MINUTES

Kansas Bioscience Authority
Board of Directors
Monday, March 9, 2009
Washington, DC

Call to Order: A quorum being present, a meeting of the Board of Directors of the Kansas Bioscience Authority was called to order at the Sheraton Four Points Hotel, Washington, DC, at 1:35 p.m., by Chairwoman Sandra Lawrence. Other Directors present were Bill Thornton, Ray Smilor, Angela Kreps, Dan Glickman, David Franz, John Carlin, Ed McKechnie, and Bill Sanford. Board nominee, Melvin Neufeld, was in attendance. Others attending from the KBA staff were Tom Thornton, Jan Katterhenry, Bret Healy, and Ashley Tyrrell. Jeff Ellis, legal counsel from Lathrop & Gage, was also in attendance.

Several members of the public were in attendance at the meeting, and it was noted that telephone hookup was available at the KBA offices in Olathe, Kansas, for others to attend the meeting via teleconference at that office location.

Approval of January 26-27, 2009, Board Meeting Minutes: Upon motion by Mr. Glickman and second by Ms. Kreps, the minutes of the Board meeting of January 26 and 27, 2009, were approved as presented.

President's Report: Mr. Thornton introduced Jeff Ellis of Lathrop & Gage as new legal counsel to the KBA and passed out biographic information regarding Mr. Ellis to all Board members. Mr. Thornton also introduced Dr. Krista Walton, the first Rising Star funded by the KBA. Mr. Thornton referred to the Board Meeting book previously sent to Directors for his detailed report, then briefly discussed the Centers for Innovation and indicated that four proposals had been given to the KBA staff for review. He also reported that two more proposals will go to the Investment Committee for consideration.

Mr. Thornton then discussed the importance of NBAF and handed out a brief summary of the current status of the project, which indicated that the land had been transferred to the Board of Regents and that the Kansas share of the cost in the amount of $125 million had passed as a part of the legislative budget package. Mr. Thornton indicated that a meeting had been held with DHS Secretary Napolitano, who is in strong support of the project. In response to a question from Mr. Glickman, Mr. Thornton indicated that the project was in the federal budget for FY 2010 and would not need to be dealt with through earmarks. It is important that the state put its cost share on the table now in order to present a good budget profile for the project. Funding jumps to over $400 million in FY 2011, and Mr. Thornton pointed out the need to flatten out the budget profile for future funding and a need to reach agreement on the final report on the scope of work for NBAF. There have been some delays, but not because of KBA's lack of responsiveness.

Mr. Thornton next discussed the ongoing project with the Wichita Graduate Center for Medical Education and confirmed that the KBA staff had been very diligent in responding to that entity. KBA staff has signed the agreement for its strategic plan and the final agreement for the final report and scope of work had also been signed. Mr. McKechnie questioned whether the KBA has the expertise to deal with graduate medical education, emphasizing that KBA's primary mission is bioscience commercialization. The Board generally discussed whether graduate medical education should be a part of the KBA mandate. That concluded Mr. Thornton's report to the Board.

Chair's Announcement: Before moving to the next agenda item, Chairwoman Lawrence noted that there would be one change in the agenda with the addition of an executive session for later in the meeting.

Financial Reporting: Ms. Katterhenry reviewed the financial report. She indicated that there was approximately $90 million now in the bank and that the Legislature had placed a cap on further funding at $35 million for the remainder of this fiscal year. The KBA is to receive the remaining $4 million in funding by fiscal year end. The KBA has approximately $154 million of commitments previously approved which are yet to be paid. In response to a question by Mr. McKechnie, Ms. Katterhenry indicated that the state was current in its payments of funding to the KBA.

Governor Carlin questioned whether the KBA had secure funding to satisfy its current commitments and whether staff was confident financial projections would hold true. Ms. Katterhenry indicated that she had met with the Secretary of Revenue and that more precise estimates of funding will be available in April. She indicated that the budget and payments appear to be on track for now. Mr. McKechnie indicated that staff should prepare projections for the annual meeting regarding the amount of commitments made, the projections on when payments are due, and establish priorities on how funds are to be paid. Mr. Thornton noted that the cap established by the Kansas Legislature simply has the impact of extending the accrual time to get the full funding due the KBA; revenue will not be reduced overall. He also noted that estimates indicate that for every dollar invested by KBA, others have contributed $7, clear evidence of the leverage gained by KBA investment in bioscience development.

