Biotechnology Industry Outlook Report

1. (left to right)
Joe Heppert, University of Kansas
Kevin Sweeney, Polsinelli Shughart (Co-Sponsor, Chair and Host)
Stephen Higgs, Kansas State University
(Co-Sponsor)
Robert Casillas, MRIGlobal
John Norton, Henry W. Bloch School of Management, UMKC
John Garretson, Shook Hardy & Bacon
Jeff Boily, Center for Animal Health Innovation
Peter Dorhout, Kansas State University
(Co-Sponsor)
Dan Getman, Kansas City Area Life Sciences Institute
Patrick Wooley, Polsinelli Shughart, Co-Sponsor and Host)
Jeff Reene, University of Kansas Cancer Center, Kansas City Cancer Center
Not Pictured: Henry Randall, Saint Luke's Hospital
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2. More Best Than Worst of Times for Area
Biotech Sector
In the 12 years of Ingram’s Industry Outlook assembly series, Polsinelli Shughart’s Kevin
Sweeney did something that no previous chair had thought to do: begin his presentation with a
recitation from Charles Dickens.
“It was the best of times, it was the worst of times,” said Sweeney, who proceeded to read the
rest of the entirely apt opening paragraph of The Tale of Two Cities. This excerpt summarized
Sweeney’s feelings on the state of the biotech industry in this region.
Positive signs are many: MOSIRA, a major income-tax based financing tool on the Missouri
side, a record level of federal grants for area institutions, a loosening of venture capital, Kansas
State’s new facility in Olathe, Kansas University’s state-of-the-art clinical facility in Mission, an
angel tax credit bill recently introduced in Missouri’s legislature, helpful new federal legislation,
progress with NBAF and National Cancer Institute designation for the KU Cancer Center, the list
goes on.
“Those are all good things,” said Sweeney. He then proceeded to cite challenges: the worst
economic downturn in memory, the risk of losing companies to either coast, difficulties
negotiating the state line, and the political consequences pursuant to that division.
Sweeney invited his colleagues to sort out the best from the worst and point the way to the future
while so doing. Joining him at Polsinelli Shughart’s offices overlooking the Country Club Plaza
were a dozen high-level stakeholders from the area’s most prominent biotech institutions,
including representatives from Kansas State University, which co-sponsored the assembly.
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3.
1. Kevin Sweeney invoked the opening of Charles Dickens’ “A Tale of Two Cities” to assess the current state of biotech in the
region. | 2. Joe Heppert said the Kansas City region is on the cusp of top-tier translational research. | 3. John Garretson praised the
collaborative nature of biotech interests in the two-state area. | 4. John Norton cited opportunities to steer more intellectual
property onto paths for commercialization.
Opportunities
As an opening question, participants were asked to cite the most promising opportunities for the
region’s biotech industry. There appears to be much to look forward to.
Joe Heppert, associate vice chancellor for research and graduate studies at KU’s Lawrence
campus, sees great promise in translational science on his campus. Ideally, the research that
chemists, biologists, and pharmacists are doing can be translated into cures, both human and
animal. “We’re on the cusp of doing this about as well as anybody does in the country,” said
Heppert.
“I think that it comes down to three things,” said John Garretson, who leads Shook Hardy &
Bacon’s practice group to biotech. He cited “opportunity, money, and identifying and helping the
entrepreneurial talent.” Garretson, who recently moved to the area from New York, found the
more collegial environment here a welcome change from the “insular sort of mindset” that
hampers research back east.
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4. Robert Casillas, vice president of strategic life sciences and national security for MRIGlobal,
sees “enhancing and strengthening our partnerships and collaboration” as a major opportunity for
all regional players. “Those successes will pipeline in the talent,” said Casillas, “which is the
human research talent that we’ll need to continue to grow.”
“There’s a lot of research to do. There are a number of start-up companies. There’s a momentum
to this area,” said Patrick Woolley, chair of the science and technology group at Polsinelli. What
the area lacks, however, are major investment funds, and this Woolley sees as a likely area of
growth.
Dan Getman, president of the Kansas City Area Life Sciences Institute, pointed to three broad
areas with growth potential: the animal-health corridor; translational research, particularly in the
medical area; and the improvement in the venture capital environment, an example of which is
Aratana Therapeutics.
This KCK-based animal health company recently completed a $15 million Series B financing
deal, which brings the total capital raised to $31 million since Aratana was launched earlier in
2011. “They brought in some really top talent,” said Getman, “and it’s a very unique company.”
