< Back to Listing
October 8, 2009
10:30 a.m. CT
Investment Committee: Olathe
MINUTES
Kansas Bioscience Authority
Investment Committee of the
Board of Directors
Thursday, October 8, 2009
10:30 AM – 11:00 AM CT
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 10:35 a.m. on October 8, 2009, by Chairman Dr. Ray Smilor. Other Committee members in attendance included Governor John Carlin, David Franz, Ed McKechnie, and Bill Sanford. Additional Directors participating were Dan Glickman, Angela Kreps, Sandra Lawrence, and Bill Thornton. The KBA staff in attendance included Tom Thornton, Janice Katterhenry, Cary Nourie, Terry Osborn, David Vranicar, Lisa Kay, Brad Kemp, and Marsh LoScalzo. Various members of the public were in attendance. Also present were Jeff Ellis of Lathrop & Gage representing legal counsel, David Rowe of KU Medical Center, and Christine Metz of the Lawrence Journal World. In attendance via teleconference was Eric Denneny of Ennis Knupp.
Consider Potential Investment in the Kansas Bioscience Growth Fund: Dr. Smilor asked Tom Thornton to bring the Committee up to date on the recommendation regarding the legal structure of the Kansas Bioscience Growth Fund in response to questions that were raised at the last Investment Committee meeting. Mr. Thornton noted three options. The first option is that KBA would invest directly in the funds using its existing legal entity, the second option is to form a subsidiary entity that would invest into the venture funds, and the third option is a hybrid of each. Mr. Thornton recommended the first option as the optimal arrangement since it is the simplest and easiest to implement. He said it would only make sense to create a subsidiary entity if we had other investors that were investing with the KBA to create a bigger investment pool. Under Mr. Thornton’s recommended structure, KBA would invest directly in the funds subject to a limited partnership agreement and a side letter agreement documenting our requirements that the fund collaborate with Heartland BioVentures, that KBA’s funds not exceed 20% of total investment capital of each fund, that each venture firm raise a minimum of $25 million in capital, and that each firm establish a strong presence in Kansas. We would move forward with the companies that have already raised the required minimum level of funding by starting negotiation of the limited partnership and side letter agreements. We would subsequently start that same process with the other firms after they have raised the required minimum capital.
Dr. Smilor commented that all Board members are aware of the rigorous process utilized to evaluate the funds. In summary, it began with a Request For Qualifications (RFQ) soliciting responses from interested venture funds, which generated multiple responses. We then engaged Ennis Knupp as a professional third-party evaluator to help us assess the firms that replied to our RFQ. We invited a number of promising funds to make formal presentations to the Investment Committee, The Investment Committee continued its consideration with further discussions, and then a recommendation was made by staff to select the eight funds for investment. Dr. Smilor commended the staff for their efforts and the result is an exciting recommendation. He then opened the meeting for further discussion.
Mr. Sanford commented that the process has been sound and the recommendation makes sense due in part to the range of focus of the funds across industry sectors and stage of investment. In addition, it is very positive that we have two large international funds in addition to regional funds focused on the Midwest region of the country. The eight selected funds have positive relationships with one another, suggesting there will be cooperation among the firms. Mr. Sanford believes all of the funds have good track records and strong management teams, and the recommendations for these funds are valid. He further commented he was very pleased with the process used to evaluate the candidate firms. Governor Carlin seconded Mr. Sanford’s comments. Mr. Sanford asked if KBA staff had received more comments or feedback from the funds when we informed them they had been selected. Mr. Thornton noted there is uniformly strong interest by the funds, and that the firms believe the existence of Heartland BioVentures is a tremendous advantage for Kansas as compared to other states. He further noted that the firms believe our range of funds diversified by sector and stage is very important, and that they are excited by the prospect of working together. They are ready to hit the ground running.
