BioAccel bets on Arizona entrepreneurs, aims to boost state’s struggling economy

April 27, 2009

By hammersmith

Those with a fear of heights probably shouldn’t follow in the footsteps of Ron King and MaryAnn Guerra.

Five years ago, the two technology-commercialization experts took a gamble to join their colleague from the National Institutes of Health, Jeffrey Trent, to help establish the Translational Genomics Research Institute (TGen) in Phoenix.

Now, they have stepped away from that highly successful non-profit venture to lead a new one, BioAccel, which provides grants and community-related investments to support late-stage discovery research that is poised to be rapidly commercialized.  Guerra is BioAccel’s CEO and chairman of the board, and King is the nonprofit’s president and scientific director.

Designed to drive economic development through the commercialization of late-stage basic and applied research in the life sciences, BioAccelseeks to usher commercially promising discoveries from Arizona laboratories to the marketplace.

In significant ways, BioAccel resembles the very sort of startup firm its founders want to champion: one with a novel solution to a stubborn problem, a commitment to efficiency, and energetic leadership that isn’t afraid to take shrewdly calculated risks.

“I was 10 years at the most high-profile institute at the NIH and walked away,” says King, who served as the deputy scientific director and founding director of the technology-transfer office at the National Human Genome Research Institute. “There should be no surprise that we’d be willing to do it again.”

King says that leaving the NIH in 2003 was possible because the backing in Arizona for TGen was so broad-based. A string of Arizona leaders–including then-Gov. Jane Hull and then-Mayor of Phoenix Skip Rimsza–had made a compelling pitch that Trent should select Phoenix over competitors like Houston or Atlanta.

“The feeling you got was that you had everyone’s support,” King says.

Guerra, who between 1994 and 2001 was deputy director for management for the National Cancer Institute, as well as manager of the NIH’s largest technology-transfer program, saw Arizona as a perfect place to build on the lessons she had learned throughout her career. In Arizona, she recognized, she could focus on the clear need to translate and accelerate commercial development of basic research.

“Taxpayers provide an incredible amount of support to the NIH and other public research institutions,” Guerra states. “It is important that we leverage this investment to the greatest degree possible and establish efficient ways to turn research into results that serve the public.”

King and Guerra believe that BioAccel will generate the same kind of support that TGen received from Arizona leaders who recognize the new endeavor’s urgent utility.

The challenge they are tackling is well-known: As articulated in the most recent reports on the progress of Arizona’s Bioscience Roadmap, funding to translate innovations into new products and firms has dried up.

The problem is systemic–the latest Money Tree Report recorded, for the first quarter of 2009, a 42 percent year-over-year decline nationwide in venture-capital funding for biotech and pharmaceutical companies. Funding for medical-device firms fell 61 percent. Capital is especially difficult to access in regions of the country—such as Arizona–that are newer arrivals on the bioscience stage.

But BioAccel’s leadership believe that what Arizona entrepreneurs need extends beyond venture capital. Specialized expertise and connections are critical, too, so that innovators and fledgling firms can receive accurate assessments of their ideas’ viability, guidance toward making smart business decisions, and linkages with the executives, investors, grant makers, and larger firms who can help take discoveries to market.

BioAccel recognizes that finding and accessing such resources is not a simple task, Guerra says; she and King hope to reduce those barriers to market entry by providing a range of resources to facilitate the translation of research into commercially viable products.

While King and Guerra worked at the NIH, they ran two of the Institutes’ most productive commercialization operations, and were in fact instrumental in helping the NIH implement technology-transfer infrastructure that enabled government to work more effectively with industry.

Guerra says that she recalls chairing the Education committee–on which King also served–to help NIH scientists become familiar with and engage in technology-transfer activities.

In addition to that experience, King says, their roles allowed them ample opportunity to observe the implications of policy decisions at the federal level. Such backgrounds are particularly valuable now, he notes, amid the turmoil of a global economic downturn, a sudden but short-lived infusion of federal stimulus funding, and dramatic state-level budget shortfalls.

