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April 21, 2005

Marc G. Cloutier, PhD

The Vern Riffe Center

Ohio Dept. of Development

Technology Division-BRTT

77 S. High St.
25th Floor
Columbus, OH 43215-6130

Dear Dr. Cloutier:

I am writing to transmit the first report of the Committee to Review Proposals to the 2004 Biomedical Wright Centers of Innovation (WCI) and the Biomedical Research and Technology Transfer (BRTT) Partnership Awards Program of the State of Ohio. This letter provides the committee’s assessment of 14 proposals submitted to the BRTT Partnership Awards program, and provides the committee’s observations about the nature of the applications collectively and its recommendations on which specific applications the state should consider for funding.

The committee’s activity was supported by a contract between the Ohio Department of Development and Ohio BRTT Commission and the National Academy of Sciences and was performed under the auspices of the National Research Council’s Board on Life Sciences.

THE COMMITTEE AND ITS CHARGE

The Ohio BRTT Partnership Awards program is a competition to fund innovative projects that have commercial potential in biomedicine and biotechnology. Its overall objectives are to strengthen Ohio’s position of national leadership in biotechnology, to create jobs, and to foster research that will benefit the health of Ohioans.

The Ohio BRTT Commission asked the National Research Council (NRC) to conduct an independent review of 14 proposals that were received in response to the announcement of the 2004 awards program. To undertake the review of the proposals, the NRC appointed a 15-member committee with collective expertise across the breadth of biomedical science and its commercial applications. In particular, the committee’s scientific expertise included molecular genetics and genomics, bioinformatics, cell biology, biochemistry, ophthalmology, nano-biotechnology, cancer research, obesity,



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Review of the Biomedical Proposals to the 2005 Biomedical Research and Technology Transfer Partnership Award Program of the State of Ohio: Letter Report April 21, 2005 Marc G. Cloutier, PhD The Vern Riffe Center Ohio Dept. of Development Technology Division-BRTT 77 S. High St. 25th Floor Columbus, OH 43215-6130 Dear Dr. Cloutier: I am writing to transmit the first report of the Committee to Review Proposals to the 2004 Biomedical Wright Centers of Innovation (WCI) and the Biomedical Research and Technology Transfer (BRTT) Partnership Awards Program of the State of Ohio. This letter provides the committee’s assessment of 14 proposals submitted to the BRTT Partnership Awards program, and provides the committee’s observations about the nature of the applications collectively and its recommendations on which specific applications the state should consider for funding. The committee’s activity was supported by a contract between the Ohio Department of Development and Ohio BRTT Commission and the National Academy of Sciences and was performed under the auspices of the National Research Council’s Board on Life Sciences. THE COMMITTEE AND ITS CHARGE The Ohio BRTT Partnership Awards program is a competition to fund innovative projects that have commercial potential in biomedicine and biotechnology. Its overall objectives are to strengthen Ohio’s position of national leadership in biotechnology, to create jobs, and to foster research that will benefit the health of Ohioans. The Ohio BRTT Commission asked the National Research Council (NRC) to conduct an independent review of 14 proposals that were received in response to the announcement of the 2004 awards program. To undertake the review of the proposals, the NRC appointed a 15-member committee with collective expertise across the breadth of biomedical science and its commercial applications. In particular, the committee’s scientific expertise included molecular genetics and genomics, bioinformatics, cell biology, biochemistry, ophthalmology, nano-biotechnology, cancer research, obesity,

