David G. Lowe, a California venture capitalist, and his wife were house hunting last week in Austin.
Lowe, CEO of Austin startup Aeglea BioTherapeutics, planned his move before Texas Gov. Rick Perry’s latest overture to Californians trying to escape higher taxes and greater regulation.
Lowe said he’s not fleeing California. In fact, his wife, an oncologist, will live in Austin but continue to work for a San Francisco Bay area firm.
Instead, Lowe is here because of cancer research by professor George Georgiou at the University of Texas and the attraction of another Texas institution — the Cancer Prevention and Research Institute of Texas, the $3 billion cancer-fighting fund commonly known as CPRIT.
“The company will be located in Austin, not California, because of CPRIT,” said Georgiou, the company’s founder.
CPRIT proponents point to Georgiou’s experience as the polar opposite of the environment when another UT professor, Jonathan Sessler, co-founded Pharmacyclics Inc., a publicly traded company, more than 20 years ago in California.
“I would have loved to have it here; it would have made sense,” Sessler said. “We tried hard to raise venture capital and there just wasn’t any here in Texas.”
CPRIT spends the bulk of of its money on research and prevention programs, but there is a debate at the Capitol over how much it should dedicate to commercializing research into marketable products. It hasn’t helped that the state agency is under criminal investigation and legislative review because it mishandled at least three of its largest grants, totaling $56 million. Two of those grants involved commercial projects.
The experiences of Georgiou and Sessler is a story of two professors, two companies and the two paths they chose to bring their cancer research to market. It might be the best examples for CPRIT proponents because it shows taxpayer money can stop the flow of research out of the state — but it also might be the worst example, because it underscores the long odds of a new cancer drug or therapy making it as a marketable success.
Take Pharmacyclics, which was founded in 1991. By most measures, it’s a success in the difficult field of cancer research. It has major investors and partners, 150 employees and a stock price at an all-time high as the company has products in the final stages of seeking approval from the U.S. Food and Drug Administration.
Sessler’s research to improve radiation therapy for brain cancer — the initial spark for creating the company — didn’t make it.
“After 15 years and 1/3 billion dollars,” Sessler said, “it did not get through the FDA.”
The company pursued other discoveries along the way.
“At this point, I’m just an investor,” Sessler said. “It’s a child that’s grown up and is doing remarkably well.”
Still, there are risks — even 20-plus years later. According to its annual report, the company has a history of operating losses, accumulating a deficit of more than $400 million and has yet to generate money from the sale of its products. If it gets an FDA-approved product, that alone doesn’t guarantee a home run in the market.
“Cancer isn’t cured because we are lazy or stupid,” Sessler said. “It’s a difficult disease.”
Sessler, himself a cancer survivor, hasn’t stopped trying.
A fixture at UT for 28 years, Sessler said he has been recruited to leave. As recently as a year ago, Sessler said, he was exploring his options when CPRIT awarded him a $1.3 million grant on a project with the University of Texas MD Anderson Cancer Center in Houston.
He said that grant pays for a third of his lab. In 2010, Sessler also received a $2.4 million research training grant from CPRIT.
“Without CPRIT, no new drug gets developed,” Sessler said. “With CPRIT, there still may be no drug, but we have a fighting chance.”
Lowe and Georgiou are aware of the odds.
Georgiou has received three CPRIT grants, totaling $2.4 million.
The taxpayer money helped as Georgiou’s team created human enzymes that destory nutrients required for a cancer to grow.
“What CPRIT did, they supported the early work,” Georgiou said. “We will be ready for clinical trials soon and it will be possible to attract the interest of investors.”
That’s where Lowe comes in.
He started his career at Gentech Pharmaceutical, eventually running his own lab. For the past decade, Lowe was a venture capitalist looking for winners in a tough business.
“In the early stages, investors are reluctant to jump in,” he said. “It’s easy to say no. I did it all the time. I’d say, ‘See me on the next round (of funding).’”
Biotech companies, Lowe said, “incinerate cash.”
Many venture capital firms, seeking to reduce risk, wait to invest later in a company’s lifespan.
So why should taxpayers invest early?
“The venture capital perspective is strictly financial,” Lowe said. “We’re losing the ability to take all this (cancer) research and turn it into new medicines. That’s a role for government to play.”
Texas’ Achilles has been a shortage of venture capital compared to the West and East coasts.
“Yes, the attitude is that there’s only two places to set up a biotech company — California and Massachusetts,” Lowe said. “CPRIT financing has gotten people’s attention.”
In 2007, Texas voters approved $3 billion in bonds to finance a 10-year effort to find cures and therapies for various cancers. As of December, the Cancer Prevention and Research Institute of Texas — commonly known as CPRIT — has awarded $836 million.
So far, 76 percent of the money has gone to research, 21 percent to prevention programs and 3 percent to product development.
Forty-four researchers also have been persuaded to relocate their labs and teams to Texas.