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Initiative is shattering the glass-half-empty past of gender diversity at the top of KC companies
BANKING ON A LOAN
Area companies, banks match up to partner for smart growth. BEHIND THE CURTAIN
Mergers and acquisitions missteps are commonplace in KC, and with them, plenty of lessons to learn
|KCBCentral.com: Biomedical Research Expands Area Economy|
STORY BY Julius Karash
And while the restoration of Union Station marked a great achievement, the constant growth of life sciences activities in our region is cutting a wide swath as well. Much of the impact will come from new jobs created by companies that commercialize life science discoveries taking place in area labs.
Getman cites life science powerhouses in our area such as the Stowers Institute for Medical Research, the KC Animal Health Corridor and the University of Kansas Cancer Center, which is seeking National Cancer Institute designation.
The KCALSI reported recently that the Kansas City area is home to more than 70 contract research organizations that generate an estimated $1.33 billion in annual revenue and employ more than 9,000 workers.
Others contributing to growth in the Kansas City area life sciences community include the University of Missouri-Kansas City, Kansas City University of Medicine and Biosciences, Teva Neuroscience Inc. and MRIGlobal, a not-for-profit research and development organization that recently formed a global health and security unit.
“Building collaborative relationships with research universities and medical centers has helped us focus and develop programs that are more complementary,” says Tom Sack, who is senior vice president and director of technical operations at MRIGlobal. “As the local academic community grows, that provides us with a much better workforce.”
“By having these things like Stowers, the [Animal Health] Corridor, the Kansas Bioscience Authority and the Cancer Center effort,” says Getman, “those cause people to look at Kansas City and say ‘Wow, there’s something really good going on in this area. Maybe I need to go visit. Maybe I want to collaborate. Maybe I want to establish a presence in that region.’”
BUT CAN KANSAS CITY REALLY DO THIS?
Of course, most life science efforts won’t be lucky enough to find a Jim Stowers to bankroll them, and Kansas City’s share of research grants and life science venture capital investing pales in comparison to areas such as Boston and San Diego.
But funding comparisons can be misleading, Getman says. “Dollar for dollar, it’s hard to compare research funding that goes to our metro area compared with other metro areas because most of the major universities in our region lie outside our metro area. We operate as a broad region.”
In addition, Getman says such comparisons typically don’t include organizations such as the Stowers Institute, which was endowed with nearly $2 billion, and MRIGlobal.
“Many of these studies are based on NIH (National Institutes of Health) funding,” Getman says. “That really puts a focus on medical research within the immediate Kansas City area. We have much more diverse funding sources, like the Department of Defense, the U.S. Department of Agriculture and Homeland Security, as well as NIH.” Furthermore, there is evidence of substantial growth in NIH funding for the area.
The Kansas Bioscience Authority reported in 2010 that Kansas was No. 1 in the nation for its increase in NIH funding, jumping 37 percent (from $75 million to $103 million) between fiscal year 2004 and fiscal year 2009.
One of the emerging success stories in the Kansas City area bioscience sphere is the Olathe-based Novita Therapeutics, which is developing new medical devices for renal, cardiovascular and gastrointestinal health.
Novita got a boost last year when the Kansas Bioscience Authority made a $600,000 investment in the company.
Novita Therapeutic’s president and CEO is Dr. Nicholas Franano. His accomplishments have made him emblematic of the success that is possible in the bioscience-business world. In 2001, Franano and William P. Whitaker co-founded Proteon Therapeutics Inc., which is developing pharmaceuticals to address the medical needs of patients who have renal and vascular diseases.
Eight years after that, they received the 2009 Ernst & Young Entrepreneur of the Year awards in the private equity/venture capital-backed category in the Central Midwest region.
Proteon Therapeutics has since grabbed the attention of Swiss pharmaceutical giant Novartis AG, which has an opportunity to acquire the firm for $550 million in 2013.
Novita Therapeutics develops products internally, Franano explains. “When we get to the point where we would like to show them to venture capital investors, we put them into a subsidiary company. We created our first subsidiary company in 2010, and our second last year. We’re developing products at both subsidiaries, and we’re actively talking with investors about spinning off both of them.”
