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Texas’ SFBR Spins Out First For-Profit Co.; Firm to Focus on Women’s Health Products

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The Southwest Foundation for Biomedical Research, the largest non-profit research institute in Texas, has spun out a drug company focused exclusively on women’s health and based on intellectual property and know-how developed in the institute’s organic chemistry department, SFBR said this week.
 
The company, called Evestra, is the first startup company launched by the San Antonio-based institute since it was founded more than 60 years ago, according to SFBR president John Kerr. In fact, the foundation has only in recent years begun turning its attention toward identifying opportunities to commercialize the $44 million in annual research it conducts.
 
“This is a unique opportunity to build a company and create a lot of value,” Kerr told BTW this week. “The ultimate beneficiary of that value creation will be [SFBR], which is a non-profit research institute. So this would be a big payback to the university if successful — much more so than you’d have in a traditional tech-transfer licensing process.”
 
Evestra will attempt to develop and bring to market various products for women’s health based on the more than 30 years of experience that SFBR’s organic chemistry department has in discovering and synthesizing steroid compounds for use in areas such as birth control, gynecological disease, hormone-replacement therapy, and hormone-dependent breast cancer.
 
The company’s management comprises senior vice president of research Pemmaraju Rao, who is also senior scientist and chair of organic chemistry at SFBR; President and CEO Ze’ev Shaked, who was formerly COO of Ilex Oncology; and CSO and Managing Director Klaus Nickisch, a former senior vice president and head of global project management in the areas of oncology and female healthcare with Germany’s Schering, which is now part of Bayer.
 
Kerr said that SFBR has “a fair amount of experience” in outlicensing technologies developed at the institute, but in particular Rao and others in the organic chemistry department have been the most prolific in this area.
 
For instance, in collaboration with the National Institutes of Health, Rao and colleagues developed the selective progesterone receptor modulator Proellex, which the foundation and NIH jointly licensed to Houston drug maker Repros Therapeutics. The candidate is currently in phase III clinical trials for treating endometriosis and for non-surgically shrinking fibroid tumors.
 
“What we have not had in the past internally is the commercial industrial drug-development capability,” a piece that Shaked and Nickisch are bringing to the table, Kerr said. “They’ve worked together in the past, and bring a lot of experience in the drug-development process right on through final FDA approval and product launch. That capability is now being married to the very strong steroid synthesis capability within the academic organization here.”
 
According to an SFBR spokesperson, the foundation has not specifically tracked licensing revenue from tech-transfer deals over the years. The total research funding awarded to SFBR over the past three years – including federal grant awards, commercial contracts, and philanthropic grants – was $44.7 million in 2007; $44.3 million in 2006; and $41.9 million in 2005.
 
However, Evestra will be SFBR’s first spinout company, a fact that Kerr attributes to the very early-stage, basic nature of the research the foundation conducts. The major exception, he said, is the work of the organic chemistry group.
 
He said he believes another reason that it took the foundation more than 60 years to launch a for-profit is that “the corporate culture at SFBR is one that was not particularly focused on commercialization opportunities.”
 

“I think the corporate culture at SFBR is one that was not particularly focused on commercialization opportunities.”

Kerr became president of SFBR two years ago, he said, “and my background has involved a lot of new ventures, many of which came out of academic research. So it was more of a natural for me to be looking for these opportunities.”
 
Evestra said in a statement that it will pursue a short- and long-term drug-development strategy. The short-term strategy will try to reformulate existing, approved steroid-based pharmaceuticals, while the long-term strategy will seek to internally develop novel steroidal drugs based on the expertise of SFBR’s core scientific team.
 
The company will seek accelerated approval for its leading drug candidate, which it has determined will be a reformulated oral contraceptive. It is not clear what stage of development this product is in. Other initial drug-development candidates include progestin drugs for fertility control; a reformulated hormone replacement therapy with a “superior safety profile;” a new drug candidate for endometriosis and fibroids; and new drugs to prevent the recurrence of breast cancer.
 
According to Shaked, a large part of Evestra’s assets comprise “trade secrets” in the area of scaling up and designing steroid-based drugs.
 
“Steroids are not the kind of compounds that you can go to the lab and [synthesize] overnight,” Shaked said. “Typically steroids are made in something like 10 to 20 chemical steps. You need to know what you’re doing in this business. We have that know-how and experience, and we have done that all the way from a milligram scale to a kilo scale.”
 
Shaked also said that the company has access to a pilot facility on the SFBR campus where it can make clinical-grade materials to conduct initial clinical studies. The company will also partner with Austin-based contract pharmaceutical manufacturer PharmaForm, although the details of that partnership have not been disclosed.
 
Evestra has already received about $500,000 in startup funding from SFBR, most of which was bestowed before the company was formed, and the foundation has invested an additional $500,000 in the company, Kerr said.
 
SFBR received an undisclosed equity stake in Evestra in exchange for its initial investment and for access to know-how of its various scientific founders; various “physical assets” such as space on the SFBR campus; and a portfolio of some 15 patents and a number of patent applications related to steroid chemistry, drug-development methods, and women’s health.
 
Kerr said the firm is currently in the process of raising another $4 million in private financing “primarily from local investors in the community,” and added that it will be “very aggressive” in seeking investment. He said it plans to supplement any venture capital with non-dilutive funding in the form of government grants.
 
All in all, Kerr said that he expects SFBR to be the majority shareholder in Evestra for the time being.
 
“This model we’re using is what I would call a clean break,” Kerr said. “All of the scientific research staff formerly within this group [at SFBR] are now 100 percent with Evestra.”
 
Evestra’s main headquarters will be located in approximately 8,000 square feet of the more than 500,000 square feet of lab and office space on the 350-acre SFBR campus. Kerr said he expects the company to outgrow that space in about three years, at which point it would seek office space in the greater San Antonio area.
 
“We carved that space out on campus, and we are actually leasing it,” Shaked said. “Clearly as a for-profit, we are running this independently at arm’s length from SFBR, which is the majority owner, and that is reflected on the board and ownership. But essentially we are running an independent business entity.”
 
Evestra will also open a German subsidiary under the direction of Nickisch, who currently resides in the Berlin area. This strategy will allow the company to “draw expertise” from the companies and academic institutions in that area, to seek additional revenue in the form of German government grants, and to tap into the regional investment community, Shaked said.
 
Lastly, Evestra said that it will generate short-term revenue by synthesizing steroids for the NIH pursuant to a contract the agency has had with SFBR for more than 30 years, which is being transferred to Evestra. The value of that contract has not been disclosed.
 
Evestra’s scientific advisory board includes Walter Eger, former head of female health research at Schering and Jenapharm; Irving Spitz, director of the Institute for Hormone Research in Jerusalem, emeritus professor of endocrinology at Ben Gurion University in Israel, and adjunct professor of medicine at Weill Medical College of Cornell University; and Werner Raff; former head of the female health strategic business unit at Schering.
 
Other SAB members include James McGinity, professor and head of pharmaceutics at the University of Texas at Austin College of Pharmacy; and Robert Shenken, chair of clinical gynecology at the UT Health Science Center in San Antonio.

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