Log in
updated 2:54 PM CDT, Jul 28, 2018

FlynnsHarp logo 042016

Access to growth capital could challenge state life-sciences sector's bright future

Washington State's life-sciences sector has remained, through the economic downturn, a jewel in the state's economic development crown. But the challenge of accessing capital that bedevils the industry's emerging companies, including the possible demise of the Life Sciences Discovery Fund, could hinder future growth.

 

The role biotech and biomedical companies have come to occupy as one of Washington's five largest and fastest-growing sectors, generating tens of thousands of high-wage jobs and more than $10.5 billion in economic activity, creates an important anchor for the state's economic future.

 

But as the Washington Biotech & Biomedical Association (WBBA) prepares for its annual meeting next week, in partnership with The Governor's Life Sciences Summit, there's an ongoing focus on seeking to ensure that emerging companies in the industry find the growth capital they need. And that could be increasingly challenging.

 

"With 70 percent of our companies having 50 or fewer employees, access to capital is the greatest challenge we face," said Chris Rivera, WBBA president.

 
 

 

An important part of that funding has been the Life Sciences Discovery Fund (LSDF), the program created by tobacco-settlement dollars that came into existence in 2008 and has been championed by Gov. Chris Gregoire as a key to fostering more biotech innovations and jobs in Washington.

 

But it has taken deep cuts each session as legislators grappled with yawning state budget deficits, and now could face elimination.

 

Rep. Glenn Anderson, the Eastside Republican who is one of four legislative trustees for the fund, says "it's an open question whether the fund will survive" the next session's budget cuts.

 

"The fund has done a good job of encouraging basic science and marketable, actionable, investable outcomes," Anderson said. "But I'd say there's only a 50-50 chance it will survive and if it doesn't survive, I think that would be shortsighted."

 

Rivera puts numbers on the fund's successes to provide definition to shortsightedness.

 

"LSDF awardees have been able to leverage their grants and bring in $9 for every $1 awarded," he said. "These are real dollars from out of state.  This has led directly to job creation, and great innovation in our state.

 

"I believe that LSDF has proven to be a smart investment by our state into a sector of great current economic value and future potential," he added. "Other states have poured hundreds of millions into life sciences, as they see the potential economic value of this sector and are willing to invest strategically."

 

Beyond the fund, WBBA has mounted some initiatives, as have supporting organizations, in seeking to develop alternative sources of capital, given both the now-challenged traditional lending sources and the problems facing the venture capital industry.

 

Bruce Jackson, vice president for business development at EnterpriseSeattle and ex-officio member of WBBA's board, says that despite the success of the biotech and medical-device sector, these are "clouded times" for young companies seeking to ramp up.

 

"In addition to the fact federal regulations can create a headwind for companies, access to capital for some deserving companies can be difficult," Jackson said.

 

EnterpriseSeattle's year-old partnership with the City of Federal Way in a medical-device incubator called Cascadia MedTech Association is an innovative approach to helping grow the industry, though Jackson concedes "the model hasn't been proven yet."

 

"The companies we're supporting must transition from being supported by grants to creating cashflow," Jackson added.

 

WBBA itself touts the program it created called VIP Forums, through which quality investors and strategic partners (VIP's) are invited to Seattle for a showcase of the most promising life science companies and research opportunities.

 

In addition, in spring of 2009 the association formed a non-profit angel network called WINGS, whose role is to close the early-stage funding gap to speed medical-technology innovation "from lab bench to patients."

 

The gathering of industry leaders and others for whom the industry is part of the economic hope for the future will likely hear an upbeat assessment as they review the WBBA's third annual Life Sciences Economic Impact at their gathering on November 18 at Meydenbauer Center in Bellevue.

 

Comments from the governor, who will be attending her last WBBA annual conference, and University of Washington President Michael Young, attending his first, are likely to focus on upbeat prospects for the sector's future. But both may also share concerns about the impact of funding availability on that bright future.

 

And a comment from Rivera during an interview this week could set the stage for some discussion among attendees: "I understand and know that these are difficult times, but I hope that our state leaders are strategic in where they place our precious resources, and help this state maintain its competitiveness nationally and globally."