Kansas has become a great state in which to start a life sciences company, Franano says from experience. “When I first started in 2001, as an entrepreneur, you could legitimately complain that there weren’t enough resources in the region to do the kinds of companies that I wanted to do. But I think now the onus is on the entrepreneurs to make good.”
CANCER SURVIVORSHIP TRAINING INC.
The answer? A resounding no.
“They told me I was overly ambitious,” Klemp says. “And I said, ‘All right! I’ll take that on.’”
Klemp had obtained financial support from Back in the Swing, a local nonprofit organization, but more was needed. To move the dial forward, she and her colleagues formed a corporation and signed a licensing agreement with KU in January.
“The license agreement with KU allows me, as an employee, to use my intellectual property to build something that also has commercial value,” says Klemp, the company’s CEO. “KU’s an investor in the business. It allows us to take great things that are happening at KU and [use them] in this business.”
Klemp also received Kansas Angel Tax Credits geared toward startup technology companies. The credits allow investors to get back 50 percent of their investments with a limit of $50,000. “This has been a very helpful tool for us getting investors,” she says. “We’re raising $500,000, and we’re about two-thirds of the way there.”
Cancer Survivorship Training is based in Prairie Village. Klemp’s partners in the company are Rob Bykowski, president and chief operating officer, and William Brunkhardt, chief technology strategist.
Klemp has performed research at the KU Lawrence campus and at the KU Medical Center in Kansas City, Kansas. According to KU, Klemp recently published research on a national needs assessment, in a partnership with the National Oncology Nursing Society, to evaluate both the extent and the type of survivorship care being delivered to patients, as well as the educational needs of the health care providers.
Klemp sees a great need for what she’s offering. “By 2020 there are going to be 18 million cancer survivors in the United States,” she says. “They are [seen and treated] in every type of medical practice, including endocrinologists and internal medicine doctors and cardiologists. If all of these folks don’t understand some basics on cancer survivors, then they are going to be at a deficit when caring for those patients.”
To prevent such deficits from occurring, Cancer Survivor Training will provide tools for activities such as patient assessment and care coordination.
How far does Klemp want to take her business? “We can handle as much volume as we can get,” she says. “We are going to license it to organizations and universities. We are also going to sell [training] courses to individual users. The platform can be used in any health care space (not just cancer or survivorship). You can build anything you want into that framework.”
Klemp says that researchers who want to follow a path similar to hers should know that “there are opportunities for funding out there. There are creative ways to get funding. It is our responsibility to take grant and philanthropic dollars and leverage them to the next step. And it’s very important to look to the business community for collaboration.” And in all of these, keep an open mind.
Also crucial is the willingness to work as part of a team, Klemp says, and to “think outside the box. Businesses don’t have to be just a medical device or drug therapy. There are lots of ways we can take things to the next level.”
KC ANIMAL HEALTH CORRIDOR
Area civic and business leaders realized a few years ago that a corridor stretching from Columbia, Missouri, to Manhattan, Kansas, was becoming the hub of one of the world’s top centers for animal health enterprises. To leverage that expertise, they established the KC Animal Health Corridor in 2006. The Kansas City Area Development Council (KCADC), Greater Kansas City Chamber of Commerce and Kansas City Area Life Sciences Institute led the initiative.
Major players in the region’s animal health field include Bayer HealthCare Animal Health, Boehringer Ingelheim Vetmedica, Hill’s Pet Nutrition and CEVA Biomune.
“One-third of the $19 billion global gross sales of the animal health industry emanate from companies that have a presence in the Kansas City Animal Health Corridor,” says Kimberly Young, who is vice president of bioscience development for the KCADC. “This represents 20,000 jobs at about 220 companies in the region.”
The goals of the KC Animal Health Corridor are retaining the companies that are already here, recruiting companies to move here and growing the animal health research base in the region.
The Animal Health Corridor has thrived even amid challenging economic times, Young says. “Since the start of the effort, 22 companies have moved here,” she says. “They’ve created almost 1,300 jobs and $1 billion in new investment. That’s very significant.”
