MINUTES
Kansas Bioscience Authority
Investment Committee
September 10, 2008
10:00 AM - Noon
Call to Order: A quorum being present, the meeting was called to order at 10:00 a.m. by Chairman Dr. Smilor. Additional Directors participating were Dave Franz, Angela Kreps and Ed McKechnie. The KBA staff in attendance was Tom Thornton, Janice Katterhenry, Jim Mitchell, Gary Micheel, Chad Bettes, Bret Healy and Marsh LoScalzo. Representing legal counsel was John Petersen of the Polsinelli law firm. Additional guests present were Barbara Atkinson, (WCGME); Greg Krissek, Scott Kohl and Tim Allen, (ICM); Gene De Shazo, Richard Nelson (NOWA); Doug Sterkel, (Project Broadway) and Mike Hart (KBA consultant).
Review of Minutes Dr. Smilor addressed the minutes of the previous meeting of the Investment Committee Meeting and asked whether there were any changes. Mr. McKechnie made a motion to approve the minutes of the August 18, 2008 Committee meeting, Mr. Franz seconded and the motion passed unanimously.
Wichita Center for Graduate Medical Education Research Enhancement Initiative: Dr. Mitchell introduced to the committee the guests from WCGME, including Penny Vogelsang, Hugh Tappan, Lauri Labarco and Don Brada, participating by phone, and gave an overview of the proposal and what had transpired since it was considered at the previous Investment Committee meeting. Mitchell advised that following the last Investment Committee meeting the KBA staff met with the Applicant and based thereon the Applicant has modified the proposal. The most recent proposal is a request of $2.94MM to support 3 areas that WCGME believes are of near term importance The Center for Research Support Services, Center for Outcomes and Health Services Research and the Center for Clinical and Translational Technologies. KBA staff recommended a one-time investment in the form of a $1.47MM grant to support the development of the proposed centers of excellence, and approve funds of up to $250,000 for a strategic plan to assist in efforts to develop a research environment and maintain accreditation of residency programs in the 14 departments within the WCGME system.
In response to questions from Committee Members McKechnie, Kreps and Smilor, Barbara Atkins and Don Brada explained each component of the $2.9 Million request and the need for multi-year funding.
Executive Session: Dr. Smilor made a motion to go into executive session to review, consider and discuss potential investment information of a proprietary nature, Mr. McKechnie seconded, and the motion passed unanimously.
WHEREAS, the Investment Committee of the Kansas Bioscience Authority (the “Authority”) in this meeting of September 10 and records related to the financial condition and financial operations of the Authority and how such financial information and records relate to the business and operational strategies of the Authority; (ii) operational information and records related to the marketing and operations of the Authority and how such information and records relate to the marketing, business, and operational strategies of the Authority; and (iii) matters with counsel for the Authority that would be subject to the attorney-client privilege; and
WHEREAS, pursuant to Kansas law, in particular the Kansas Bioscience Authority Act, as codified in K.S.A. §74-99b01 to §74-99b89 and elsewhere (the “Act”), the Authority may discuss and consider the following in executive session when, in the opinion of the Board, disclosure of such would be harmful to the competitive position of the Authority: (i) plans that could affect the value of property, real or personal, owned or desirable for ownership by the Authority; (ii) the condition, acquisition, use, or disposition of real or personal property, and (iii) contracts for bioscience research, bioscience product manufacturing or commercialization, construction and renovation of bioscience facilities, and marketing or operational strategies; and
WHEREAS, pursuant to the Act, records of the Authority shall not be subject to the provisions of the Kansas Open Records Act, when in the opinion of the Board, the disclosure of the information in the records would be harmful to the competitive position of the Authority, provided those records include, but are not limited to (i) proprietary information gathered by or in the possession of the Authority from third parties pursuant to a promise of confidentiality; (ii) contract cost estimates prepared for confidential use in awarding contracts for research development, construction, renovation, commercialization, or the purchase of goods or services; or (iii) data, records, or information of a proprietary nature produced or collected by or for the Authority, its employees, officers, or members of the board; financial statements not publicly available that may be filed with the Authority from third parties; the identity, accounts, or account status of any customer of the Authority; consulting or other reports paid for by the Authority to assist the Authority in connection with its strategic planning and goals; and the determination of marketing and operational strategies; and
WHEREAS, the Board believes that the disclosure of any such items and records would be harmful to the competitive position of the Authority; be it
RESOLVED, it is the opinion of the Board that the disclosure of such items would be harmful to the competitive position of the Authority, and therefore the Board declares that its review, consideration, and discussion of such financial and operational information and records at this Committee meeting shall occur in executive session; and
FURTHER RESOLVED, it is the opinion of the Board that the disclosure of such records and information would be harmful to the competitive position of the Authority, and therefore, such records and information to be reviewed at this Committee meeting shall not be subject to the provisions of the Kansas Open Records Act; and
FURTHER RESOLVED, Dr. Smilor stated that the committee would enter Executive Session at 10:30 a.m., concluding at 10:50 a.m. (CDT) pursuant to the resolution, not to exceed 20 minutes; and
FURTHER RESOLVED, that the following persons shall remain and participate in the executive session of the Committee inasmuch as their involvement is important to the Committee’s review, consideration, and discussion: Directors, Mr. Thornton, Dr. Mitchell, and John Peterson.
