Texas Cancer Agency Withdraws Pending Startup Funding Applications

7/2/13Follow @angelashah

The Cancer Prevention and Research Institute of Texas has dismissed five pending grant applications by companies seeking funding in light of CPRIT’s ongoing reorganization.

The move came days after Texas Gov. Rick Perry approved on June 15 a new law designed to reform  the embattled agency. CPRIT had come under legislative and legal scrutiny late last year following allegations of conflicts of interest and that grants were improperly awarded.

That, along with a moratorium on activities imposed by Perry in January, meant that many life sciences startups midway through the application process found their applications in limbo.

Now, their CEOs are looking at starting the entire funding process from scratch and wondering whether to take their ideas out of Texas. “CPRIT is unable to project when it will be able to move forward with commercialization recommendations, if any, from this review cycle,” according to a notice sent by CPRIT to companies on June 19.

“It is likely that by the time CPRIT is able to take action, the business and research plans submitted by you will be nearly two years old,” the letter states. “To be respectful of your options regarding the work proposed in this submission and to provide you with the best possible opportunity to receive CPRIT funding, CPRIT has decided to administratively withdraw your application from this review cycle.”

Walter Klemp, founder and CEO of Houston-based Moleculin, had applied for a $5 million grant to research a drug to fight cutaneous T-cell lymphoma, a deadly skin cancer, in March 2012. The money was meant to fund two clinical trials this year.

“The difficulty is that until they know when the next RFA [request for application] will be, it’s difficult to formulate a strategy from our perspective,” he says. “It could be a month from now or a year from now.”

If the process were to open up reasonably soon, Klemp says he would re-apply. In the meantime, Moleculin is retooling its funding efforts and shelving the project in the United States to look for funding opportunities in the European Union. “I live here; I’m a cheerleader for Texas,” he says. “But at some point if the bureaucracy fails, which it clearly has, we can’t let the project founder, so we’ll find other ways.”

Wayne Roberts, CPRIT’s interim executive director, said in an e-mail Monday evening that there are still seven companies with pending applications. These companies submitted their requests for funding in the August and November 2012 cycles, he said.

If companies resubmit an application, they would have to start the process over, a spokeswoman said on Tuesday. (In an interview with Xconomy last month, Roberts did say he would prefer that companies left in limbo would be able to resume the application process where they had left off.)

CPRIT was created by a 2007 amendment to the Texas state constitution with the mission of funding cancer research and prevention efforts in the state. With $3 billion to dole out over 10 years, CPRIT is the nation’s second-largest supporter of cancer research, behind the National Cancer Institute. A Texas State Auditor’s report in January detailed significant issues, including questionable or inappropriate activity in three grants totaling $56.2 million.

CPRIT says that companies that resubmit would not have to pay the commercialization application fee and that the withdrawal will not be held against them in the new evaluation.

While CPRIT may not hold the withdrawal against them, Michael Redman, CEO of Oncolix in Houston, is worried that the funding community looks unfavorably on startups caught up in the institute’s turmoil. CPRIT is an 800-pound gorilla and even a soft “no,” such as a withdrawal of applications can adversely affect future fundraising prospects, he says.

“We’re extremely disappointed,” he says. “We had to lay off some people, we postponed our clinical trial. It’s soured other potential investors, because if CPRIT doesn’t like you …  That really hurt us.”

Redman, whose company is developing a drug to fight ovarian cancer, also received the letter from the institute that his pending application for a $12 million grant was withdrawn. This was Oncolix’s second attempt to secure funding.

The company’s first try for funding was rejected. “We didn’t have any means to give any rebuttal to some of the erroneous statements that were made,” he added. Oncolix, he points out, has other investors, including the Texas Emerging Technology Fund, which gave the company a $2.4 million grant, and has orphan status from the FDA and clearance to hold a phase 1 trial.

Jon Northrup, CEO of BetaCat Pharmaceuticals in Gaithersburg, Maryland, didn’t get a letter from CPRIT withdrawing his application, but says he doesn’t have any better idea of the status of his application.

“We still think CPRIT is a fantastic idea and has potential to do wonderful things for Texas and oncology companies,” he says. “We’re still interested in making the move to Texas.”

Part of CPRIT’s mission is to fund out-of-state startups that would then move their operations to Texas. BetaCat initially applied for a $15 million grant to develop a drug that targets cancer stem cells, in the same cycle as Moleculin (the deadline in March 2012).

Northrup says they were turned down in September but then received an invitation from CPRIT to re-apply for a new cycle of applications that had a deadline of November 15 last year. He has not heard from authorities about where that grant application stands, he says.

“I think we would re-apply even if we were told we had to start over from scratch,” Northrup says. “We would go back one more time—that would be our last time.”

Angela Shah is the editor of Xconomy Texas. She can be reached at ashah@xconomy.com or (214) 793-5763. Follow @angelashah

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