Texas Biotech Leaders Doubt CPRIT Will Get Its Groove Back

1/24/14Follow @angelashah

The Cancer Prevention and Research Institute of Texas is back in business again, and is seeking a fresh start after a well-documented scandal. But many in the life sciences startup community are skeptical that the once-ambitious state agency will ever become a catalyst for creating high-impact biotech companies that could build on the state’s momentum in biomedical research.

CPRIT, as the agency is known, started in 2007 with a 10-year mandate to invest $3 billion of taxpayer money for cancer-related research, drug development, and prevention in Texas. But in 2012, the agency came under legislative and criminal scrutiny over improperly allocated grants. During the various allegations and investigations, CPRIT was put on a yearlong hiatus. And two months ago, Texas lawmakers imposed a series of reforms that allowed it to resume operations.

But many biotech entrepreneurs and investors worry that the agency will become a “mini-NIH” focused primarily on grants for academic research, not the kind of awards that go one step further into commercial development, which are needed to help small companies grow and create valuable new cancer drugs or diagnostics.

Bruce Given, COO of Arrowhead Research in Houston, says the only way the agency can hope to live up to its stated mission of curing cancer is to support young life sciences companies. Having a 10-year mandate to deliver results gives the agency the flexibility to be a patient investor, but that doesn’t mean it can wait forever. “The only way you can change outcomes in this time period is to focus on translation, company formation, and new products to the marketplace,” Given says.

Since the agency issued its first grants in 2009, an overwhelming majority of CPRIT funds have gone to research projects—380 awards for a total of $652 million. Product development awards, or those that target commercialization, numbered 13 for a total of $98 million. Everything came to a halt in May 2012 when Alfred Gilman, the former chief scientific officer of CPRIT and a Nobel laureate, resigned over concerns about how the state money was being handled.

And, the agency itself is trying to figure out where it will place its priorities. Its oversight committee will today discuss the issue with hopes of finalizing a policy later this spring.

Wayne Roberts, CPRIT’s new CEO, rejected the idea that the agency has lost the opportunity to play a major role in commercialization. Grant totals, so far, do not fully indicate what the agency is prepared to do, he added.

“Part of why they [in the Texas biotech community] would have that perception I believe is, to this point in time, there has been many more meritorious research projects that have come forward than meritorious product development applications,” says Roberts, who was the agency’s interim chief during the moratorium. “We are going to be actively finding ways to beat the bushes to encourage more [product development] applications.”

Roberts also says that, while not technically classified as product development, many research grants also have potential to advance ideas with commercial potential. “It’s the ‘D’ in ‘R&D’,” he says.

“We probably get at least 30-to-1 research to commercialization applications,” Roberts says. “If a company or someone in the private sector is disappointed in the number of product development projects that we’ve funded, my answer to them is to pull a group together and give us quality applications and run it through our processes, and I look forward to a successful relationship with them.”

CPRIT 2.0

A few weeks after reinstatement on December 9, the agency issued requests for proposals, three each in research, product development, and prevention. The deadline for applications is next week.

Dan Watkins, a managing director at the Mercury Fund in Houston who focuses on life sciences investments, says he thinks the glass is “half-full.”

“I’m encouraged that going through these problems may result in even more disciplined and objective analysis,” he says. “The state should be able to really pick up some outstanding technologies and create some outstanding companies.”

At the time of voters’ approval of the amendment creating CPRIT, life sciences entrepreneurs hailed the agency as a remedy for one of biotech’s biggest obstacles in commercialization: money, or the lack thereof, for what are typically risky ventures. With Big Pharma cutting back on R&D, and venture capitalists steering away from the earliest and riskiest stages of biotech innovation, backers hoped that CPRIT could plug that hole.

But when allegations surfaced that the agency’s oversight committee approved awards that had not been properly vetted, operations ground to a halt. And several startups with pending applications got caught in the breach.

Opportunity Delayed

Jon Northrup, CEO at Beta Cat Pharmaceuticals in Gaithersburg, MD, was in the final review stages for a $15 million CPRIT grant just days before Texas Gov. Rick Perry announced a moratorium on the agency’s activities in 2012. The company sought the money to help fund research into a drug that targets cancer stem cells and said it would move to Texas if it could get a grant.

