accounting ledger, and your NoA together and backed up. Federal rules generally require you to retain records for three years from the date you submit the Federal Financial Report (FFR) that covers those costs, and your NoA can require longer.

Common Traps for Small SBIR/STTR Teams

A few issues come up again and again with small, lean teams. None are hard to avoid once you see them coming.

One person wearing every hat. When the founder is also the CEO, the PI, and the person who signs off on spending, you lose the separation of duties that keeps federal money defensible. You do not need a big team, but the person who approves an expense should not be the only one who requested and recorded it. Build in a second set of eyes, even a part-time bookkeeper, early.

The work-split rules are not a suggestion. For an SBIR Phase I, your small business must perform at least two-thirds of the work. For an STTR, your company must do at least 40 percent and your research-institution partner at least 30 percent. These thresholds are measured and enforced. If a subcontractor or partner creeps past their share, you can put the award at risk.

Human-subjects and animal work take longer than you think. If your project involves human subjects, you will likely need training for key personnel, a Federalwide Assurance (FWA), and Institutional Review Board (IRB) approval before you can spend a dollar on that work; companies without a university partner usually use a commercial IRB. If your project involves vertebrate animals, you will need an OLAW Animal Welfare Assurance and Institutional Animal Care and Use Committee (IACUC) approval of your protocol. And if any portion of the work meets the definition of a clinical trial, you will need to register it on ClinicalTrials.gov. Start these approvals immediately, because they gate the spending rather than follow it.

Do not quietly change an approved arrangement. Some post-award changes are yours to make, but others require NIH's prior written approval - among them a change in scope or objectives, a change in or replacement of the PI, a reduction of the PI's effort by 25 percent or more, the addition of a foreign component, and transferring a substantial portion of the work to a third party. Making one of these without checking can create a compliance problem, even when the change seems minor or saves money. When in doubt, ask your grants management specialist before you act.

Keep your foreign-disclosure filing current - this is new for 2026. NIH now requires SBIR and STTR recipients to submit a foreign disclosure form and keep it up to date throughout the award. Updates are due with each annual, interim, and final RPPR, and within 30 days of any change to ownership, covered individuals, or foreign relationships, submitted through the Additional Materials tool in eRA Commons. The requirement applies to active awards, not only new applications, and a material misstatement or an unreported, risk-posing change can lead to termination or repayment. Treat it as an ongoing obligation.

For SBIR, your PI must be primarily employed by the small business. On an SBIR award, your Principal Investigator's primary employment - more than half of their time - must be with the company for the duration of the project, so a founder-PI cannot simultaneously hold a full-time position elsewhere, such as a full-time faculty appointment. STTR differs: there, the PI may be primarily employed by either the small business or the research institution. Confirm this before the award begins, because it is an eligibility requirement rather than a formality.

A Note for STTR Awardees

If your award is an STTR rather than an SBIR, three differences matter from the start:

• You are required to have a formal partnership with a research institution - a U.S. university, nonprofit research institution, or FFRDC. This is not optional for STTR, and a federal laboratory cannot serve as the research partner.

• The work split is 40/30: your company performs at least 40 percent and the research institution at least 30 percent.

• You need a written intellectual property agreement between your company and the partner that spells out how rights and data are allocated. Put this in place early; it is far harder to negotiate after a dispute than before one.

Money First-Time Awardees Leave on the Table

Several sources of funding and support are built into the SBIR/STTR programs, and first-time awardees routinely overlook them.

• The fee (your profit). SBIR and STTR allow a fee of up to 7 percent of total costs in your budget. It functions as profit: it is yours to use at your discretion, and it does not have to be justified with receipts. If you did not include it, you left money behind - build it in next time.

• TABA (Technical and Business Assistance). In addition to your award, NIH will fund outside expert help with intellectual property, market research, regulatory strategy, and reimbursement planning - up to $6,500 in Phase I and up to $50,000 in Phase II. It generally must be requested in the application, so plan for it early.

• I-Corps. NIH offers an entrepreneurial training program that sends teams out to test their commercial assumptions with real customers. It is provided at no cost to selected awardees and directly strengthens the commercialization case your Phase II application will be evaluated on.

Start Positioning for Phase II Now

Phase I is a proof point, not the finish line. The teams that move cleanly into Phase II start preparing while Phase I is still running.

• Keep your data organized and your milestones documented. Your Phase II application, and your reviewers, will want clear evidence that you met your Phase I aims.

• Build your commercialization story as you go. NIH weighs whether there is a real path to market, so capture customer conversations and partnership discussions as they happen and fold them into your Commercialization Plan, which is where reviewers assess your path to market. (NIH is also moving away from open-ended letters of support toward short letters of collaboration, so do not rely on a stack of support letters to carry the argument.)