Jeff Boily, the CEO of the Center for Animal Health Innovation, agreed that one of the core
strengths of the region was the animal-health corridor. The corridor—a swath that stretches from
Manhattan in the west to Columbia in the east—includes companies that account for nearly 32
percent of total sales in the $19 billion global animal-health market. “I’m not sure everyone truly
realizes how unique the corridor is,” said Boily. That much said, he recognized that the area falls
short in the amount of investment capital available.
“What I see in this area,” said John Norton, the associate director of the UMKC Institute for
Entrepreneurship and Innovation, “is the opportunity to connect lots of intellectual property, lots
of new knowledge to people who have the resources to develop the new knowledge
commercially.”
Jeff Reene, chief operating officer of the KU Cancer Center, envisions three major growth
opportunities. The first would be to grow the federal research-funding portfolio. The second, on
the translational side, would be to leverage local strengths to make sure area institutions were
fully capitalizing. And the third would be to increase access to capital.
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5.
1. Collaboration, said Stephen Higgs, will be key to driving success of the NBAF facility in Manhattan, Kan. | 2. “Cancer doesn’t
recognize the state line,” said Jeff Reene, addressing the need for collaborative efforts. | 3. A key to driving life-sciences success
will be educating a new cohort of skilled biotech workers, said Peter Dorhout. | 4. Changes in federal funding policies compels
more collaborative efforts between organizations, said Robert Casillas.
“My mandate is to educate, train and develop scientists for the NBAF,” said Steve Higgs,
research director of the Biosecurity Research Institute at Kansas State. NBAF, the National Bio
and Agro-Defense Facility, is the planned research facility that will replace the 1950s-era Plum
Island facility in New York. The 520,000-square-foot facility is scheduled to become fully
operational by 2020 and employ up to 300 people. K-State has fought very hard to secure it and
get it funded. Success, said Higgs, will require collaboration between federal labs, like NBAF,
and biotech facilities and industries here in the region.
Peter Dorhout, the dean of arts and sciences at K-State, argued that one of the critical missions
for everyone around the table would be educating the work force for biotechnology’s future.
“One of my goals as dean of arts and sciences,” said Dorhout, “is to really engage graduate
students and undergraduate students in the whole inquisitive process of learning about science.”
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6. Bi-State Collaborations
From the windows of Polsinelli Shughart, one can see the state of Kansas less than a mile away.
As Kevin Sweeney pointed out, the uniquely bifurcated nature of the region makes competition
between the states inevitable, and collaboration difficult. He wondered how institutions dealt
with that reality.
“It is not just cross-border collaboration that has to be cultivated here,” said KU’s Joe Heppert.
“It is collaboration between institutions that are in the same state.” One challenge for him is to
create stronger collaborations between KU and KU Medical Center, which is part of the same
system. One area in which KU is looking to foster collaboration, both with K-State and the
University of Missouri, is bioinformatics.
“Cancer doesn’t recognize the state line,” said Jeff Reene. He cited the momentum generated by
Roy Jensen’s return to the Kansas City area in 2004 to help University of Kansas Cancer Center
obtain National Cancer Institute designation.
“It was very apparent that we needed to rise above the traditional challenges there,” said Reene.
In creating the Midwest Cancer Alliance, a collaboration of 15 institutions on both sides of the
state line, the goal was “to rally together and leverage our collective capabilities in terms of this
pursuit of NCI (National Cancer Institute) designation.”
Reene cited two other examples of successful bi-state collaboration, one being the clinical and
translational science award that involved seven or eight institutions. “That’s a huge feather in our
cap as a region,” said Reene. A third example is the IAMI, the Institute for Advancing Medical
Innovation at KU Med Center funded by a Kauffman Foundation grant. “We’ve had some
phenomenal early results there in terms of collaborations with Children’s Mercy,” said Reene.
“We intentionally set aside the state line. We’re not big enough to figure this out alone. We’ve
got to figure out how to collaborate.”
As Dan Getman observed, there is an intense competition for funding at the national level, and
most of the grants now require cross-institutional collaborations. In the region, he noted, each of
the different institutions has unique strengths. “Rather than trying to elevate every area at each
institution,” he recommended that area institutions “build on our strengths.” That is already
occurring. “If we don’t do that,” he added, “we won’t be able to compete nationally.”
According to Robert Casillas, MRIGlobal has succeeded with partnerships not just across state
lines but within the larger region. “It is a business model for MRIGlobal to partner,” said
Casillas. The federal funding environment all but demands “pre-partnering.”
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7.
1. Jeff Boily noted the truly unique levels of outcomes-focused cooperation in this region, even among companies that have been
competitors in the animal-health sector. | 2. By moving more intellectual property disputes into patent court, as opposed to federal
court, resolutions can be achieved quicker, and more efficiently, said Patrick Woolley.
