MINUTES
Kansas Bioscience Authority
Investment Committee of the
Board of Directors
Monday, August 2, 2010
3:00 p.m. – 5:00 p.m. CDT
Call to Order: A quorum being present, a meeting of the Investment Committee of the Board of Directors of the Kansas Bioscience Authority was called to order at 3:05 p.m. on August 2, 2010, by Chairman Dr. Ray Smilor. Other Committee members present by phone included Dr. David Franz, Michael Borgman, John Carlin and Dan Watkins. KBA staff in attendance included Tom Thornton, Janice Katterhenry, David Vranicar, Cary Nourie, Keith Harrington, Tom Krol, Tony Simpson Don Colbert and Nancy Ruf. Also present were Catherine P. Logan of Lathrop & Gage, representing legal counsel, and Maria Flynn of Orbis BioSciences, Inc. which had a proposal under consideration at the meeting.
Investment Recommendation – Matching Fund Program, Orbis BioSciences, Inc.: Dr. Smilor referred the Committee to Tab 3 of the Investment Committee booklet for the meeting and asked Dr. Krol to review the Orbis BioSciences, Inc request of $347,550 from the KBA as a partial match of the funding it has been awarded under a National Institute of Health SBIR grant. Dr. Krol introduced Maria Flynn, who is Chief Operating Officer of Orbis.
Orbis has received a “Lab to Marketplace: Tools for Biomedical Research” SBIR competitive grant from the NIH of $695,173 to develop a scalable process for fabricating oil encapsulated microparticles with uniform sizes and physical characteristics. The investment by the KBA will be used to supplement the SBIR award with consulting expertise, additional prototype materials, business development and commercialization resources. The fabrication work will be performed in Orbis laboratories in Kansas City, KS, near KU Med Center.
The proposed KBA investment and the SBIR grant would align the current particle fabrication process with cGMPs, or current good manufacturing practices, and successfully scale up the technology for use with viable pharmaceutical products, both for animal health and human health projects. Orbis was founded in 2008 by entrepreneur Bo Fishback and inventor Dr. Cory Berkland, who is now a faculty member at the University of Kansas.
KBA funds would support the hiring of an engineer to create components of the process and support cGMPs . They would allow the company to use prototype materials over and above that identified in the SBIR grant, both active pharmaceutical ingredients and polymeric matrix materials. In the second year the KBA grant would provide for these enhanced activities in addition to allowing Orbis to hire a business development resource to assist Ms. Flynn gain additional contracts from the pharma-bio community
With SBIR and proposed KBA funding, Orbis will add 3 jobs to the Kansas economy, and over $1 million in Kansas R&D investment. In the proposal there is a specific budget for Year 1 and Year 2 in which the federal government will provide $695,173 over the 2 years. Orbis will provide $361,000 and the KBA would provide $347,550, assuming KBA board approval. There are milestones included in the write-up based on anticipated achievements. The KBA staff recommends a KBA investment of $347,550 as a partial match of the funding for this awarded grant of $695,173.
A discussion followed about the staffing of the grant project, with Dr. Smilor asking about the current roles of Bo Fishback, listed in the materials as CEO, and Dr. Cory Berkland, listed in the materials as CSO, of Orbis. Ms. Flynn reported that although Mr. Fishback is employed full time as VP of Entrepreneurship with the Kauffman Foundation, he devotes approximately 25% to 30% of his time to Orbis. She reported that Dr. Berkland, who is an associate professor at KU, also devotes approximately 25% of his time to Orbis, more in summer months and he plans a sabbatical in the coming year.
In response to further inquiries from Dr. Smilor, Ms. Flynn stated that the company is planning to hire two individuals to do the lab work associated with this proposal, with Dr. Berkland providing scientific oversight. She confirmed that she is employed full time with the company, is currently its only full time manager, and that the company plans to eventually replace Mr. Fishback with a full time CEO.
Dr. Smilor asked Ms. Flynn to provide more information about the plans for the growth of the company. Ms. Flynn reported that current focus is on hiring lab employees. The company has been involved with 10 proof of concept studies over the last 2 years and is currently subcontracting lab work to scientists at KU. Milind Singh will be the second full-time hire. The timing of hiring Milind Singh is uncertain because a H1B Visa application is pending. He is finishing post-doc work at Rice University, but has worked in Dr. Berkland’s lab during graduate school. Dr. Smilor noted the lack of risk assessment in the write up and asked about the back up plan if Milind Singh does not join the company. Ms. Flynn replied that the back up person is a post-doc scientist in Dr. Berkland’s lab at KU.
Ms. Flynn explained that the company has a target candidate for the engineer position who could be starting as early as 2 weeks from now. The sales person would be hired next summer. These two persons and Mr. Singh are the 3 projected added jobs.
Dr. Smilor asked about the grant writer listed in the staff write up, and Mrs. Flynn explained that the budget includes modest funds to support writing of future grant proposals. Ms Flynn confirmed that the SBIR grant has been awarded, and that the company’s technology is patented.