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Review of the Biomedical Proposals to the 2005 Biomedical Research and Technology Transfer Partnership Award Program of the State of Ohio: Letter Report diabetes, nutrition, biophysics, immunology, neuroscience, drug discovery, radiation and biomedical imaging technologies. The committee’s commercial competence included venture-capital investment, drug discovery, start-up formation, and technology licensing. (Appendix A contains short biographical sketches of the committee members.) Before appointment to the committee, prospective members were screened for a potential fiduciary or financial interest that they or their immediate family members might have had in any of the organizations and institutions involved in the proposals. At the start of its meeting on February 16-17, 2005, the committee held a discussion of bias and conflict of interest and reviewed its composition relative to the expertise needed for the assessment of the proposals. None of the committee members had a conflict of interest, and the balance and fairness of the review committee were determined to be sound. The committee was charged with conducting a scientific review and examination of the commercial potential of the 14 proposals. It was asked to assess how well each proposal met the criteria of the awards program and to identify the proposals of greatest merit for consideration by the BRTT Commission for funding. The committee was also asked to rank the best proposals. Finally, the committee was asked to comment on Ohio’s request for proposals for the BRTT competition and to provide additional observations about the awards programs. REVIEW PROCESS Each proposal was assigned to one and in some cases, two committee members as its primary reviewers according to relevant expertise. The program and business plans of each proposal were also reviewed by every other member of the committee; that is, the full committee membership was assigned as secondary reviewer for all proposals. The committee members who are venture capitalists were asked to focus on the business plans. Two external reviewers (Dr. Mark Saltzman of Yale University, and Dr. Craig Thompson of the University of Pennsylvania, School of Medicine) provided additional comments on specific aspects of the scientific programs of several of the proposals. The reviewers were screened for potential conflicts of interest before receiving the proposals. All committee members were provided with the Ohio 2005 BRTT Request for Proposals (RFP), and evaluation criteria based on information in the RFP. All committee members were asked to score each proposal on each of the different criteria. Prior to its February meeting, the committee held a conference call to talk about the review process generally and to discuss the weakest proposals as identified by committee members. During the meeting, the remaining proposals were evaluated in a multi-step process. First, the proposal scores were collated and presented to the committee. Then each proposal was presented by its primary reviewer(s) and discussed by the committee. Next, the committee grouped the proposals into two categories: proposals that had sufficient merit for further consideration by Ohio and proposals that were found to have significant shortcomings relative to the BRTT program criteria and

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Review of the Biomedical Proposals to the 2005 Biomedical Research and Technology Transfer Partnership Award Program of the State of Ohio: Letter Report priorities. After a final discussion of Ohio’s overall goals for the program and a rescoring process, the proposals the committee felt should be considered by Ohio and that best met the BRTT criteria were ranked according to merit. EVALUATION CRITERIA Using the awards program request for proposals (RFP) for guidance, the committee evaluated four general aspects of the proposals, as follows: Compliance with the Fundamental Requirements of the Awards Program RFP Each proposal should have a focus in at least one of six research fields: human genetics and genomics, structural biology, biomedical engineering, computational biology, environmental biology, and plant biology. Each proposal must include collaboration between two or more Ohio-based institutions, at least one of them with commercial expertise. The partner responsible for commercialization must provide significant matching funds or in-kind support. Each participating entity must make a specific and new institutional commitment to the proposed venture in the form of matching funds, new salary support, equity, instrumentation support, or in-kind services. Scientific Merit of the Proposed Work Clarity, conciseness, and organization of the proposal. Adequacy and appropriateness of the project work plan, division of labor, infrastructural resources, and budget. Scientific soundness, novelty, and level of risk (certainty of the scientific outcome) associated with the proposal. Scientific credentials and experience of the proposing institutions, study directors, and key personnel. Adherence to regulations regarding human subjects and use of animals in research. Commercial Viability of the Proposed Products and Services, including:

