Life Sciences Discovery Fund Debunks Perceptions with Omeros Deal, Shows State Can Bankroll Companies

12/14/10Follow @xconomy

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of the deal, he says.

As part of this transaction, Huntsman says an as-yet-unnamed nonprofit entity is being established with a similar mission to that of the Life Sciences Discovery Fund. If Omeros truly hits the mother lode with drug targets that are deemed super-valuable by Big Pharma, then all the extra proceeds beyond the $25 million to the state agency will flow into this nonprofit, Huntsman says. This nonprofit, dubbed “the initiative” at this point, is still in its earliest of phases, as it needs to form a mission statement, and decide on who will serve on its board of trustees, Huntsman says. Omeros and the Life Sciences Discovery Fund will have equal say in who serves on the board of trustees, Huntsman says.

The structure is considered workable, Huntsman says, because it’s really not different at least in concept, than the way the Life Science Discovery Fund works now. Currently, if a state grant goes to a University of Washington researcher who develops a hit drug, then the state can get its original grant paid back in full, Huntsman says. And if the UW hits that kind of licensing home run (like inventing a new vaccine such as Merck’s Gardasil) then the university (a nonprofit entity in its own right) has the opportunity to spread the loot all around campus to help support other researchers.

The Omeros grant is like that in concept, Huntsman says. One difference is that any additional windfall would accrue to a new nonprofit that would then re-invest the proceeds in a multitude of nonprofits around the state, like the University of Washington or Fred Hutchinson Cancer Research Center, he says. He added that the nonprofit “initiative” could be established to invest in shared facilities that could benefit the entire biotech community, and it might be free to invest in biotech startups.

The major limitation on doing this deal wasn’t actually legal parameters, but financial constraints, Huntsman says. The Life Science Discovery Fund entered this year after having its budget cut 40 percent, giving it a little more than $20 million to spend. So a $5 million grant to one company is a big chunk of what the agency is capable of offering in the broader context. It’s really the second big grant the fund has made this year, after a round of grants totaling $15 million to the UW, Hutch, and Sage Bionetworks in April.

What struck me as particularly new and interesting is Huntsman’s interest in creating the new nonprofit. Anyone following state politics knows the state has a serious budget crunch, which puts a huge amount of pressure on lawmakers to cut everything in sight. That includes the Life Sciences Discovery Fund. By structuring the Omeros deal so that it can provide returns to both the state agency, and a new nonprofit agency that could be its mirror image, there is a possibility that Huntsman could be creating a new vehicle for life science investing with its own independent source of cash that is insulated from the budget cutting whims of future legislatures.

Huntsman didn’t deny that’s a possibility, although he said it wasn’t the prime motivation of the deal structure. He stressed that if Omeros has success in this GPCR project, the benefits will flow all around the community. While I’m sure many people would measure the success in the number of jobs created, he declined to provide a number of jobs it might create.

“If Omeros has upside success and it flows back to the nonprofit which has a purpose similar to ours, it’s just like having the UW or Hutch or somebody else here prosper,” Huntsman says. “Except this could have an even broader impact.”

Since the deal was announced, Huntsman has had a few entrepreneurs come in for meetings, asking lots of questions about the deal. A few have been perplexed, saying they didn’t think the state could do anything like this for a corporation. But the state life sciences fund may consider doing another deal like this for a company if it has the money, Huntsman says.

The state surely won’t have a lot of proceeds to invest anytime soon. Real money from drugs developed by Omeros, or by Omeros’ partners, may take decades to materialize, if ever. Huntsman, being a scientist by training, knows all about the high-risk, high-reward proposition that biotech offers. Even so, he insists his agency doesn’t need to hit the jackpot to justify the investment. The state’s $5 million grant is justified on the fact that it helps catalyze a $40 million scientific project that pools money from Omeros, Vulcan, and the state in an intense local R&D effort.

“If Omeros hits a home run and this new nonprofit gets off the ground, it’s good for life sciences in the state,” Huntsman says. “We don’t have to worry about whether the Life Sciences Discovery Fund survives or doesn’t. If the new nonprofit exists with a mission of advancing life sciences, it’s good for our mission.”

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  • rrtzmd

    …”Life Sciences Discovery Fund has plowed its resources directly into a for-profit entity.”…and they may as well have taken that money and flushed it down the nearest toilet…was that actually taxpayer money?…did ANYONE investigate what they were buying?…

    …Omeros has spent FIVE YEARS trying to gain approval for a ridiculous IRRIGATING solution containing the ALREADY APPROVED drugs amitriptyline, ketoprofen & oxymetazoline…not only that but the trial was supposedly completed well over a YEAR ago and yet the company has repeatedly postponed reporting the results…we’re not talking about complicated data here…it’s stuff that could analyzed by any eighth grader with a statistics calculator in a few hours…

    …in the meantime, per the IPO prospectus, OMER has been so kind as to pay Demopulos’ medical malpractice insurance AND his patient care fees…that’s on TOP of his half million dollar a year salary, benefits, bonuses, and perks…

    …MOREOVER, the trial ostensibly was completed about 3-4 months BEFORE the IPO…a little fact that seems to have not made it into the prospectus…gosh, I wonder what it means if the results turn out bad — I’m confident they will — and someone starts poking their nose into who knew what, where, and when…they already fired some guy named Richard Klein because he complained about the way books were being kept…and I noticed the disappearance of a Dr. Murray just weeks after he was hired as Vice President of Clinical Development…that looked a little odd as well…

    …and Vulcan?…did anyone look at Paul Allen’s investment record?…it doesn’t exactly have a glittering history of success…

    …your government dollars at work…what a joke!

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