Motion: KBA staff had previously distributed to all Investment Committee members for their review recommended resolution language for possible use by the Committee in the meeting. Dr. Smilor confirmed with Mr. Ellis that since the recommended resolution had been distributed prior to the meeting, he could make a motion to approve the full recommended resolution without reading the resolution in its entirety. Dr. Smilor then moved that the Investment Committee recommend to the Board of Directors approval of the recommended resolution. Mr. Sanford recommended that the resolution language be modified to require the venture firms to not only open an office in Kansas, but also to maintain such office for the life of the fund. Mr. McKechnie further recommended that the resolution language make explicit the fact that the specific meaning of the word "considerable" pertaining to the amount of time the firms’ staff will spend in the state will be jointly agreed by the parties. Additionally, Governor Carlin recommended that the resolution language specify that each venture firms’ Kansas office shall be opened within three months of the date that the KBA executes the firm’s limited partnership agreement. Dr. Smilor then moved that the Investment Committee adopt the above recommended amendments to the resolution language. Governor Carlin seconded, and the motion was approved unanimously.
Motion: Dr. Smilor then moved that the Investment Committee recommend to the Board of Directors approval of the amended resolution regarding investment into eight venture funds as previously discussed. Governor Carlin seconded. The motion passed unanimously.
The full, amended resolution language follows:
Resolved, that the Board of Directors approve investments in the following venture funds in the amounts specified:
· $10 Million in MPM Heartland BioVentures, L.P. when minimum fund of $40 Million is closed.
· $10 Million in Burrill Life Sciences Capital Fund IV, L.P. when minimum fund of $40 Million is closed.
· $5 Million in Prolog Capital III, L.P. (has already raised $29 Million in current fund).
· $5 Million in MidPoint Food and Ag Fund, L.P. (has already raised $27.8 Million in current fund).
· $5 Million in Open Prairie Ventures II, L.P. (has already raised $25.8 Million in current fund).
· $5 Million in Triathlon Medical Ventures Fund II, L.P. when minimum fund of $25 Million is closed.
· $5 Million in Midwest Venture Fund I, L.P. when minimum fund of $25 Million is closed
· $5 Million in MeadowLark Venture Partners, L.P. when minimum fund of $25 Million is closed;
Further resolved, that the approved investments in each venture fund be contingent upon each of the following key terms:
· Each fund must raise a minimum of $25 million of investment capital before KBA will be required to invest, and in the case of MPM and Burrill, a minimum of $40 million.
· KBA’s funding commitment to each fund will not exceed 20% of the fund’s aggregate capital raised or available capital for investment.
· KBA and each fund must execute a mutually acceptable limited partnership agreement and any other associated legal documents required to appropriately document the rights and responsibilities of each party.
· KBA and each fund must execute a mutually acceptable side-letter agreement documenting commitments and special arrangements between the KBA and the fund that do not apply to all limited partner investors. Such side-letter agreements are expected to include the following terms at a minimum:
o Each fund shall commit to open an office in Kansas within 90 days of the date the KBA executes the fund’s limited partnership agreement. In addition, each firm shall maintain such office during the life of the fund, and shall spend considerable time (to be mutually agreed) in the state seeking and making investments, and managing portfolio companies post-investment.
o Each fund shall commit to make a good faith effort to invest at least an amount equal to the KBA’s capital commitment into bioscience companies operating in Kansas.
o For those funds that have not already raised the required minimum $25 million of investment capital ($40 million for both MPM and Burrill), each will commit to a first fund closing of the required minimum amount within 12 months from the date the limited partnership agreement is executed. KBA commitments to invest will terminate after 12 months if the required minimum funding milestone is not achieved.
o KBA (through Heartland BioVentures) and each fund shall commit to closely collaborate with one another with respect to providing investment leads, evaluating prospective investments, offering advice and counsel regarding companies of interest, assisting portfolio/client companies to achieve commercial success, identifying investment criteria, and the like.
o Each fund manager shall commit to have at least one principal attend the annual Invest Midwest Venture Capital Forum in Kansas City or St. Louis, the Animal Health Investment Forum in Kansas City, and the Great Plains Capital Conference in Wichita.
o Other relevant terms that arise in the detailed negotiation of the limited partnership and side-letter agreements;
And further resolved, that the KBA President or his or her designee(s) be authorized to negotiate, and the KBA President be authorized to execute, definitive limited partnership, side-letter, and other appropriate legal agreements with each approved venture capital firm materially consistent with the other provisions of this resolution.