Dr. Smilor noted for the minutes that the staff report states that one of the external directors of the company is Michael Beckloff. Dr. Smilor reported that he just learned that Mr. Beckloff offered Dr. Smilor’s son a summer project. Dr. Smilor has no information about the project and does not know if it relates to this company or something else. Dr. Smilor asked if the committee members or Ms. Logan have a concern about whether this creates a conflict for Dr. Smilor in connection with this investment recommendation.
Ms. Logan indicated that she did not believe there is a conflict. Mr. Borgman also stated that the project with Mr. Beckloff appears to be totally independent of this investment recommendation, which Dr. Smilor confirmed to the best of his knowledge, though he acknowledged he does not know specifically what his son will be doing for Beckloff Associates. None of the other committee members indicated concern that this creates a conflict for Dr. Smilor.
Dr. Franz asked Ms. Flynn if anyone else is competing with a similar technology, and also about competing technologies for increasing bio-availability of poorly water soluble drugs.
Dr. Krol explained that while there are multiple companies and multiple technologies, Orbis has a unique technology that shoots sound waves into highly specialized nozzles that bring the water phase and oil phase together to create particle sizes that are almost identical. There are other ways to do this using sieves and using specialized screens, but this is a unique way to do it and it does provide some advantages. Ms. Flynn added that the Orbis technology meets the scalability requirements of pharmaceuticals, which other technologies do not.
Mr. Borgman asked about the goal of the scaled technology to produce microcapsules at a rate of 10 kilograms per minute. Ms. Flynn reported that the company has achieved the goal of one kilogram per minute with a 90 nozzle head, and that the company is designing a 350 nozzle head. She also indicated that one kilogram per minute seems to be more than enough for pharmaceutical clients, that food clients might want a little more, but that the company can safely market to pharma clients in the 10 kilograms per minute range.
Also in response to an inquiry from Mr. Borgman, Ms. Flynn stated that the company expects the jobs to be added to continue beyond the completion of the project being funded.
Mr. Borgman asked for clarification about the portion of the staff report which states that Orbis helps clients integrate PPS technology into their products and collects royalties and milestone payments. Dr. Krol and Ms. Flynn clarified that these royalties are not currently being collected, but rather, that they are planned to be collected in the future.
Dr. Smilor asked Dr. Krol if he has met with Mr. Fishback and Dr. Berkland, and Dr. Krol confirmed that he had met with both, and Ms. Flynn was his primary contact with the company.
Dr. Smilor indicated that the staff report should clarify the part-time status of these individuals with the company. He also asked Ms. Flynn to confirm that the Kaufmann Foundation allows Mr. Fishback to serve as CEO of the company, which she confirmed.
Mr. Thornton confirmed that the KBA grant is not required as a matching grant under the SBIR grant.
In response to an inquiry from Dr. Franz, Ms. Flynn explained that the latter third of the project being funded is geared around drying, monitoring and recycling modification. She also confirmed her plan to remain with the company.
Dr. Smilor asked Dr. Krol to explain the fundamental bases for the staff’s recommendation to invest in this project.
Dr. Krol responded that he is most enthused because the technology provides another way to design particles that is unique and appears to provide unique benefits. He noted that a well known pharma product using specialized particle design technology is an injectable anti-psychotic drug, Risperdal Consta that is given intramuscularly to psychotic patients, with a market of over a billion dollars. This is one example of the type of application possible with Orbis’s technology. Also, the technology is a broad platform technology that has potential in many different applications with multiple business model possibilities for Orbis, including royalty/milestone payments from technology licensing arrangements and direct drug product development opportunities for Orbis’s own account.
Mr. Borgman stated that he would like the staff report to include a section on the risks and mitigation plans, which Dr. Krol confirmed would be added.
A discussion followed led by Dr. Smilor of the options of making a recommendation today for consideration by the Board at its October meeting, or adding a risk assessment discussion to the staff report and having a further consideration of this investment at the September investment committee meeting.
Mr. Carlin asked Ms. Flynn if increased employment would be in Pennsylvania or in Kansas if the company is successful. Ms. Flynn confirmed that increased employment will be in Kansas, explaining that the work being done with a partner in Pennsylvania is a narrow piece of contracted work, and that no Kansas companies do that particular specialized work.
The consensus was for the committee to review this recommendation again at the September meeting based upon a revised staff report. Ms. Flynn confirmed that this revised committee review schedule should not cause timing problems for the company.
Executive Session:
Motion: Dr. Smilor moved that the Investment Committee recess into executive session pursuant to K.S.A. 74-99b07 and K.S.A. 75-4319(b)(4) to consider a proposal or proposals for funding and to discuss operational strategies of the Authority and confidential data and proprietary information of the applicants for funding, the disclosure of which, in the opinion of the Committee, would be harmful to the competitive position of the Authority and the applicants if disclosed. The executive session will begin at 3:50 p.m. and continue for 30 minutes. The Committee will reconvene in open session at 4:20 p.m. Included in the executive session will be all members of the Investment Committee, KBA staff and Catherine P. Logan, legal counsel. The motion was seconded by Mr. Watkins and unanimously approved.
Return to Open Session: The Committee reconvened in open session at 4:20 p.m.
ADJOURNMENT:
Motion: On motion by Dr. Smilor and seconded by Mr. Watkins, the Investment Committee meeting adjourned at 4:15 p.m.