When the Grant Falls Through

The first ninety days in any CEO role are supposed to be about listening. Mine were about choosing.

When I took over as CEO back in December, the company had something most biotechs would envy: a novel drug target, a world-class scientific team, two independent validated mechanisms, and genuine platform potential across multiple indications. What it did not have was a strategy that could raise capital. Optionality without priority is not a strategy. It is a menu. And menus do not focus teams, do not survive investor scrutiny, and do not hold up when things go wrong.

So the first ninety days were not about listening. They were about making an explicit, painful, strategic choice: which indication leads, how we fund it, and what happens to everything else.

We chose. We built a development plan with defined stages, gates, budgets, and timelines. We assembled an expert network of regulatory, clinical, and commercial advisors to pressure-test every assumption. We built a financial architecture that deliberately separates the equity-funded lead programme from non-dilutive parallel tracks. The executive team threw themselves into it. The scientific founders helped shape it. The board challenged it.

Then, the week before the board was due to formally endorse that plan, we lost a major grant application.

Let me give you the shape of it without the confidential details.

Our lead programme targets a vast chronic respiratory disease market with no approved therapy addressing the root cause. It will be funded through equity. Our second programme targets a different, acute clinical setting with high unmet medical need, but no potential to raise significant equity, so we have been pursuing non-dilutive funding to advance it on a parallel track.

The grant rejection was for the second programme. Not the core strategy. Not the equity-funded plan. Not the thing our investors are backing.

My COO, who had invested months in the application, messaged the scientific founders that evening. She kept it factual, professional. One of our co-founders replied with the honest version: "That's quite disappointing."

It was. But here is what did not happen: nobody questioned the strategy. Nobody asked what this meant for the company's direction. Nobody spiralled.

I wrote to the founders that same evening: our new strategy is independent of grant funding and will be driven through equity. We have other options to pursue for the acute programme. Disappointing but not a major blow.

By the next morning, my COO was already mapping alternative funding routes. Not because I asked her to. Because the strategy was clear enough, the architecture solid enough, that she could see the next move without being told.

The board meeting was a week away. And in the days between, instead of licking our wounds, the team refined the plan, sharpened the financials, and arrived at that board meeting with more clarity and conviction than they would have had without the setback.

Last week the board formally endorsed the full development strategy. Unanimously. Founders, investors, independent directors: aligned on a single strategic direction.

The board did not rubber-stamp it. They interrogated the assumptions. They questioned the staging. They stress-tested the milestones. And then they backed it. Fully.

I briefed them on the grant rejection as part of the meeting. There was no drama. The financial architecture held. The parallel track has alternative funding options already in progress. The lead programme, the one the board was there to endorse, was never dependent on that grant. The team had already demonstrated, in the week between the setback and the meeting, that the plan absorbs exactly this kind of disappointment without losing a step.

One rejection. One endorsement. The order was not what I would have scripted, but the outcome confirmed something I have suspected since taking this role: the quality of the work matters more than the luck of the timing.

Here is the part that might seem counterintuitive. The rejection did not shake our strategy. But it also did not change something else: we are still pursuing grants. We have another major application pending, with a decision expected this summer.

There is a reason for that, and it goes beyond the money.

Our lead programme addresses a chronic disease with a clear commercial path. Investors understand that story. Equity will fund it. But our second programme, the one targeting acute hospital infections, sits in a space that equity markets consistently undervalue. Hospital-acquired infections kill tens of thousands of patients a year. The unmet need is enormous. But the commercial model is harder, the reimbursement landscape is less attractive, and most venture investors will tell you the same thing: "important problem, but not our thesis."

That is exactly the gap that grant funding exists to fill. Programmes like the one we lost, and the one we are still waiting on, are designed to advance science that matters for patients in areas where the market alone will not do it fast enough. When a biotech company has a platform that can address both commercially attractive chronic indications and harder-to-fund acute ones, grants are not a consolation prize. They are the mechanism that lets you pursue the full scope of the science without diluting your equity story.

Losing one grant does not change that calculus. It sharpens it. The strategy absorbs the loss because it was designed to. And the next application goes in because the science deserves to be funded, even when the first answer is no.

Here is the thing nobody tells you about strategy: the real test is not whether your board approves it. It is whether your team is energised by it.

Over the past four months, I have watched something shift. Scientists who had been spread across multiple projects started digging deeper into one problem. Chemists who had been synthesising analogues across different targets started optimising for a single indication. The weekly meetings changed tone. People were not reporting on activity. They were solving a shared problem.

When I sat in the board meeting last week and watched the team present the plan they had built together, the energy in the room was unmistakable. Not the forced enthusiasm of a pitch. The quiet confidence of people who know what they are doing and why it matters.

That energy survived the grant rejection a week earlier. If anything, it sharpened it. The team's response to the setback was not "what do we do now?" It was "let's get the next application in and keep moving."

I do not think that response was accidental. I think it was the product of ninety days of strategic work that gave everyone a clear answer to the question: "What are we actually trying to do here?"

When people know the answer to that question, setbacks become problems to solve, not existential threats.

To the team, I contextualised. There is a difference between minimising and contextualising. Minimising sounds like "it does not matter." That is dishonest, and your team knows it. They put months into that application. Contextualising sounds like "this is disappointing, and it is real. But our core plan is not dependent on this outcome, and here is why." The "here is why" only works if you have done the strategic work to make it true.

To the board, that context was clear in the financial architecture. The lead programme is equity-funded. The grant would have funded a parallel track. We have alternative non-dilutive options already in progress. The endorsement they were there to give does not change by a single line item.

To myself, I had to stop doing something I have been guilty of in previous roles: carrying the emotional weight privately. When you have done this before, there is a temptation to absorb every setback silently because you know from experience that it is survivable. But a CEO who processes setbacks alone misses the opportunity to show the team how the strategy holds under pressure. The team needed to see me acknowledge the disappointment and then demonstrate, in real time, that the plan absorbs it. That visibility matters more than stoicism.

The standard playbook for grant rejections in biotech is silence. You absorb the hit privately, adjust the plan quietly, and hope nobody on the cap table notices. The lesson never gets shared.

I think that is a mistake. The lesson is genuinely useful, and I wish someone had shared it with me before I needed it.

The resilience of your company in a setback is determined by the quality of the strategic work you did before the setback arrived.

If your team does not know what the priority is, every rejection feels existential. If your team knows exactly what matters and why, a grant rejection for a parallel programme is a disappointment, not a crisis.

The practical question is not "how do I handle bad news?" It is "have I done the strategic work that makes bad news absorbable?"

If you are a CEO and you are not sure your team could tell you, in one sentence, what the company's priority is and why, fix that before the next setback arrives. It will arrive. The only question is whether it finds a team with a clear direction or a team that is still deciding.

In the days after the grant rejection, two things happened that had nothing to do with the grant. Our lead investor confirmed a major strategic introduction that had been weeks in preparation. A partnership conversation we had been nurturing for months took a significant step forward.

Last week, the board endorsed the strategy. The founders are aligned. The team is energised. The financial architecture held its first real test. And the next grant application is pending, because the science it would fund matters too much to stop asking.

Ninety days of listening would not have built that. Ninety days of choosing did.

Mark Beards is CEO of Santero Therapeutics and writes at beardsonbiotech.com