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Review of the Biomedical Proposals to the 2005 Biomedical Research and Technology Transfer Partnership Award Program of the State of Ohio: Letter Report Credentials and experience of proposing institutions, study directors, and key personnel. Likelihood of producing a commercial product. Clarity and realism of the commercialization pathways, goals, and milestones. Adequacy of intellectual-property disposition plan. Fulfillment of Overarching Objectives and Priorities of the Awards Program The proposed venture should have the potential of strengthening Ohio’s position in biotechnology, developing new research capabilities, and broadening the research base in support of the state of the art. The proposed venture should have the potential of leveraging additional public and private resources for research. The venture should lead to the creation of new jobs in Ohio. The venture should address research questions that will potentially result in health benefits to the people of Ohio. SUMMARY ASSESSMENT To understand the basis for its conclusions and recommendations to the State of Ohio, it might be helpful to be aware of the committee’s expectations. With the evaluation criteria in mind as it approached the proposal review process, the members of the committee sought to identify the most compelling applications for biomedical and biotechnological innovations submitted by a partnership of committed Ohio institutions. Conceptually, the ideal partnership would consist of universities and companies, under whose financial backing a group of collaborators would engage in research and development for a common purpose. A leadership team from those institutions would have developed the initiative, and the application itself would reflect team preparation, suggesting that all members of the partnership had put time and effort into the conception of the project’s main ideas and organization and had contributed to the development of the application. Letters of collaboration and support would not be based on boilerplate language, but rather contain information that would give the committee a sense of the shared effort and risk that each partner was willing to make. The jointly proposed program would be directed at a specific end point or end points (products, services, capabilities) of value in the marketplace, to be reached through the combination of a logical research plan predicated on a strong scientific basis and a methodical and well-developed commercialization plan. The research plan would consist of several coordinated projects of high scientific quality. Given the three-year horizon of

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Review of the Biomedical Proposals to the 2005 Biomedical Research and Technology Transfer Partnership Award Program of the State of Ohio: Letter Report the BRTT award, a portion of the research involved would have an applied focus. Basic research associated with the application would pursue novel ideas, with the potential to speed the pace or expand the scope or effectiveness of the project. Each research element would be described in the context of the overall venture, giving some indication of the venture’s dependency on the success of each element, which would suggest the overall level of risk, flexibility, and potential. The business plan would describe “the market” not only in terms of how many people had a particular disease, but in terms of the number of individuals locally or nationally who realistically might benefit from the proposed service or device. The plan would identify specific potential customers (whether they be intermediary companies, doctors, or patients, for example) and the manner in which the project or service would be sold, delivered, or licensed to the customers. Some exploration into whether the customers would be interested in the innovation in question would have already occurred. The business plan would also identify competing products and describe the advantages of the proposed innovation over those of competitors. The plan would describe the steps to be taken from product development to market with realistic milestones that indicated not just what would be achieved by when but how that progress would be made. The proposal would also explain the logical basis for the number of new jobs anticipated to be created as a result of the venture and what kinds of jobs those might be. In an ideal application, the committee could easily see the sources of matching funds or support for the projects, as well as the way in which the funds would be spent. The committee would get a sense of where the money was going and how much each component of the project would cost. The amount of time commitment to the venture of each major investigator, businessman, investor, and tech transfer agent would be clearly stated in the application, and the proposal would describe mechanisms for implementing the human interactions needed to coordinate and move the project forward. In its assessment, the committee found that none of the 14 applications submitted to the 2005 BRTT competition represented what might be considered the “ideal” proposal; that is, the marriage of a well-conceived scientific strategy with a comprehensive commercialization plan. The nature of the shortcomings among the proposals varied. Some were not written clearly; others outlined a research plan without any particular product focus, in some cases describing methodology in detail but with no concept of the bigger picture. Some applications appeared to be a collection of extracts from different NIH grant proposals. Others did not address issues relevant to the research plan, such as human subjects experimentation, or issues relevant to the business plan, such as the freedom to operate in research areas in which patents are known to be held by other parties. And in general, the commercialization plans of most of the proposals lacked a robustness that the venture capitalists and entrepreneurs on the committee, in particular, would have liked to see. In response to the generally weak commercialization plans, the committee has generated a series of questions and issues that each application should address. These questions, found in Appendix A, are intended for the guidance of both the State of Ohio and the applicants.