Explained Casillas, “We have already come to the table, looked at each other and said ‘What are
our strengths and what are our weaknesses?’ and pre-positioned ourselves so that we can—No. 1
—provide optimal solutions for our national security.”
Peter Dorhout, who has recently arrived at Kansas State University by way of Colorado State,
finds the environment here conducive to collaboration. “Kansas actually is in a very positive
place,” he said, “because higher education often speaks with one voice. We spoke with 14 voices
in Colorado.” As a telling example of that problem, he added, “There were times when I felt it
was easier for me to collaborate with colleagues at nuclear weapons facilities in the former
Soviet Union than it was to collaborate with folks down at Colorado University Medical Center.”
Jeff Boily noted that participants in the animal-health corridor, some of them competitors, looked
at the idea of collaboration from an outcomes perspective. The industry came together with the
goal of accelerating early-stage research to help “grow the corridor, grow jobs, and give the
member companies access to a greater product pipeline. “
“I have not seen this any place in the world,” said Boily, “where everyone is still kind of on the
same page, moving forward, and we’re attracting interest literally from around the world.”
Commercialization
Kevin Sweeney asked UMKC’s John Norton, whose Bloch School is well known for its efforts
in entrepreneurship, what he was seeing in regard to the commercialization process. “What are
we doing right,” Sweeney asked, “and what could we be doing better?”
Norton reported that many would-be entrepreneurs think it is all about securing start-up money.
But he believes that ideas must come first. It is important “to start lots and lots of businesses and
to start to commercialize lots of ideas.” Bloch’s research has shown them what works, and
faculty expose their students to these models. Given that the average entrepreneur will create
some 500 jobs in his lifetime, and that Bloch trains 100 entrepreneurs a year, “that’s a big deal.”
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8. With ideas being critical, and knowing that the intellectual property surrounding those ideas
creates value, Kevin Sweeney wondered how Washington’s “new intellectual property regime”
would impact the regional bio-tech industry.
As Patrick Woolley explained, the new system basically takes cases out of the federal court
system and puts them in the patent office where, presumably, they can be managed a lot more
economically. “I think you get a better result without spending upwards of seven figures to go try
a patent case,” said Woolley. This approach also harmonizes American law with the rest of the
world’s, which Woolley believes, is “actually a good thing for our purposes.”
John Garretson generally agreed with Patrick Woolley, but is not quite so bullish on the changes.
Garretson thinks we are entering a period of uncertainty. He cited specifically the FDA’s failure
to issue guidelines on biosimilars—that is, officially-approved subsequent versions of innovator
products. These guidelines were promised by January of last year but have not been delivered.
In addition to the uncertainty, Garretson wondered how the government was going to find several
hundred new patent judges to hear these cases. “What it does is put pressure on early assessment
of what is your IP” or intellectual property, said Garretson.
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9.
1. John Norton addressed the way advancing technologies could help address the acute lack of physicians in rural areas. | 2. Joe
Heppert talked about how advances in bioinformatics could revolutionize medical care. | 3. Increasing numbers of junior faculty
members are helping drive awareness of the need for commercialized research, said John Garretson.
Peter Dorhout believes that the academic sector shares the responsibility of fostering
entrepreneurship. That, he said, is going to take training. “We need to make [commercialization]
a part of the reward process and we need to facilitate it.”
According to John Garretson, a large number of junior faculty are way out in front of their
institutions on the issue of commercialization. “They want to do this regardless of whether there
are well-characterized rewards at stake,” said Garretson. “They’ve grown up with the expectation
that their work is going to have long-term impact and is really going to end up in the
marketplace.”
Bioinformatics
Bioinformatics, in its essence, refers to the application of computer science and information
technology to the field of biology and medicine. As Joe Heppert explained, bioinformatics means
many different things to many different constituencies, from medical informatics, as at Cerner
Corp., to molecule drug discoveries and protein-to-protein interactions. “Our ability to move
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10. beyond where we are right now in terms of discovery,” he said, “is going to be driven over the
next 10 years only by our ability to innovate and new computations.”
Although there is a significant range and variety of challenges to be overcome, said Peter
Dorhout, bioinformatics “opens doors for serious collaborations that are interdisciplinary,
multidisciplinary.”
Robert Casillas of MRIGlobal spoke to the importance of translational research in areas like food
surveillance, bio surveillance, and health surveillance. “The more that the discipline of
bioinformatics grows,” said Casillas, “the more we can address emerging surveillance concerns
whether in this country or globally.”