Young cites last year’s announcement that Argenta, a global provider of drug development services and contract-product manufacturing for the animal health industry, had decided to locate a new lab facility and office in Lawrence. The move created 27 new jobs along with an investment of $500,000 in purchasing new laboratory equipment.
“That was a nice win and investment for them to come here and create those high-paying jobs,” she says.
Young says the Animal Health Corridor benefits from 14 bioscience incubators in the region that provide crucial assistance and resources to early-stage companies. Many of the incubators are connected with universities.
Another strong point along the Corridor is the Center for Animal Health Innovation in Olathe. The Center provides early-stage proof-of-concept funding.
“One major focus of the Center is trying to identify the next big idea in the animal health area, as far as research goes, that has the potential to become a commercial product,” says Jeffrey Boily, CEO of the Center for Animal Health Innovation. “It’s all about identifying innovative, early-stage research that addresses unmet needs in the animal health industry.”
Young says that the Corridor will hold its fourth annual investment forum at the end of August. “That’s venture capital funding with a $5 million to $20 million target,” she says. “It is getting ideas off the ground, ideas that haven’t had clinical trials yet. It’s helping support that pipeline from the idea stage to a company setting up and commercializing.”
The concentration of companies here and the attention and support they receive attract other animal health companies, Young notes.
“Companies on the outside want to come here and benefit from that,” she says. “There’s no other place in the world that has this concentration and singular focus on animal health that they’re going to find here.”
“After we licensed two new compounds as innovative new medicines for dogs and cats, we settled the company in Kansas to be part of the Animal Health Corridor because there are opportunities here for us to make connections with animal health companies,” says Linda Rhodes, CEO.
After approximately nine months, the original investors wanted to raise more money. “We went out to the ‘super angel community’ in the Kansas City area, as well as across the country,” Rhodes says. “We had a very successful completion of a Series B [round of preferred stock] and raised an additional $15.5 million. We did it in two closings to take advantage of tax credits for both 2011 and 2012.”
An “angel investor” is an individual or group that provides capital to startup companies but does not become a partner. They’re rarely involved in management, but angel investors typically add value through their contacts and expertise.
One of the new angel investors in Aratana is the Women’s Capital Connection, which is based in Lenexa and was founded in 2008 with 32 investors committed to investing in women-led ventures in our region.
Other investors in the Aratana Series B round included the Mid-America Angels and the Kauffman Foundation, along with individual investors.
“The local community understood what we were trying to do as a company,” Rhodes says. “We are creating innovative new medicines for companion animals. As pets have become more a part of our families, most people who heard our story have pets or know people who have pets. They understood that pets need to have innovative new medicines, and people are willing to spend the money to support the medical care of their dogs and cats.”
Rhodes says that the three ingredients that are necessary in order to fundraise in the biomedicine and technology world are market opportunity, robust technology and the right management team.
“You can have a great technology, but if you don’t have the people who know how to bring it forward in a cost-effective way, the company may not be as successful as it otherwise could be,” Rhodes says. “We’re very fortunate in that we have a very strong team and some great technology.”
Rhodes adds that she and her colleagues are grateful for the support they got from the community. “We want to get our message out there that we’re a pioneering company doing for animal health what the human biotechs did for human health.”
SAINT LUKE’S MID AMERICA HEART INSTITUTE
Many of those patients are deemed too high-risk for conventional aortic valve replacement surgery because of advanced age or other medical conditions.
Some researchers at Saint Luke’s Mid America Heart Institute in Kansas City have been participating in national trials in order to evaluate whether a collapsible replacement valve could be inserted into such patients via catheter through a small incision in the groin or between the ribs.
“We’ve been involved in this procedure for more than two years,” says Dr. Keith Allen, director of cardiothoracic clinical research at the Institute. “The only valve that’s approved by the FDA is the one that we currently are studying. It is approved for use in very specific patients.”
Saint Luke’s was one of 22 medical centers in the country initially selected for the trial by Edwards Lifesciences, a California-based medical device company funding the research.