At TGen, Guerra served as chief operating officer as well as president of TGen Accelerators LLC, a subsidiary dedicated to commercializing TGen research. King was TGen’s vice president of strategic and business partnerships.

Although they were effective in spinning off companies from TGen’s research–the first TGen startup, Molecular Profiling Institute, sold to Caris Diagnostics in December, 2007 for $40 million–Guerra and King believed that if they were operating independently, they could accomplish even more on behalf of researchers while simultaneously amplifying their work’s impact on the local economy. But they could do so only if the unit bringing new products and firms out of the lab were a dedicated entity with no competing priorities.

“We kept seeing common impediments,” King says. “You have these late-stage research projects that might have significant discoveries, but institutions need additional capital to validate the discoveries, and validation isn’t grant-eligible.”

Costs for validation might be relatively low–$25,000 to $100,000–but in the money-tight environment of a research institution, King says, devoting funds to high-risk validation is often hard to justify even when the potential payoff for achieving proof-of-concept is substantial.

“In a research-oriented, business-supported organization, you’re measured by progress in scientific development, not business activities,” King says. “And that’s as it should be–resources go first to scientific projects. But you suffer on the business side.

“Having independence, being a business-oriented, research-supporting organization allows us to make more business-focused decisions that have a greater economic impact,” he continues. “And it opens up more avenues for funding.”

Guerra and King examined several options for how to structure BioAccel before settling on a nonprofit, philanthropic economic-development model that is a precursor to getting venture-capital support. Being a nonprofit will allow BioAccel to establish trusting relationships with scientists at universities and nonprofit research institutions like TGen. If BioAccel were a for-profit venture operation, such relationships might be more difficult to foster.

In choosing a venture philanthropy model, King adds, BioAccel has also committed to driving economic development by requiring the companies it funds to locate their businesses, or a significant project, in one of Arizona’s enterprise zones. Because of BioAccel’s initiative, Arizonans living and working in such areas would most benefit from the increased economic development sparked by Arizona’s significant investment in the biosciences.

For several years, Guerra says, she has pushed the new business-philanthropic model, and sees it as the best way to help bridge gaps that exist.

“My experience has shown me that donors want to contribute to projects that are going to make a difference for the public. Under BioAccel’s model, philanthropists can directly support the creation of new businesses that will drive economic development in the areas where investments will have the greatest impact,” she says. “We help them get a solid start, provide incentives for locating in one of the enterprise zones that is most in need of economic development, and then turn the new business over to the competitive market, where it can grow and prosper.”

It doesn’t hurt the attraction of BioAccel for those philanthropists that they receive a close-up view of some of the most promising new technologies emerging from Arizona research laboratories. When proof-of-concept is achieved and BioAccel-supported startups are ready for broader investment, those philanthropic funders will be able to make well-informed decisions about whether to invest in the new firms.

The first major grant that BioAccel has secured is a five-year commitment of up to $14 million from Los Angeles-based Abraxis BioScience, a biotech firm that developed the chemotherapy agent Abraxane. Abraxis’ chairman and CEO, Patrick Soon-Shiong, first met Guerra when he was preparing to launch a Phase I study of ABI 007, the drug candidate that became Abraxane.

They reconnected, Guerra says, when Dr. Soon-Shiong met with the Greater Phoenix Economic Council (GPEC) and other Arizona stakeholders to secure a Phoenix manufacturing facility for Abraxis. Dr. Soon-Shiong said at the time that he was eager to join in the collaborative approach to developing the biosciences that Arizona leaders had initiated. Guerra presented the model for BioAccel to Dr. Soon-Shiong when he returned to California, and he underscored his enthusiasm for the project with the grant commitment.