Adjournment: Upon motion by Mr. McKechnie, seconded by Ms. Lawrence, and unanimously approved, the meeting was adjourned at 10:55 a.m.
---------
MINUTES
Kansas Bioscience Authority
Investment Committee of the
Board of Directors
Thursday, October 8, 2009
11:00 AM – 1:00 PM CT
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 11:10 a.m. on October 8, 2009, by Chairman Dr. Ray Smilor. Additional Directors participating were Governor John Carlin, Ed McKechnie, Bill Sanford and David Franz. The KBA staff in attendance included Tom Thornton, Janice Katterhenry, Cary Nourie, Terry Osborn, David Vranicar, Brad Kemp, Nancy Ruf, Lisa Kay and Marsh LoScalzo. Other members of the public were in attendance. Also present were Jeff Ellis of Lathrop & Gage representing legal counsel, David Rowe of KU Medical Center and Dr. Olga Koper and Dr. Shyamala Rajagopalan each representing NanoScale Corporation. In attendance via teleconference were Dr. Deryl Troyer, Dr. Masaaki Tamura and Dr. Mark Weiss representing Kansas State University.
Review of the October 1, 2009 Minutes: Mr. Sanford moved to approve the minutes, Mr. McKechnie seconded, the motion passed unanimously and the minutes were adopted.
JACAM Chemicals: Mr. Vranicar introduced Ms. Ruf who read an overview of the program. JACAM has currently requested $75,000 to purchase equipment. Dr. Smilor commented that $75,000 seems reasonable and JACAM is doing well by increasing revenue and employees. Ms. Ruf further noted KBA has already funded $345,000 of $500,000 authorized by the Board in April 2006, and staff is recommending approval by the Committee and Board of the remaining $80,000 without requiring additional approval from the Board. Dr. Smilor asked why the Investment Committee is being asked to approve this amount now. Ms. Katterhenry replied we are trying to avoid the need to come back to take the Committee’s and Board’s limited time for further approval of the final $80,000 given the positive outcomes JACAM has generated to date. Dr. Smilor was comfortable with the recommendation of funding $75,000 now, but would like staff to come back to the Investment Committee again with a recommendation for funding the final $80,000.
Motion: Mr. Franz moved that the Investment Committee recommend to the Board of Directors approval of $75,000 to JACAM, Governor Carlin seconded, and the motion was approved unanimously.