• Know your timeline. Phase II generally follows Phase I, and the application and review cycle takes months. Work backward from when you will need funding so there is no gap between phases.

• Close Phase I properly. The final progress report, final financial report, and final invention reporting each have deadlines. A clean closeout protects your eligibility and your reputation for the next award.

How BW&CO Can Help

BW&CO helps small biotech, defense, and deep-tech companies turn a federal award into funded, compliant research - without building a grants department to do it. We support awardees with post-award setup, budget and drawdown management, compliance and reporting, and getting Phase II-ready, so founders can stay focused on the science.

If you just received a Phase I award and want a second set of eyes on your setup, we are glad to help. Book a free 20-minute call for a conversation about where you are and what comes next.

How NIH Funds CROs: A Guide to SBIR for Contract Research Organizations

NIH will pay a small CRO to build its next service. The SBIR program funds the research to develop a new assay, model, platform or method, and the CRO keeps it and sells it to clients. Companies like EpiCypher, Integral Molecular and Litron Laboratories have built much of their business this way.

Most CROs never apply because they assume SBIR is for drug developers. This guide is for owners, CSOs and BD leads at small US CROs. It covers what NIH has funded before, what you could propose, and how Phase I and Phase II work from a CRO's side of the table.

Why NIH funds CROs

NIH funds research that leads to something people will buy, and a better research service counts. The SBIR program does not require a drug or a device. New assays, animal and cell models, screening platforms and analytical methods are funded every cycle because NIH-funded scientists and drug developers need them.

The line that matters is simple:

• Fundable: developing and validating a capability you don't have yet, such as a new assay, model, readout or platform.

• Not fundable: running studies for paying clients, or doing work you could already sell today.

Commercialization for a CRO usually means selling the new capability as a service. A kit, a reagent or a license works too. NIH reviewers accept fee-for-service revenue as a commercial path, as long as you can show who will pay for it and why.

Small CROs also start with advantages most applicants lack: working labs, experienced scientists, preliminary data, and paying customers who can say they want the new service.

What NIH has already funded

At least 13 service companies have used NIH SBIR to build what they now sell, from about $2 million to about $85 million each. Totals below are approximate NIH SBIR/STTR funding to date.

• EpiCypher (genomics services and reagents, NC), about $85M: chromatin profiling assays.

• Integral Molecular (antibody discovery, Philadelphia), about $34M: a specificity screen now used by 250+ biopharma companies.

• Litron Laboratories (genetic toxicology, Rochester, NY), about $21M: tox tests, one of which became an international regulatory guideline.

• PsychoGenics (in vivo / CNS pharmacology, NJ), about $18M: high-throughput in vivo drug screening.

• TissueVision (imaging and histology), about $16M: automated 3D whole-organ imaging for drug studies.

• Altis Biosystems (human cell models, NC), about $12M: drug-screening models of the human intestine.

• Reaction Biology (in vitro assays, PA), about $10M: new assay panels it now sells as services.

• Organix (medicinal chemistry), about $7M: its own chemistry programs.

• ingenious targeting laboratory (animal model generation), about $4.5M: new mouse models.

• ImQuest BioSciences (infectious disease), about $3.6M: antiviral and microbicide candidates.

• NanoImaging Services (cryo-EM / structural biology, San Diego), about $3M: a microED pipeline for pharma clients.

• Sus Clinicals (oncology and large-animal models), about $2.4M: validation of its Oncopig cancer models.

• Panome Bio (mass spec / metabolomics), a $2M Phase II: biomarker discovery methods.

The pattern is consistent. Each company proposed a capability the research market lacked, used Phase I to prove it worked, and used Phase II to make it a product. Many then won follow-on awards for the next service.

Totals are rounded from NIH RePORTER (SBIR and STTR activity codes) and may include awards to related entities.

What your CRO could propose

The best project is the service your clients keep asking for that you can't offer yet. Start there, then check that it solves a problem for a disease area NIH cares about.

• In vivo pharmacology: a new disease model, or automated behavioral or physiological readouts (precedent: PsychoGenics).

• Oncology models: better-predicting PDX, syngeneic or large-animal tumor models (Sus Clinicals).

• Toxicology / safety: a faster or more human-relevant tox assay that could support regulatory submissions (Litron Laboratories).

• In vitro assays: a new target-class panel or a higher-throughput format (Reaction Biology).

• Antibody services: a new discovery, screening or specificity platform (Integral Molecular).

• Cell models: human iPSC, organoid or tissue-chip models for a specific organ (Altis Biosystems).

• Genomics: a new sequencing-based assay or a lower-input method (EpiCypher).

• Bioanalytical / mass spec: a new biomarker panel or a method for hard-to-measure analytes (Panome Bio).

• Imaging / histology: automated imaging or AI-based quantitation (TissueVision).