Committee Reports: Chairwoman Lawrence next asked for committee reports. She indicated that the Executive Committee had not met since the last meeting and had no report. She then asked for a report from the Investment Committee and referred Directors to their Board Meeting book for details.

Investment Committee Report: Dr. Smilor presented the following investments for consideration by the Board:

· Renovation of the Wahl/Hixson Research Complex. Dr. Smilor gave a complete overview of the project. He complimented Dr. Jensen on his presentation to the KBA staff and said this project could be equally as exciting for Kansas as was the NBAF project. He further stated that Dr. Jensen will submit the application for National Cancer Institute designation in 2011. KBA staff recommended $26.4 million to be paid in bonds over the next ten years. Dr. Smilor indicated that if the Board approves this investment, the KU Cancer Center would likely come back for more funding once the National Cancer Institute designation moves forward. Mr. Glickman expressed his support for the project, but questioned whether the funding of bricks and mortar, as was being done with this project, might open the door for others to make similar requests for capital construction funding. Dr. Smilor indicated that concern had been discussed, and that the Investment Committee recommends that the minutes reflect that support of this investment is not to serve as precedence for further "bricks and mortar" requests. Governor Carlin concurred and asked for assurance that the investment will support getting researchers to Kansas to lead to commercialization of new pharmaceutical discoveries.

Dr. Jensen reported that he had met with NCI this morning before the Board meeting. The director of NCI confirmed that drug discovery and development is central to achieving NCI designation and that drug discovery was actually what distinguished KU from others seeking similar designation. Governor Carlin urged that Dr. Jensen and his staff assure that commercialization remains the project's primary objective. Governor Carlin also asked for assurance that the University was keeping control of the hiring process for researchers and that the process was not being delegated to departments. Mr. McKechnie indicated that the Committee has been working on this project for over a year and that there was agreement with KU that drug development and commercialization should remain its primary objective. Mr. Glickman concurred that the Committee had done a good job of focusing on the purpose of the investment and complimented the Committee on getting those assurances in advance of the investment being made.

Governor Carlin moved that the recommendation of the staff and the Committee to fund renovation of the Wahl/Hixson Research Complex in the amount of $26.4 million in bonds over the next ten years be approved. Mr. McKechnie seconded the motion, which passed unanimously.

· Lawrence-Douglas County Bioscience Authority (LDCBA). Dr. Smilor indicated that the LDCBA is requesting funding in the amount of $3.25 million to create a wet lab incubator in Lawrence, Kansas. Dr. Smilor stated that the proposed wet lab incubator would not compete with the KBA's existing incubator, but would rather complement it. Mr. McKechnie indicated his support for the incubator stating his belief that the collaboration and leadership surrounding this particular project was very exciting. In response to a question from Governor Carlin, Mr. Thornton indicated that there was a similar project a couple of years ago, but that project had not moved forward. He indicated that this project was different in that it involves Kansas University. He also indicated that the City of Manhattan had created a similar facility. Mr. McKechnie requested a more complete report from the LDCBA at a future meeting.

Mr. Glickman moved to approve the requested investment of $3.25 million to create a wet lab incubator in Lawrence. Governor Carlin seconded the motion, which passed unanimously.

· High Throughput Screening Compound Management System. Dr. Smilor indicated that the Collaborative Cancer Research Initiative is requesting $500,000 to create a library of compounds with a capacity to hold over 200,000 compounds that can be analyzed and help researchers more effectively. He also indicated that the compound library would help KU position itself for the National Cancer Institute designation.

Mr. Sanford moved that the Board approve the investment of $500,000 over two years to support the Collaborative Cancer Research Initiative request. Mr. McKechnie seconded the motion, which passed unanimously.