Kansas State University Collaborative Cancer Research Initiative (CCRI): Mr. Vranicar introduced Brad Kemp who gave an overview of the "Umbilical cord matrix-derived stem cell-based gene therapy for pancreatic cancer" proposal. Dr. Masaaki Tamura, Dr. Deryl Troyer and Dr. Mark Weiss of Kansas State University participated in the meeting via teleconference. The team has developed a long-term strategy with three specific aims: to test the therapy efficacy in mice, to use in-vivo imaging to monitor the way it works, and to create a new strain of rats that produce a new animal model of pancreatic cancer. The proposal meets the CCRI criteria. Mr. Kemp noted the human stem cells are derived from discarded umbilical cords and not embryonic stem cells. Dr. Smilor asked if there was additional financial backing and if institutions have put up funds in support. They have not, other than indirect expenses. Dr. Smilor asked if we should require institutional support and not just indirects. Mr. Thornton commented that CCRI awards will likely generate subsequent funding on the back end for expanded research if successful. Dr. Smilor asked if there is anyone at KSU tracking commercialization potential. Dr. Weiss noted they are hoping to generate a track record with transgenic animals. Mr. Thornton asked Dr. Weiss to further expand on their out-licensing track record. Dr. Weiss noted their intellectual property licensing has been picked up by Toucan Capital in Bethesda, Maryland and Vet-Stem, a vet-based company in California. Mr. Thornton noted that this KSU group is a team that has a demonstrated track record of commercial focus. Mr. Franz asked if the preliminary data has been generated with T-cells or if work has been done with stem cells and does this still support their hypothesis. Dr. Tamura responded their hypothesis has been supported by both T-cells and stem cells. Mr. McKechnie asked Mr. Kemp about the relationship between this program and KU’s drive for NCI designation. Mr. Kemp replied that it doesn’t directly affect KU’s drive for NCI designation. Mr. McKechnie suggested an emphasis be made that this is a Kansas cancer strategy and not just a KU cancer strategy and he would like this point to be included in future discussions. Mr. Sanford commented that we don’t need to force collaboration on every project in Kansas. Dr. Smilor asked if we have a clear picture of what our cancer support strategy would look like. Mr. Kemp commented that the CCRI program was developed to foster interstate, not intrastate, collaborations, and then asked the KSU team to elaborate on how this project relates to the NCI designation. Dr. Tamura replied that KSU has a mutual agreement with the KU Cancer Center and Johnson Cancer Center which directly supports the KU NCI designation and funding. Dr. Smilor asked if there are any other questions. Mr. Franz confirmed with Mr. Ellis that he should be recused from voting given his connection to KSU.
Motion: Dr. Smilor requested a motion recommending to the Board of Directors approval of the CCRI proposal. Mr. Sanford made the motion to approve, Mr. McKechnie seconded. Mr. Sanford and Dr. Smilor voted in favor, and Mr. McKechnie voted against. Mr. Franz and Governor Carlin abstained due to their relationships with KSU. The motion passed two votes to one.
Dr. Smilor confirmed that Mr. Sanford should recuse himself from discussion and voting on the next two investment proposals involving NanoScale.
NanoScale Corporation - Matching NSF STTR Phase I Grant Proposal: Cary Nourie provided an overview of the NanoScale proposal. NanoScale is requesting, and the KBA staff is recommending, approval of a $50,000 partial match of the NSF STTR Phase I project focused on synthesis and delivery of nanoparticles for determination of the progression of cancer. Dr. Smilor asked what NanoScale management is doing to facilitate commercialization. Mr. Nourie deferred the question to Dr. Olga Koper of NanoScale. Dr. Koper responded they have just filed a joint patent application with KSU and will work together on the commercialization of this technology to collaborate with large pharmaceutical companies, which they are in the process of identifying. This is very promising and will tie in nicely with KU research. Dr. Smilor asked what projects we have funded in the past with NanoScale. Mr. Nourie responded KBA has funded a NIH SBIR Phase I project which was a similar application but used a different proprietary metal. The current project uses a more sensitive proprietary metal. Dr. Smilor asked about the outcome of the NIH SBIR Phase I project. Dr. Koper replied they are currently waiting for approval of the Phase II invitation from the National Cancer Institute, which should come sometime in October. Dr. Smilor asked if there were any further questions. Mr. McKechnie commented that he is supportive of this project but asked to confirm that we are funding one third of the total funding, to which Mr. Nourie replied that KBA would be funding $50,000 in addition to the STTR grant award of $150,000 (i.e., KBA represents one-fourth of the total project funding). Mr. Franz asked whether the localization of the tumors would be via monoclones or through intratumor injections. Dr. Koper replied it would be via through injection. Mr. Franz asked if the hypothermic therapy would be just 1 inch below the surface, which Dr. Koper confirmed. Mr. Franz asked if MRI would be used for diagnosis because it offers better sensitivity and can detect tumors earlier. Mr. Franz asked how it is measured and Dr. Koper replied in vitro and further commented they are currently exploring other projects and proposals for very tumor specific identification. Mr. Franz asked if there is any way currently to self-localize the tumors and Dr. Koper responded they are exploring this currently with KSU. Governor Carlin asked if KBA funds are being used to leverage federal funds and not private funds, which Mr. Thornton confirmed.