“It’s a select group of hospitals that were chosen because of their expertise and national and international reputations,” Allen says.
How does a hospital make the cut for such research projects?
“You have to have the infrastructure to do the research, which obviously the Heart Institute has,” Allen says. “You need to have a collaborative process, particularly in the field of cardiac disease. The mantra now is to utilize a team approach. Things have become so complex that it’s important for the surgeons, the medical doctors and the cardiologists all to work together very collaboratively.”
Allen says Saint Luke’s participation in these kinds of trials has had and will have “tremendous impact on raising Kansas City’s profile in the life science research community. The Heart Institute already has an international reputation. I think that it is not always appreciated by the Kansas City community. I’m not sure they’re aware of the depth of research that goes on at the Heart Institute.”
Dr. David Cohen, director of cardiovascular research at the Heart Institute, says he moved here from Boston five years ago because the Mid America Heart Institute had a reputation for outstanding clinical work. “The collaborative heart team concept has been a very big outgrowth from this program,’ he says. “A lot of the advances that are coming in cardiovascular medicine are going to come from these collaborative efforts.”
Cohen says his area of research is known as health economics and technology assessment. His program is one of only four in the entire country.
“As everyone is aware, we have major economic challenges with health care in the United States,” he says. “One of our central missions in my research program is to understand new technologies as they mature and develop. What is the cost of delivering those treatments? What is the cost effectiveness? Who are the right patients to get these treatments?”
Cohen says he studied cost effectiveness as part of the heart valve trials, and Saint Luke’s also performs cost effectiveness studies on a third-party basis. “We have five or six research grants currently from NIH to do this kind of work,” he says.
CHILDREN’S MERCY HOSPITALS AND CLINICS
There are many children’s hospitals around the United States, but Children’s Mercy appealed to Kingsmore.
“They really wanted us,” Kingsmore says. “And they had a vision that was very similar to ours. Children’s Mercy has been focusing on personalized medicine for quite a while now. Decoding genomes is a way to do that. We toured the city and came back a couple of times. At the end of the day, Children’s Mercy just said ‘Look, we’re going to cover the cost of this. Come here.’ We had been going around the States for 18 months to different locations to find the right place to put this. We decided this was the right place.”
Genomic medicine focuses on the role that DNA mutations play in causing diseases. “There are more than 7,000 different diseases that are caused by mutations at specific places in the genome code,” Kingsmore says. “They affect 3 percent to 4 percent of children, and they cause about 15 percent of hospital admissions to places like Children’s Mercy Hospital. They are responsible for about 20 percent of deaths of newborns.”
Kingsmore’s team has developed a test to diagnose more than 600 severe childhood diseases. “Up until today, the way you were tested for these types of diseases was one at a time,” he says. “Some of the tests were very, very expensive, maybe as much as $3,500 a test. It costs us about $750 to do so.”
Children’s Mercy has established the Center for Pediatric Genomic Medicine to pursue the goal of transforming children’s medicine through genomic interpretation.
“Test development costs $1 million or so,” Kingsmore says. “But building a genome center in a children’s hospital—that’s a $10 million expense. We’re doing everything in our power to raise funds for it, like applying for government grants and reaching out to private donors in the Kansas City area. We had our first success, a significant donation from the Marion Merrell Dow Foundation, in December.”
In addition, Kingsmore and his colleagues have received several million dollars in NIH grants for genomic medicine research since arriving at Children’s Mercy. “The test is just the appetizer,” he says. “There’s a full meal to follow here. This is something that’s going to take us several years to implement, and it’s going to eventually transform medicine for everybody in the United States. We want to be a pioneer in this area.”
The genomic research taking place at Children’s Mercy is raising the profile of Kansas City in terms of innovative medicine, Kingsmore adds.
“We are having senior executives of companies fly in to see what we’re doing,” he says. “For companies already here, we hope this will be a significant development for them. My hope is that they will catch the vision of genomic medicine and will want to drive their growth in the Kansas City region by partnering with us. Once we start doing that, you’ll start to see the venture capital money come here.”
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