Dr. Smilor also indicated that the KBA staff had recommended investing $250,000 for methodology to test the high throughput screening compound management system. He indicated the preference to not fund a series of tests separately and that the Investment Committee had turned down two others who had suggested such a testing methodology. Dr. Smilor clarified that this funding was not related to the National Stem Cell Initiative. Mr. Franz explained that the library of compounds would be screened for quality.

Mr. Glickman moved that $250,000 be authorized to test the compound library system. Governor Carlin seconded the motion, which passed unanimously.

· Centers of Innovation. Dr. Smilor indicated that the KBA had received four full proposals from its RFP requesting planning grants for centers of innovation. It was determined by the Committee that two needed more work, but two were being proposed to the Board for approval.

The first proposal for consideration was a proposal for drug development and commercialization. Dr. Smilor noted that this was a strength for Kansas. Requested funding was $5 million over two years, although further requests might be expected if the project is successful. Dr. Smilor asked that the center for innovation for drug development and commercialization for the industry be approved.

Ms. Kreps indicated that Kansas Bio had been involved in the discussion of the centers of innovation, but believed that she had no conflict regarding her participation in the vote or discussion of the project.

Individual members of the Board indicated their support of the concept and Mr. Sanford noted that commercialization of drug discoveries is key to the success of the project.

Mr. McKechnie moved that the KBA invest $5 million to support the drug delivery center of innovation over a period of two years. Ms. Kreps seconded the motion, which passed unanimously.

Governor Carlin indicated that this project should serve as a standard for others to follow. Mr. Sanford concurred indicating that the state and KU have not captured the full value of what has been created to date. He expressed his hope that past parochial thought processes have been overcome and that consolidated and collaborative commercialization activities should lead to greater success.

· Innovation Center for Biofuel and Biorefinery. Dr. Smilor presented the second proposal for a center of innovation supporting the development of biofuels and biorefining. The proposal requests $4.1 million to support this center of innovation.

Ms. Kreps noted that Kansas Bio was marketing activities in this industry, but that activity would create no direct conflict of interest for her participation and consideration of the proposal.

Mr. Glickman noted that research in the area of biofuel and biorefining should avoid becoming focused on one methodology and recognize the uniqueness of the state in the production of food grains. He asked that the Committee be cognizant of the food crisis that may be on the way.

Members of the public and from the industry in attendance commented that the center of innovation was moving beyond grain as a source of fuel and considering second, third, and fourth generations of alternative fuels.

Governor Carlin noted that the center of innovation was equally divided between KU and K State and questioned how the center would be managed. Staff explained that a not-for-profit entity would be set up to control the activity with industry providing a super majority of the representatives on its board. KU and K State would each have one representative on the board of the not-for-profit governing entity. No bricks and mortar were involved in the funding. Based on a further question from Governor Carlin, it was noted that those in the industry would have equal access to the center of innovation based on the amounts of their investment in the center. It was noted that the center of innovation may assist the state in accessing federal dollars to support biofuel research.

Mr. Glickman moved that the Board approve $4.1 million to support the biofuel/biorefining center of innovation. Governor Carlin seconded the motion, which passed unanimously.

· Rising Star. Dr. Smilor then introduced Dr. Krista Walton, Ph.D. in Chemical Engineering, as a Rising Star. He noted that she had already generated over $2.5 million in outside grants. He indicated that the Committee recommended funding of $600,000 over the next five years to obtain lab space and graduate student support for Dr. Walton's activities, $15,000 per year of which would go directly to Dr. Walton.

Mr. Sanford moved that $600,000 be granted to Dr. Walton as a Rising Star. Ms. Kreps seconded the motion, which passed unanimously.

Mr. Thornton noted that the centers of innovation ideas promoted by the Board would provide the basis for a cluster-based approach to bioscience innovation and indicated that Kansas leads the nation in such approaches to bioscience development activities. He expects proposals in the future from the animal health industry.

Nominating Committee Report: Governor Carlin recommended that the KBA write a letter to KTech recommending that Dr. Smilor be reappointed to the Board. On motion by Governor Carlin and seconded by Mr. Glickman, the recommendation was approved by the Board.