Motion: Dr. Smilor requested a motion recommending approval to the Board of Directors of the $50,000 NSF STTR Phase I proposal. Mr. Sanford made the motion to approve, Governor Carlin seconded, and the motion passed unanimously.
NanoScale Corporation - Matching DOD SBIR Phase II Grant Proposal: Mr. Nourie provided the overview of the proposal. NanoScale requests, and KBA staff recommends, $375,000 from the KBA as a partial match of the funding NanoScale has been awarded under a Department of Defense (DOD) Phase II SBIR grant totaling $1,516,488 for the development of an enhanced contaminated human remains pouch (ECHRP) system. This project aims to produce a contaminated human remains pouch that offers high capacity fluid absorption, efficient vapor trapping, and high levels of chemical and biological agent hazard mitigation. A possible impact of this project is $30 million total revenue from military contracts to purchase the ECHRP units, a portion of which would go to NanoScale. The project also may result in the future creation of 30 new jobs in Manhattan to fulfill the military contracts. This project will also open up the possibility of commercial use in other industry applications that are even much more promising. Dr. Smilor asked to confirm this would be a one to four match, which Mr. Nourie confirmed. Dr. Smilor asked what needs to happen for this to be proven successful technically and commercially. Dr. Koper commented that she is highly confident they currently have the right technology for the project to be successful. Regarding commercialization, Dr. Koper commented they are taking further steps with the Department of Defense for the required commercialization documents, and estimated this should take approximately one year. Dr. Smilor asked if there were any other questions. Governor Carlin asked if the previous project discussed is different and whether we actually have three total projects with NanoScale. Dr. Smilor confirmed the Phase I project is different from this Phase II project and not a continuation. Mr. Nourie further confirmed we have a total of three projects and they are all unrelated. Mr. Franz asked if the RFP came from Mortuary Affairs. Dr. Koper confirmed the RFP came from the Army Research Office but Mortuary Affairs is involved and they are getting feedback from other agencies. Mr. Franz asked if outcomes of this project are known yet. Dr. Koper replied the outcomes are not yet known. Mr. Franz asked if the outcomes would be only for this project. Dr. Koper replied yes, the $30 million is for the entire procurement but this technology development will influence other technological applications with the Department of Defense so it has a broader application.
Motion: Dr. Smilor requested a motion recommending to the Board of Directors approval of the $375,000 DOD SBIR Phase II proposal to NanoScale. Mr. McKechnie made the motion to approve, Governor Carlin seconded, and the motion passed unanimously.
Motion to Recess Into Executive Session: Dr. Smilor moved that the Investment Committee of the Kansas Bioscience Authority recess into executive session pursuant to K.S.A. 74-99b07 to consider the proposals for funding as presented at the meeting and to discuss contracts, operational strategies, and personal 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 12:13 p.m. and continue for 30 minutes. The meeting will reconvene in open session in the Kansas Bioscience Authority conference room at 12:43 p.m. Included in the meeting will be all members of the Investment Committee, as well as Jeff Ellis, legal counsel, and the following members of the KBA staff: Tom Thornton, Jan Katterhenry, Terry Osborn, Cary Nourie, David Vranicar, Nancy Ruf and Brad Kemp. Representatives of the applicants may be invited into the meeting at the discretion of the Committee to provide information relevant to their respective applications. The motion was seconded by Governor Carlin and unanimously approved.
Return to Open Session: Upon motion by Dr. Smilor, seconded by Governor Carlin, and unanimously passed, the Committee reconvened in open session at 12:43 p.m.
Adjournment: Upon motion by Governor Carlin, seconded by Mr. Sanford, and unanimously approved, the meeting was adjourned at 12:43 p.m.
|