Research grants aid biotech's discoveries.

Scientists at Duke University knew they were onto something when the substance under study stuck to Teflon, the resin used to coat millions of nonstick pans.

That "biological glue" developed by Duke researchers Dan Kenan and Mark Grinstaff is now the basis for Affinergy Inc., a North Carolina company seeking commercial uses for the technology.

Affinergy's glue is scientifically a "peptide-linker system" that becomes a two-sided adhesive. By finding cells that selectively bind to virtually any material, Affinergy's glue may better attach biologics such as antibodies and enzymes to devices such as heart stents and hip replacements and deliver them to their destination.

Scientists had tested the substance on several materials, but Teflon turned out to be the acid test.

"When (the scientists) did it with Teflon, they knew it was pretty special," says Jonathan Gindes, Affinergy founder and chief financial officer.

Since the glue was discovered at Duke's labs, it has traced a quick path into the commercial world. In 2003, Gindes, then a Duke MBA student, wrote a business plan to spin off the technology and raised the seed capital to license it.

Gindes then attracted Peyton Anderson in 2003 to lead the venture as chief executive. Anderson, a co-founder of software company SciQuest Inc., was an attractive hire given his experience running a startup.

Both Gindes and Anderson worked without a salary for several months while the venture took shape. Affinergy's law firm and several consultants took equity stakes, instead of charging fees.

To finance initial experiments, Duke scientists and other entrepreneurs suggested Gindes apply for a grant through the Small Business Administration's Small Business Innovation Research program. Gindes embraced the idea and wrote three grant applications to divisions within the National Institutes of Health. They were all rejected.

"We didn't have a company. We had no address," explains Anderson.

Each application was ranked on a score ranging from 100 to 500. Scores above 300 had little chance. Each application--about 20 pages each--was examined by a team of scientists and returned along with three pages of feedback.

Gindes used the feedback to determine whether to re-apply. An applicant is allowed three shots with each grant proposal. "It's a peer-review process and very similar to how academics write papers," says Gindes.

Affinergy re-applied for several grants--and began finding success. The startup wanted the SBIR grants to test the "feasibility of a range of different ideas," says Anderson.

The company has since won seven awards totaling almost $3 million. The process from application to when a check arrives takes 10 to 12 months, according to Gindes.

He advises entrepreneurs pitching for such grants "not to rush them."

"It makes sense to focus efforts on one grant at a time," says Gindes. "And make sure it's something (you) will do."

It's not just federal agencies that are writing checks to Affinergy. The company has also attracted the attention of individual investors and venture firms.

In 2004, Affinergy raised $2 million from investors, including NC IDEA, Wilmington Investor Network, Charleston Angel Partners and Trinity Health-care. In 2006, Affinergy raised a Series B round of funding, garnering $6 million from previous investors.

Affinergy's biggest commercial potential may lie in partnerships it has struck with companies such as medical-device makers Boston Scientific Corp. to work on coatings for heart stents and Synthes Inc. to work on orthopedic applications, and a research agreement with DuPont, the maker of Teflon.

Gindes won't reveal details, saying that's competitive information, but describes them as financial partnerships that require Affinergy to use its technology in products the companies are pursuing.

With three years of cash in the bank, Gindes says he's not focused on fundraising but instead on delivering products on time. "Our real challenge is about operational excellence," he says. "Our plan is to build a solid business."

Revenue is now less than $20 million, he says, adding "the main source of revenue is going to be when products reach market, which is 4 to 5 years away."

Bursting with confidence, Affinergy has hired 32 employees and leased office space. In the next couple of years the company will have to produce results for its partners. That's when Affinergy's glue will face its next Teflon challenge.

INNOVATION RESEARCH GRANTS

Federal agencies paid $2 billion in Small Business Innovation Research awards in fiscal 2005, says Edsel Brown, assistant administrator for the SBA Office of Technology. A total of 6,171 grants were made by 11 agencies with the goal of expanding the competitiveness of small, high-tech companies.

The SBIR program has three phases and each phase has its own grant limits:

* Phase I is the startup phase with awards up to $100,000 for six months of research;

* Phase II has awards up to $750,000 for as long as two years for research and development;

* Phase III awards come from the private sector or non-SBIR government funding and move the product to market. Affinergy Inc. has received seven SBIR grants to date:

* Five from the National Institute of Arthritis and Musculoskeletal and Skin Diseases for a total of $2.69 million;

* One from the National Institute of General Medical Sciences for $240,279;

* One from the National Institute of Diabetes and Digestive and Kidney Diseases for $235,396.

Affinergy Inc. * Principals: Mark Grinstaff, Daniel Kenan, Peyton Anderson, Jonathan Gindes Major investors include: NC IDEA, Wilmington Investor Network, Charleston Angel Partners, Trinity Healthcare Development P.O. Box 14650, Research Triangle Park, N.C. 27709 * [phone] * www.affinergy.com * Year founded: 2003 * Employees: 32