Governance Committee Report: Mr. McKechnie reminded the members of the Board that they are required to complete their annual Statement of Substantial Interest form to be submitted to the Kansas Governmental Ethics Commissions. The annual disclosure form must be filed with the Kansas Secretary of State on or before April 30 of each year.

Other Reports: KBA staff presented a presentation regarding bioenergy and biorefining funding which may be available from the American Recovery and Reinvestment Act. It noted that Kansas is a place where all sectors of bioenergy and biorefining come together with infrastructure and resources. The Board encouraged staff to inform industry and the public of how ARRA funds might be accessed. Mr. Thornton indicated that KBA was engaging partners to identify avenues to access possible stimulus funding grants.

Mr. Sanford discussed the creation of Heartland Bioventures and the initiative to create one or more investment funds for Kansas. He indicated that the staff had received 11 responses to his request for proposals regarding the idea which had been sent to outside reviewers for consideration. The report is expected at a future meeting.

Executive Session: Chairwoman Lawrence asked permission to recess into executive session to discuss personnel matters of non-elected personnel and matters regarding the competitive position of the KBA.

Motion to Recess Into Executive Session: Dr. Smilor moved that the Board recess into executive session to discuss personnel matters of non-elected personnel pursuant to K.S.A. §75-4319(b)(1) and to discuss operational strategies which, in the opinion of the Board, would be harmful to the competitive position of the KBA if disclosed pursuant to K.S.A. §74-99b01, et seq. The executive session will commence at 4:35 p.m. for a period of 20 minutes. The meeting will be attended by members of the Board plus Mr. Thornton, Ms. Katterhenry, and Mr. Ellis. Mr. Franz is to be included in the meeting for a portion of the meeting to discuss the contract between the KBA and Midwest Research Institute. The motion was seconded by Governor Carlin and unanimously approved. The executive session commenced at 4:35 p.m.

Return to Open Session: Upon motion made by Dr. Smilor, seconded by Ms. Kreps, and unanimously approved, the Board reconvened in open session at 4:55 p.m. No action was taken in executive session.

Executive Session: Chairwoman Lawrence asked permission to recess into executive session to discuss personnel matters of non-elected personnel and matters regarding the competitive position of the KBA.

Motion to Recess Into Executive Session: Mr. Sanford moved that the Board recess into executive session to discuss operational strategies which, in the opinion of the Board, would be harmful to the competitive position of the KBA if disclosed pursuant to K.S.A. §74-99b01, et seq. The executive session will commence at 4:56 p.m. for a period of 10 minutes. The meeting will be attended by members of the Board plus Mr. Thornton, Ms. Katterhenry, and Mr. Ellis. The motion was seconded by Dr. Smilor and unanimously approved. The executive session commenced at 4:56 p.m.

Return to Open Session: Upon motion made by Dr. Smilor, seconded by Governor Carlin, and unanimously approved, the Committee reconvened in open session at 5:06 p.m. No action was taken in executive session.

Executive Session: Chairwoman Lawrence asked permission to recess into executive session to discuss personnel matters of non-elected personnel and consultation with an attorney for the body related to personnel issues.

Motion to Recess Into Executive Session: Mr. McKechnie moved that the Board recess into executive session to discuss personnel matters of non-elected personnel pursuant to K.S.A. §75-4319(b)(1) and to consult with an attorney for the Authority that would be deemed privileged in the attorney-client relationships pursuant to K.S.A. §75-4319(b)(2). The executive session will commence at 5:10 p.m. for a period of 25 minutes. The meeting will be attended by members of the Board plus Mr. Thornton, Ms. Katterhenry, and Mr. Ellis. The motion was seconded by Governor Carlin and unanimously approved. The executive session commenced at 5:08 p.m. Mr. Thornton and Ms. Katterhenry left the meeting at 5:13 p.m.

Return to Open Session: Upon motion made by Mr. McKechnie, seconded by Ms. Kreps, and unanimously approved, the Committee reconvened in open session at 5:35 p.m. No action was taken in executive session.

Adjournment: There being no further business to come before the meeting, the meeting was adjourned at 5:40 p.m.