Continue reading

Spokane mom's autistic children provided lessons that prepared her for new venture

With her three autistic children as her "classroom" for the past decade, Laura Kasbar learned the unique ways autistic kids learn. Now she is ready to launch a business whose video-based web platform will offer parents, schools and health therapists a new tool to harness that process of learning for a dramatically growing number of kids with autism.

 

Kasbar, a Spokane mother of six, including twins Max, who was severely autistic, and Anastasia, who was moderately so, says the new company, called GemIIni (named for the twins), will launch in the first quarter of 2012.

 

Funding for the launch has come from the Spokane Angel Alliance and its leader, Tom Simpson, and an unusual commitment by Spokane's Inland Imaging and its CEO.

 

It was 11 years ago, Kasbar recalls, "that I walked into the tv room and saw all my kids lined up on the couch watching television and I couldn't really tell which were the autistic ones."

 

"At that time, the conventional wisdom was that the television should be off if autistic kids were around. But that experience was the catalyst that made me realize I should be using video to teach them," she said.

 

So over the next decade, with the help of her oldest son, Nicolas, who was on the autism spectrum as Asburgers, she developed the method embodied in the video. Her special focus was to help Max, who doctors told her, when he was four, would never talk.  She says he is now mainstreamed in school and excels in class without an aide. 

 

Now 14 and featured on a GemIIni video, Max has recently tested as having a college-level reading ability, a dramatic advance from his original diagnosis of being a lifelong non-verbal autistic. 

 

Kasbar says all three of her once-autistic children have now been removed from the autism diagnosis.

 

When Kasbar decided earlier this year she and her husband, Brian, were ready to launch the company, she was introduced to Simpson, who formerly guided a Spokane-based venture fund and now oversees the Spokane angel group.

 

Simpson set up a presentation for the start-up company a few months ago and wound up investing, as did some of the angel-group members. The presentation also drew the interest of Steve Duvoisin, Inland Imaging's CEO, who personally invested as well as bringing his company aboard. 

 

"I briefed our 60 physicians after the presentation and their attitude was: 'You mean we can make an investment that will help a lot of kids and could also provide a return on the investment?'," Duvoisin recalled. "It was an easy decision, but I emphasize their focus was on how much help this would be to the kids."

 

The number of children on the autistic spectrum and who thus need the learning help amounts to one in 38, and is growing at an amazing 17 percent per year.

 

"Autism is a very genetic disorder with an environmental trigger," she explained. "There are things in the environment that are the triggers for those genetically predisposed to autism."

 

The range of the autism spectrum, she says, "suggests a range of susceptibility to the triggers."

 

Explaining the role of video as a learning tool for autistic kids, Kasbar noted that the autistic avoid looking directly at a speaker's face and thus lose much of the normal learning process of mimicking articulation in speech. But, she says, they are not uncomfortable looking on-screen personalities in the eye and watching their faces.

 

"I've spent thousands of hours working with families in Europe and in the U.S. over the past three years to perfect the method," she said.

 

She says Nicolas, now 24, and a salsa instructor, as well as a coach of sales teams, helped with actual interaction between the program and the child, adding:"It was very helpful having someone on the autism spectrum work to refine the program."

 

Materials prepared for the marketing of GemIIni indicate it will use a subscription-based model with online computer-based training platform that Kasbar hopes to sell to families with autistic children, but also school districts, independent therapists and treatment centers and health insurance companies.

 

The business model provides for a charge of  $36 per student monthly, a fee that she says testing and surveys indicate is acceptable to parents, who would thus have a way to leverage home-time into therapy time at a reasonable cost.

 

She estimates the total special-needs market, including children with language-related disorders, at 7.8 million. Her target is to reach 50,000 families the first year.

 

"I expect that the company will become a leading provider of therapies for children with autism and other learning disorders," said Simpson, who is providing office space and consults with the Kasbars on marketing and development issues.

Continue reading

Support grows for proposals to create jobs by easing some of investor protections

The mounting pressure on Congress and the Obama Administration to find some job-creating ideas to jumpstart the ailing economy is stirring growing interest in a couple of Congressional proposals that would lessen investor protections for the sake of allowing businesses more growth opportunities.

 

One proposal, already filed as a House bill by Rep. Ben Quayle, R-AZ, with the intent of accelerating the growth of younger companies, would suspend for most newly public companies what many view as a costly and troublesome provision of the Sarbanes-Oxley Act.