Return to Open Session: Dr. Smilor made a motion to return to open session at 10:49 a.m. The motion was seconded by Ms. Kreps and was passed unanimously.
Dr. Smilor asked if there was a motion in regard to the proposal. Mr. McKechnie made a motion that KBA recommend to the Board of Directors a one-time, no-match planning grant for this year of $250,000 to develop a strategic plan. Secondly, $5.88MM would be funded over 3 years, decreasing annually starting at $2.94M for the first year. The second year would be funded at 66% or $1.96M and the third year would be funded at 33% or $980,000. Year one would be funded per the proposal as presented, years 2 and 3 would be earmarked dollars and funded through application by WCGME to KBA under existing programs. Over 3 years the total funding would amount to $6.13MM. Ms. Kreps seconded the motion. The motion passed unanimously.
The Investment Committee further recommended that the Executive Committee consider approving the planning grant for expediency purposes at their next meeting.
Via Christi and Wichita State University Cluster Hire: Dr. Mitchell introduced to the committee, Mr. Mike Good (Business Operations Director, WSU), participating by phone. Dr. Mitchell reported to the Committee that the original proposal to the KBA was for support under the KBA Rising Star Program. However, due to additional information received, it was determined at the last Investment Committee Meeting that the KBA would not support the request as part of the Rising Star Program but would consider supporting a cluster hire to assist WSU and Via Christie in their pursuit to hire Dr. Yang. The original proposal was for $346,422 spread over 5 years. The KBA staff recommended $273,779 in support over a 4-year period. Mr. Good provided additional financial information beyond the original request, which highlighted changes in salary requirements which would require an increase to $327,500 for the four-year period. With Dr. Wooley’s recruitment there were key pivotal hires that needed to be made after his arrival. Dr. Shang-You Yang from a commercial aspect is a solid recruit who would help round out Dr. Wooley’s skills and abilities.
Dr. Smilor asked for motion to recommend to the KBA Board of Directors the approval of hiring Dr. Shang-You Yang at a KBA funding amount of $327,500 over 4 years. Ms. Kreps made a motion to that effect. Mr. Franz seconded the motion, and it passed unanimously.
ICM, Inc. Dr. Mitchell introduced to the committee Greg Krissek, Scott Kohl, and Tim Allen of ICM and gave an overview of the program. ICM is seeking $2MM over 2 years through the R&D Voucher program. These funds are to be used to support a $4MM collaborative research effort with Edenspace, Diamond Ag and Kansas State University.
Previous funding for Edenspace was reviewed by the Committee along with the KBA staff recommendation that the KBA Investment Committee approve $1MM in funding over a two-year period in support of this collaborative effort led by ICM. Payment of the funds will be contingent on the achievement of milestones outlined.
Dr. Smilor made a motion to recommend to KBA Board of Directors approval of $1MM in funding over a two-year period. Mr. McKechnie seconded. Motion passed unanimously.
NOWA Technology, Inc, Matching Fund Program: Dr. Mitchell introduced Gene De Shazo and Dr. Richard Nelson of NOWA and gave an overview of the proposal. NOWA is a Prairie Village, Kansas, based company that has developed a patent-pending technology that utilizes municipal wastewater sludge as a starting material, and chemically extracts marketable products from this waste stream, including cellulose and no. 6 fuel oil. A key aspect of the process is the use of all of the sludge, thus eliminating the need for municipal wastewater treatment facilities to incinerate or landfill its sludge. NOWA is seeking investment funding of $2MM from the KBA as part of a $4MM effort over 2 years to construct and initiate operations of a demonstration plant (skid).
KBA staff recommended that the Investment Committee approve a $1.5MM investment, in the form of interest bearing debt, dedicated to NOWA.
Ms. Kreps made a motion to recommend to the board approving an interest bearing loan at a rate of 3% with the payments to begin in year 3 following the loan and completed in year five following the loan. Mr. McKechnie seconded and the motion passed unanimously.
Project Broadway Attraction and Retention: Dr. Mitchell introduced Doug Sterkel of Project Broadway to the committee along with Mike Piotrowski, participating by phone. Mr. Sterkel gave an overview of the company and background. Broadway, headquartered in West Seneca, New York, is a Veterinary research company relocating to Kansas to complete the development and launch of its initial product EIPHISOL, the first and only proprietary, non-performance enhancing treatment for Exercised Induced Pulmonary Hemorrhage (EIPH), a disorder that afflicts many of the equine athletes in the horse racing industry.
They are seeking a $300,000 investment from the KBA specifically for the relocation of Project Broadway from New York to the state of Kansas. Dr. Mitchell noted that Broadway meets the eligibility criteria for the Attraction and Retention Program. Consideration for further investment will be evaluated once Broadway has committed to Kansas.
Dr. Smilor asked for a motion to recommend to the KBA Board of Directors approval for funding of $300,000. Mr. McKechnie made a motion, Mr. Franz seconded and the motion passed unanimously.
Adjournment: There being no further business a motion was made by Ms. Kreps to adjourn. The motion was seconded by Mr. McKechnie and passed unanimously. The meeting adjourned at 11:57 a.m.