Joe Heppert emphasized the potential of bioinformatics in the development of personalized
medical care. Jeff Reene strongly agreed. “Based on studying the biomarkers and the data,” he
said, “we’re now able to target therapies to individuals to be much more effective.”
Advances in bioinformatics, John Norton suggested, could offer small-town doctors the ability to
practice the kind of medicine heretofore done only in cutting-edge facilities. “The possibilities
are really staggering,” Norton said, “and we don’t know which ones are going to work. All we
know is that we need to rethink the way data are manipulated, the way data are approached,
combined and dealt with.”
An advantage for the Kansas City area, Woolley observed, was Google’s selection of the area for
the installation of an ultra-high-speed network that will allow for Internet access more than 100
times faster than what most Americans have today. “It’s a big pipe,” said Wooley. “It’s fast. You
let people run with it. You have small grants, and you see where it takes you.”
Henry Randall, director of transplantation and hepatobiliary surgery at Saint Luke’s Health
System, has high hopes for applied bioinformatics. “Cancer is also a part of what I do,” said
Randall. “So developing bioinformatics, expanding that arena for transplant, for cancer care, is
something very personal to me.”
Work-Force Training
Kevin Sweeney asked his colleagues whether they were “moving the needle” on the quality of
the regional biotech work force. “I think the best measure of that is going to have to come from
industry that is telling us we’re doing the right things,” said Peter Dorhout. In launching a
training program with Manhattan Area Technical College, K-State is now working with students
from the associate degrees all the way up to the graduate level.
An integral part of training the work force is retention, said Steve Higgs. “There’s nothing that
motivates somebody to be trained more than an opportunity to be safe, secure and doing
something exciting.”
Joe Heppert is enthused about the incubator spaces that are starting to spring up across the
metropolitan area and in Lawrence. Some of them, in fact, are so full that they are running out of
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11. space. Heppert worries that if we do not provide for the talented undergrads and PhDs that the
region is producing, “We’ll continue to be a great feeder for the coasts.”
Some of the better secondary schools are also contributing to the creation of a viable work force.
John Norton gave kudos in particular to the Blue Valley’s Center for Advanced Professional
Studies, an extraordinary consortium of five high schools. “They’ve got little tiny kids that are
patenting biotechnology and aero-space stuff,” said Norton. His hope is to keep those students in
the area, ideally at UMKC. “We need to get them integrated into this process,” Norton added.
“Our greatest impact is reaching to the middle school and high school systems to bring that talent
up,” agreed Robert Casillas. “The more we can be involved as mentors, as tutors, allowing our
various staff to be involved and engaged daily is where were going to see that greatest impact.”
Law firms are in the recruiting business as well. Polsinelli Shughart already has 11 PhDs. As
Patrick Woolley observed, they need more—more chemists, more doctors of pharmacy, more
people with technical training who
are prepared to spend three additional years in law school.
Henry Randall wants not only to nurture young talent here but to recruit from outside the area as
well. One of the quickest ways to do that is to identify mentors and create programs that are
attractive to outsiders.
Incentives
One part of a comprehensive plan to attract and retain talent is a program of government-
sponsored incentives. Kevin Sweeney asked his colleagues which of the available development
tools has proven most effective.
Dan Getman lobbied for the Angel Tax Credit Program, which has been very successful in
Kansas. He also likes the state’s Eminent Scholars Program. Jeff Reene believes that the Eminent
Scholars program has been integral to the success of the Cancer Center.
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12. Said Jeff Boily of the Center for Animal Health Innovation, “There’s no doubt that the tax credit
issue has been very successfully used across the board.” Jeff Reene spoke highly of the 1/8 cent
sales tax in Johnson County that funds the Johnson County Education and Research Triangle,
providing funding for K-State’s Olathe campus, the Edwards Campus of KU, and the University
of Kansas Medical Center.
Surprises
As a closing question, those participants relatively new to the area—and there were many—were
asked what surprised them most when they got here.
The area’s work ethic impressed Peter Dorhout, also the affection people have for where they
live, especially Kansans.
“What I saw here was a clean slate,” said Henry Randall, “the opportunities for building a
clinical program, to also add on a research component to it, and knowing that Kansas City did
have this developing biotech industry, and
I wanted to be a part of that.”
Said Dan Getman, “I was stunned by people in the region who didn’t have an appreciation for
the progress that had been made over the last decade in the life sciences.”
Dan Casillas was impressed by the area’s “partnering environment.” John Garretson agreed. The
spirit of collaboration here he found to be “light years beyond” what he had seen in New York.
For John Norton, it was the em-brace—by the region in general and the Bloch School in
particular—of the entrepreneurial spirit. “Were going to change the economy of this region,” he
enthused. “We’re going to change people’s lives.”
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