 

Quayle's proposal would allow a much greater number of public companies to opt out of Sarbanes Oxley Section 404, which requires public companies to disclose the scope and adequacy of their internal-controls structure. The measure would raise the current $75 million market-value threshold for reporting to $1 billion.

 

The other proposal would help entrepreneurial and start-up companies, many currently  hamstrung in their ability to attract growth capital, to reach large numbers of investors for limited amounts of money via the internet in what's being called crowd-fund investing.

 

The proposals have come to center stage only in the last couple of weeks. And each has attracted growing support from those who contend the measures are vital to the goal of job creation. And each is also starting to stir opposition from those who question the idea of setting aside shareholder and investor protections.

 

Each proposal merits an in-depth look and thus in this first of two columns we'll examine the discussions surrounding Quayle's bill, the support being gathered for it and the comments of those expressing concerns.

 

Next week's column will focus on the crowd-funding proposal, including a look at those backing it and the concern it is stirring from many angel-investor leaders, particularly those up and down the West Coast.

 

Quayle's bill would allow public companies with market valuations below $1 billion to opt out of Sarbanes-Oxley Section 404 for the first 10 years after going public. The original Sarbanes-Oxley Act was amended in last year's Dodd-Frank Wall Street Protection and Consumer Protection Act to create the under-$75 million exemption.

 

Quayle and supporters of his measure, including the entrepreneur-focused Kauffman Foundation, contend that the costs for complying with the requirements of this section of Sarbanes-Oxley can exceed $1 million for new companies and can cost them up to $20 million in loss of valuation.

 

Quayle's measure is close to a plan outlined by the Kauffman Foundation a few months ago as "a set of non-partisan ideas to jump-start the ailing U.S. economy and increase job creation by accelerating the growth of startups and young businesses."

 

Kauffman, the nation's largest non-profit foundation focused on entrepreneurs, noted that the role high-growth startups play is vital to assure U.S. economic strength.

 

"Virtually all of the growth in U.S. jobs has been driven by the formation of firms less than five years old, and these new firms have been disproportionately responsible for commercializing the cutting-edge innovations that characterize modern life," the Foundation said.

 

"I believe this bill is an important step as we  try to increase the number of companies that go public in the United States," said Robert Litan, Kauffman's vice president for research and policy. "The ability to raise capital in public markets will be essential as new companies create the jobs required to put Americans back to work."

 

One of the most pervasively visible proponents of both lowering the regulatory barriers for newly public companies and the proposal for crowd-fund investing is a Miami, FL, entrepreneur named Sherwood Neise, who has testified before Congress about both. He was co-founder of a company called Flavorx, which added flavors to medicine, that went public and was later sold.

 

In 2006, he was among those decrying what he called the "unintended consequences of Sarbanes-Oxley on small businesses," saying that meeting 404's requirements "ate up 14 percent of our net income."

 

But among those urging caution is former SEC Chief Accountant Lynn E. Turner, who said in an e-mail that contained the subject line "Short Memories:" "Clearly people have forgotten the hundreds of billions in dollars of losses investors suffered during the corporate financial reporting frauds, and the tens of thousands of jobs lost."

 

Neil McReynolds, a corporate-governance consultant in Seattle, said that while the original Sarbanes-Oxley requirements created some real cost and regulatory problems for smaller public companies, the changes brought about by the Dodd-Frank bill corrected some of those.

 

McReynolds, who has been a member of a number of boards of private companies and consulted with boards of public companies, said that while extending the exemption to $75 million cap companies, as Dodd-Frank did, made sense, "extending the exemption to $1 billion companies may be a bit of a stretch." He added that "there's still value in disclosure and internal controls."

 

Sharon Philpott, managing partner of national accounting firm BDO's Seattle practice, agreed, saying her firm supports the positions of the CFA Institute, Center for Quality Audit and the Council of Institutional Investors, who have all urged caution against further exemptions from Sarbanes-Oxley.

 

In the end, success or failure of expanding the exemption for internal controls may hinge on whether the pressure for jobs trumps the pressure to protect shareholders and investors.

 

 

 

Continue reading

52°F

Seattle

Mostly Cloudy

Humidity: 63%

Wind: 14 mph

  • 24 Mar 2016 52°F 42°F
  • 25 Mar 2016 54°F 40°F
Banner 468 x 60 px