When I spoke with Northrup last June he was concerned that sitting in a holding pattern would impair Beta Cat’s ability to move forward with either plans for a clinical trial or to court other investors. For a biotech startup, both time and money are in short supply, he added.

Since then, Northrup says, Beta Cat has reapplied for a CPRIT grant. “We remain hopeful and, we will see when all the cutting is done, who might be left,” Northrup added. “My observation would be that the new management of CPRIT is working very hard to show the world that the program can be successful and we are very pleased with the new activity.”

Others are less optimistic. “I originally thought CPRIT was the biggest blessing we’ve ever had and then it became the curse of biotech in Texas,” says Michael Redman, CEO of Oncolix in Houston.

Oncolix, which is developing a drug to treat ovarian cancer, has received investments from the Texas Emerging Technology Fund as well as orphan status from the FDA and clearance to start testing its drug in the first phase of human clinical trials. But its application to CPRIT was one of several startups whose applications were withdrawn by the agency following the moratorium last year. Its first attempt at securing $12 million in funding was rejected in a process that Redman says was full of erroneous assumptions by the evaluating committee. “We were not even allowed to respond,” he says.

Still, Redman says he and his partners, hopeful that the agency is back on track, have been preparing to respond to CPRIT’s latest request for proposals. Last week, however, he received an e-mail from the agency stating that Oncolix was ineligible to apply since it had already submitted two applications. But a letter the company received from the agency last April stated that the “withdrawn application does not count towards the application submission limit.”

“We were told it wasn’t going to count; now it does,” Redman says. “The deadline is coming and we don’t know what to do. We were planning on submitting; we spent a lot of resources on this only to be told at the 11th hour” of the ineligibility.

For Redman, the inconsistent messages at least display a level of carelessness that doesn’t spur confidence among life sciences entrepreneurs that the agency is serious about commercialization.

A CPRIT spokeswoman says that the agency can’t comment on specific cases.

Looking Ahead

In our interview, Roberts says the agency has and does respect the contribution private companies can bring to CPRIT’s mission. What should help illustrate this, he added, are provisions in the law that require leaders to set out policy priorities on which projects they should fund.

“Previously, this wasn’t very clear to the public or the media or the legislature, as to what we were trying to do,” Roberts says. “I need something to measure my progress by. That is what is going to take place. It’s very important.”

Even as agency leaders decide on the best way to divvy up its funds, a key component of its ability to support commercialization is missing: its chief product development officer—the person vetting commercialization proposals at the frontline. The job became open after Jerald Cobbs resigned in November 2012. (Last month, he was indicted by a Travis County grand jury for improperly awarding an $11 million grant to Dallas-based Peloton Therapeutics, one of the grants that led to CPRIT’s moratorium.)

While the agency searches for Cobbs’s replacement, some in the life sciences community say it will be difficult to attract high-caliber talent. Not only is there the matter of a pay cut—counterparts in the private sector can make multiples of a government job that tops out at $219,000—but because of the past controversy, they feel that any candidate would have a target on his back and, so, be wary of taking on the sort of risks inherent in life sciences innovation.

“This could have helped Texas move part of the way to get caught up to Boston and San Francisco, and, boy, they just completely botched it,” says Arrowhead’s Given, who was on CPRIT’s commercialization review committee the first year. “I just view this as a big lost opportunity.”

Some question whether Roberts, a longtime and respected Austin hand—most recently as an associate vice president for public policy at the University of Texas Health Science Center at Houston—is the best candidate to help CPRIT fulfill the agency’s commercialization priorities in the years it has left.

“I know a lot more about the science and commercialization of it than a lot of people may want to give me credit for,” Roberts says. “I view my responsibility here as making sure the train runs on time and stays on track. If I see something that calls into question the integrity of CPRIT’s processes, I’ll call it out.”

“I’m at a stage in my career where it is not worth my personal reputation to do something that gets called into question,” he added. “I want to see CPRIT succeed.”

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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  • Frank Grassler

    Angela, did you confront Roberts with the Oncolix problem of inconsistent treatment of their second application?

    • http://www.xconomy.com/texas Angela Shah

      Hi Frank. I did ask him about concerns from many entrepreneurs about the review process. CPRIT would not get into specific company applications.