“It is our hope that these more fully developed technologies will enhance new-company formation, accelerate the delivery of novel products to the public, and drive economic development for the state,” Dr. Soon Shiong said in a GPEC announcement of BioAccel’s launch.

BioAccel is using the Abraxis grant–which it must supplement with additional grants in order to continue drawing funds–to support its startup operations and its initial series of funded projects. By the time its own startup funding is exhausted, King says, BioAccel should be self-sustaining.

BioAccel hopes to take equity in the companies it is helping to launch, then return any profits made upon sale back into BioAccel ’s philanthropic mission.  None of BioAccel ’s staff will personally profit from any of these transactions.

To help identify the best candidates for BioAccel to fund, King and Guerra have assembled a multitude of advisors. They are drawing from the extensive relationships they have cultivated over many years of experience and deal-making across the United States and Europe, Guerra says.

When BioAccel selects research discoveries to fund, it does so with specific requirements, King explains, creating for each project a development plan with milestones for entrepreneurs to meet and a community-impact review that assesses the project’s potential benefit to the local economy.

“We ask to serve as the commercial agent for the project,” he explains. “We want to be able to take responsibility to grow these opportunities, managing funds to make sure the project stays on track.”

Generally, BioAccel works with Arizona-based projects in therapeutics, diagnostics, and medical devices; apart from those guidelines, it can make funding decisions in its own best interest. So, it treats its portfolio of projects rather like a portfolio of stocks–should a project fail to meet benchmarks or to satisfy its community-impact requirements, BioAccel has the option to discontinue funding. Such a stance would likely be more difficult to maintain were BioAccel tied to a particular research institution instead of being independent.

“We want to develop a long-term sustainable model and manage it from a point of view of optimization,” King says. “We have to hedge the portfolio against massive swings in technology, while aiming for short-term, medium-term, and long-term wins.”

Assembling a balanced project portfolio means that BioAccel will likely not fund all worthy projects, much less all projects that show glimmers of promise. BioAccel does guarantee, though, that it will provide feedback to all applicant entrepreneurs that it doesn’t fund.

That response aligns with a complementary element in BioAccel’s business plan: coupling management of its portfolio of commercialization projects with business mentoring, education, and technical assistance.

“Given the kind of experiences we have had, here in Arizona and throughout our careers, we are able to provide education to researchers and others in the field,” King says. “It’s a different expertise than most researchers have.”

Guerra says she would like to take BioAccel’s mission a step further and franchise the model in various states nationwide.

“We have a great model that is absolutely needed by the research community—and not just in Arizona,” she says. “We’d like to share this model with others and perhaps leverage what we have already begun here in Arizona. We are already in discussions with individuals at the University of California and University of Chicago to discuss possibilities.”

Closer to home, one of BioAccel’s first collaborative projects is for the City of Surprise, which is in the process of converting its former City Hall facility into a bioscience incubator, part of a larger plan to develop a cluster of bioscience companies. Under the terms of a strategic collaboration with Surprise, BioAccel will offer technical assistance with due-diligence research on startup companies interested in incubator space, strategy, and branding. BioAccel will also help Surprise create an advisory committee to assess bioscience-related decisions.

The collaboration with Surprise is the first of BioAccel’s initiatives to receive public notice, but others are coming soon, King says, including its first mission-related investments to fund nascent bioscience firms. That means that the first opportunities for BioAccel to prove itself are around the corner.

“I grew up in the Bay Area, where an entrepreneurial spirit was normal,” King says. “The key feature of Silicon Valley is that there’s no fear of failure.

“We don’t have to be here–we’re doing it here because we believe in the potential here in Arizona. Now we’re counting on the community to work with us.”

“Arizona got something important started, the community supported and grew the idea, and now it is time to capitalize on those investments in a manner that directly benefits the people of Arizona,” Guerra says. “We believe BioAccel Bio is poised to do this.”

For more information:

City of Surprise news release, 03/23/2009

GPEC news release, 01/16/2009