A small piece of the 2009 Economic Stimulus Package will revamp aid to small businesses, which could give way to successful relationships between  small pharmaceutical/biotech companies and academic institutions. This may be what related investments and exchange traded funds (ETFs) need to help the industry break through.

Challenge Grants are two years grants to National Institute of Health (NIH) designed to bring about collaborations between  small pharmaceutical and biotechnology companies and academia. This funding could bring about additional innovation in the industry and keep it growing.

Ruben Dagda for The Examiner reports that the biotechnology industry has proven as a safe and foolhardy industry even in these rough economic times. Both the health care and biotechnology industries have been among the least hard-hit in terms of job losses and contraction, although it’s far from recession-proof.

Early signs of funding within the industry are coming back and the biotech industry needs the funding because of the nature of the industry. Thomas Gryta for The Wall Street Journal reports the sector has a higher need for that cash than other industries because its drug-development model often requires years of losses before a product is approved. The tight credit markets have left the bioetch companies in a vulnerable position, and the stimulus package has the ability to preserve them.

• iShares NASDAQ Biotechnology (IBB): down 2.5% year-to-date; up 8.2% over three months

• SPDR S&P Biotech (XBI): down 11.2% year-to-date; up 5.5% over three months

• PowerShares Dynamic Biotech & Genome (PBE): down 3.4% year-to-date; up 6.3% over three months

• First Trust AMEX Biotechnology (FBT): down 0.30% year-to-date; up 6.5% over three months

For more stories about biotech, visit our biotechnology category.

Tags: Biotechnology, FBT, Health Care, IBB, PBE, Sector ETFs, XBI