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New Blood: Biotech CEOs Bring Fresh Experience to Houston Ecosystem

Xconomy Texas — 

Houston—A number of Houston biotech companies have new leadership at the helm.

These leadership changes include a few executives like Lonnel Coats, CEO of Lexicon Pharmaceuticals (NASDAQ: LXRX), who have relocated to Houston from the East and West coasts—homes of more established and successful biotech ecosystems.

“We had the ability to move the company to New Jersey, or stay in Texas,” says Coats, who recently moved from New Jersey to Lexicon’s headquarters in the northern suburbs of Houston.

But ultimately, Coats says he decided he would move instead and keep the company’s Texas roots intact. The biotech’s first drug, telotristat ethyl (Xermelo), which treats diarrhea from carcinoid syndrome, was discovered at Houston’s Baylor College of Medicine and its first investor is a Texan. “There was no reason to change the foundation of that,” he says.

For Ann Tanabe, CEO of life sciences trade group BioHouston, that sentiment is a sign of a growing momentum in the further development of the city’s life sciences ecosystem. In addition to Coats, both Tom Luby, the new head of JLabs’ Houston outpost and Erik Halvorsen, director of TMC’s Innovation Institute, were both recruited to Texas from posts in Cambridge, MA.

“We’re starting to get people from other hubs and ecosystems coming to Houston and that’s going to help us,” she says. “There is that buzz with [people] like this making the career move to come here. People are taking notice.”

That buzz is something that Tanabe says Houston needs if its biotech community is going to be able to grow into a fully mature biotech community on par with Boston or San Diego. While Houston is known for its research and scientific prowess—namely at institutions at the Texas Medical Center—and a capital network with the dollars to fund good ideas and transform them into marketable products, city has lacked a seasoned group of executives that can shepherd that process.

A region can’t become a top biotech hub if “much of your leadership is commuting from the coasts,” says Rick Fair, a former Genentech executive who became CEO of Bellicum Pharmaceuticals in January—and is commuting from his home in San Francisco.

Still, the Houston biotech community has recently seen an infusion of new blood. Nestor Molfino’s resume includes running his own biotech consultancy, being the chief medical officer for San Francisco area-based KaloBios Pharmaceuticals and vice president for clinical development at MedImmune, the research and development arm of big pharma company AstraZeneca (NYSE: AZN). (KaloBios has had a rocky recent history, including the arrest and ouster of former CEO Martin Shkreli, bankruptcy, and a Phase 2 clinical trial failure for its drug candidate to treat infections in cystic fibrosis patients. Nestor was dismissed along with the previous CEO in 2015.)

Molfino says he was familiar with the fact that the Texas Medical Center was based in Houston, but didn’t know much about the innovation ecosystem that might be here. “You cannot deny it’s a challenge to recruit to this area,” he says.

Still, he agreed last month to join Pulmotect, which is developing an inhaled therapeutic to prevent and treat respiratory infections in cancer patients with compromised immune systems. The company last year completed a second clinical trial to assess the safety of its lead drug candidate, PUL-042, and has raised about $18 million in federal and state grants.

Molfino says the fact that Pulmotect is a portfolio company of Fannin Innovation Studio gives the company the added benefit of having its own “micro-ecosystem” and the opportunity to work on different projects. That sort of plan B is important considering the high failure rate of young biotech companies.

“It’s a fabulous place to grow,” Molfino says. “Houston is going to be the third hub in biotech in the future.”

Zaffer Syed was a group manager for clinical marketing at Boston Scientific (NYSE: BSX) in Valencia, CA, when he was recruited to join Houston dental device company OrthoAccel in 2013. “This gave me startup experience … and introduced me to more of a consumer health side of things,” he says.

Though Syed says he, too, didn’t know much about Houston’s life sciences community, he saw the OrthoAccel position “as an opportunity to accelerate my growth and go back to California.”

Then, late last year, Saranas CEO Michael Magnani left the company and Syed was approached about that role. The medical device startup is developing a sheath that, inserted through a catheter, can measure electrical resistance, which changes if a rupture in a vessel causes blood to accumulate within the vessel. These types of slow blood leaks can happen if a catheter accidentally punctures a vessel as it’s being inserted.

Syed says he believes that the startup is very close to getting FDA clearance for the medical device. “They’re looking to exit and they believe I’m going to be able to help them,” Syed says. “The idea of leading this company to the finish line seemed attractive to me.”

Another reason why he says he decided to stay in Houston was, once he got here, he began to see the city’s potential in biotech. “I see what’s going on with TMC, JLabs; I wish I was involved earlier to lend my experience to the stuff that’s going on,” he says.

Bellicum’s Fair was formerly the head of Genentech’s oncology global product strategy division in San Francisco, and replaced founding executive Tom Farrell. “I’ve been in the industry for 20 years, the first 16 in purely commercial roles,” Fair says. “I’ve come to Bellicum at a time when that’s an increasingly important skill set.”

Fair says his choice to commute from San Francisco to Houston is largely because he has middle-school and high-school aged children, and that he hopes to get more connected with Houston’s biotech community. “Bellicum is very connected to Houston so it’s in our interest and we’re eager to see a lot of success here so we can cultivate a better talent pool,” he says.

Coats, of Lexicon, took the helm nearly four years ago in August 2014. He replaced the biotech’s founding CEO Arthur Sands, who was dismissed following major cuts at Lexicon in order to cut costs. The company’s board cited his 18-year career at Tokyo-based Eisai’s US subsidy where he had a hand in $5 billion worth of acquisitions and partnerships, as a main reason for bringing him on board. But it wasn’t until this year that Coats decided he needed to be in Houston full-time—around the same time that Lexicon got FDA approval and now has a product to sell.

“Success begets success,” Coats says. “The moment you have a surviving company that commercializes a product where the science was founded in Texas and the product make it to market, people will pay attention. You haven’t had enough of that happening in Houston yet.”

Coats, of course, says he believes Lexicon will be among that vanguard.