• Structural biology: a new structure method or pipeline for difficult targets (NanoImaging Services).

• Model generation: new genetically engineered or humanized animal models (ingenious targeting laboratory).

A strong CRO project usually has three things:

1. A clear gap: researchers can't get this measurement or model today, or only at a cost or speed that limits their work.

2. A health link: the capability speeds up research or drug development in a disease area an NIH institute funds.

3. Proof of demand: clients or partners willing to write letters saying they would use and pay for it.

How it works: Phase I and Phase II

Phase I proves your new capability works; Phase II builds it into something you can sell. Each phase is a separate grant with its own application and review.

Can your CRO apply? Most small independent CROs can. You need to be a for-profit US company with 500 or fewer employees, including affiliates, and majority-owned by US citizens or permanent residents. The project lead (PI) must be primarily employed by your company. CROs owned by a large parent or a non-US group usually do not qualify.

Phase I: feasibility

• Purpose: show the new assay, model or method works.

• Budget: $323,090 guideline (total costs); higher on some institute waiver topics.

• Length: 6 months to 2 years.

• Work done by your company: at least two-thirds.

Phase II: development

• Purpose: validate, scale and get it ready to sell.

• Budget: $2,153,927 guideline (total costs); higher on some institute waiver topics.

• Length: 1 to 3 years.

• Work done by your company: at least half.

• Reviewers weigh: your Phase I results, the approach, and a full commercialization plan.

Ways in

• Standard path: apply for Phase I, then apply for Phase II once you have results.

• Fast-Track: apply for both phases in one application. Phase II funding starts once you hit pre-agreed Phase I milestones, which avoids a funding gap.

• Direct to Phase II: skip Phase I if you already have feasibility data from your own work. This often fits CROs with strong internal pilot data.

• After Phase II: NIH offers later-stage awards, including the new Phase IIB Strategic Breakthrough award, which requires matching private funding.

Timing. Standard due dates are January 5, April 5 and September 5. Expect about 6 to 9 months from submission to funding.

Program status. Congress reauthorized SBIR in April 2026 through September 2031, after a six-month lapse. HHS now limits each company to nine SBIR/STTR submissions per fiscal year, so pick projects carefully. Budget limits vary by institute and topic, so check the current solicitation before you build a budget.

Where CRO applications go wrong

CRO applications rarely fail on the science. They fail when the project reads like client work, or when the business side isn't ready for a federal grant.

• It reads like a service contract. Frame the project as research with open questions and measurable go/no-go milestones, not a study plan you already know how to run.

• Client data or IP is tangled in. Don't build the project on a client's compounds, samples or confidential data. Check your master service agreements for clauses that give clients rights to methods you develop.

• The significance is about your business, not health. Reviewers fund what advances research on a disease. Lead with the scientific bottleneck, then show your service removes it.

• No evidence of demand. Letters from clients, pharma partners or academic labs saying they would use and pay for the service carry a lot of weight.

• Staff time is double-counted. Scientists who also bill client work need timekeeping that separates grant effort from billable hours. The PI must meet the primary-employment rule.

• Accounting isn't grant-ready. You need to track grant costs apart from client revenue and support your indirect rate. NIH also allows a fee (profit) of up to 7% on SBIR awards, which many first-time applicants forget to request.

• Registrations aren't done. SAM.gov, Grants.gov, eRA Commons and the SBA company registry can take several weeks. Start them a month or more before the deadline.

Frequently asked questions

Who owns what we build?

You do. Under SBIR you keep the rights to your inventions and data; the government gets a limited license for its own use.

Can we keep serving clients during the grant?

Yes. The grant pays for the development project, and your client business continues alongside it. Keep the costs and staff time separate.

Can we sell the service while it's still grant-funded?

Selling the finished capability is the goal. Selling results from grant-funded work to a client during the project needs care, so plan it with your grants advisor.

Do we need an academic partner?

No. SBIR lets your company do the work. If a university collaborator does a large share of the research, the related STTR program may fit better.

We have a parent company. Are we eligible?

It depends on the parent's size and ownership. Affiliates count toward the 500-employee limit, so check before you invest time in an application.

How long does an application take to write?

Plan on 6 to 8 weeks for a Phase I, including registrations, letters of support and the budget.

Talk it through with us

In a free 20-minute call, we'll tell you whether your CRO is eligible, which of your service ideas could fit NIH, and which deadline makes sense. BW&CO helps small companies win non-dilutive funding, including NIH SBIR.

Book a free 20-minute CRO funding call

Sources

• NIH RePORTER: award totals for the companies above

• NIH SEED: Understanding SBIR and STTR: budget guidelines and project periods

• Crowell & Moring: SBIR/STTR programs reauthorized after six-month lapse

• BW&CO: 2026 NIH SBIR/STTR program changes