Bert Caldwell: Life Sciences fund still has growing pains

Aegis Bio- sciences LLC is a new, still-small presence in Spokane.

Principal David Vachon has an office at Sirti, the local business incubator. His two partners live and work elsewhere.

But Aegis is nearing Phase 1 testing of its first product, a dressing for chronic sores like those afflicting diabetics and the bed-ridden. He has estimated the market for such bandages could be worth $800 million.

Monday, Vachon attended a presentation by John DesRosierprograms director for Washington’s Life Sciences Discovery Fund. The fund will make $350 million in grants over 10 years, beginning in 2008, to support health-care research. The fund also has up to $6 million in private money that will be awarded this fall.

Vachon, although he welcomes more research funding in Washington, sees little in the program for Aegis, or for any small biotechnology company that must protect its intellectual property, or perish.

Because of Washington’s constitutional prohibition against lending state credit to private companies, the Life Sciences Fund must award its grants to nonprofit entities. For Aegis to access the state money, the company would have to do so by partnering with, for example, Washington State University.

Vachon says he is concerned that sharing intellectual property would expose Aegis to claims university researchers have expanded on the ideas, potentially entitling the university to some share of whatever revenues the company earns.

“For a small company, that can be very, very challenging,” Vachon says.

He has the same concerns regarding venture capital funding, which would entail some loss of control to new investors.

Aegis has received some licensing revenue, but grants from the National Institutes of Health have provided most of the company’s money.

Although obtaining NIH grants takes hard work, the payoff is more freedom to determine where and with whom to partner, he says, adding that Aegis outsources almost all the work under way to bring its bandage technology to market. A $20,000 Washington Technology Center grant supports work done at Gonzaga University, but the rest is done out of state.

“I go to where the experts have been for what I need for my products,” Vachon says.

Vachon and others who attended the DesRosier presentation also wondered whether the Legislature, in creating the fund in 2005, understood the economic payoffs may not be as immediate as they might be if for-profit companies could use them to get a product over the last hurdle to marketability.

DesRosier says fund supporters have tried from the outset to stress its long-term benefits, primarily as a means of improving the health care of Washington citizens, secondarily as an economic development tool. He spent the first three days of the week trying to stimulate interest in the fund in Eastern Washington. Of the 75 applicants for the first round of funds, 17 were from outside the Puget Sound area.

DesRosier, who has worked on the non- and for-profit side of biotechnology, says the issues Vachon raises have been successfully resolved many times. “There are ways to work these things out,” he says.

Concerns lawmakers might care more about immediate payoffs from the fund in terms of jobs, DesRosier adds, can be resolved by managing expectations. The focus must be kept on long-term returns on investment.

Vachon does not rule out applying for Life Sciences funding. He says he may explore the possibility he could retool a pending NIH application for the Phase 1 study as a Life Sciences Fund application in conjunction with a Washington university or other nonprofit.

Many besides Vachon will be feeling their way through Life Sciences over the next few years. The science, and the vision, will change. We’re still in Phase 1.