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Review of the Biomedical Proposals to the 2005 Biomedical Research and Technology Transfer Partnership Award Program of the State of Ohio: Letter Report A small number of proposals, however, did impress the committee as having the potential, above and beyond the others, to be successful ventures. These proposals contain novel scientific projects with convincing commercial applications, and in the committee’s opinion, should be considered by the State of Ohio for possible support. However, the committee’s enthusiasm for these proposals comes with qualifications—each proposal has weak points that the state should take into account as it makes funding decisions. These issues are addressed here. Additional details are also provided in the individual summary evaluations (Appendix B). Therefore, in keeping with its task, the committee has identified four proposals that best meet the criteria of the 2005 BRTT Request for Proposals. These proposals, ranked in order of merit, are: 05-28 Commercialization Platform for Immunotherapeutics for Cancer and Multiple Sclerosis 05-04 Targeted Nanoparticles for Imaging and Therapeutics 05-29 Adult Macular Degeneration Initiative 05-30 Clinical Tissue Engineering Center The committee gave the highest ranking to the application: Commercialization Platform for Immunotherapeutics for Cancer and Multiple Sclerosis. Compared to the other BRTT submissions this year, this proposal is the most impressive in terms of a truly collaborative strategy and gives the most detail from the business point of view. The plan shows an integrated strategy focused on commercialization as the ultimate outcome of the group’s efforts. There are frequent references to market sizes of specific products and potential revenue projections, as well as the impact on medical research and human health in the State of Ohio. The commitment letters provide more detail and include endorsements from participants in the Commercialization Steering Committee as well as the Scientific Advisory Board and co-investigators. There are references to manufacturing and marketing support. These details are important in showing a level of integration not evident in any other submission. The consensus of the committee was that the most novel and most promising aspects of the proposal are those components related to research on developing a model of Multiple Sclerosis (MS) and a screening platform for the disease. In contrast, the application’s objectives to develop immunomodulating therapies for cancer and for the development of a vaccine against EBV, have significant scientific, clinical, regulatory, and commercialization hurdles. For this reason, the committee recommends that the projects related to cancer therapy and the EBV vaccine be dropped from the initiative. Removing these projects would likely cut the budget in half. In general, the initiative can be characterized as high-risk, with a high-payoff should its research prove successful in providing MS patients with some relief, as there is

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Review of the Biomedical Proposals to the 2005 Biomedical Research and Technology Transfer Partnership Award Program of the State of Ohio: Letter Report a great unmet need for treatments for this disease. If this project is funded by Ohio, the research is likely to attract additional federal research support. The second highest ranked proposal is Targeted Nanoparticles for Imaging and Therapeutics. This proposal is attractive for the experienced investigators involved, the fact that collaborations with commercial partners already exist, and the numerous interesting scientifically projects proposed. From a strictly commercial perspective, however, only three of the projects seem likely to produce products with considerable market potential in the near term. These include Project 1: DNA Nanoparticle Therapeutics for Hemophilia; Project 4: Nanoparticles for Photodynamic Therapy; and, Project 8: “Smart” MRI Detection of Therapeutics Targeted to Metastatic Breast Tumors. If the initiative focused on these three projects only, it is estimated that about half of the current amount of funds requested would be likely to be needed to conduct the work. In contrast to the long list of detailed, proposed projects, the application’s business plan lacks specificity, providing only a broad and generic description of how research in the area of nanoparticles can be commercialized. There appears to be real commercial potential for the projects listed above, but the applicants should be required to flesh out their plans in much greater detail. While the BRTT submission is not intended to include a full business plan, the success of the venture is likely to depend on applicants’ understanding of the commercial opportunity, and what will be required of a realistic commercialization plan. The proposal ranked third is the Adult Macular Degeneration (AMD) Initiative. This proposal aims to create a program focused on developing proteomic technology for the early diagnosis and treatment of AMD. Several components of the research plan have commercial potential, although some of those are not directly related to the problem of AMD. Of all the components, the project related to stem cells is the least developed, and should probably be dropped from the initiative. It is not clear what percentage of the budget the stem cell element represents. Regardless, the consensus of the committee was that the AMD Initiative could achieve its initial work plan with three-quarters of the amount of funds requested. Some suggestions for improving the approaches to the research components are discussed in the Individual Summary Assessment. The AMD Initiative also demonstrates similar weaknesses in its commercialization plan as does the Nanoparticle proposal. While several industry partners and venture capitalists appear to be waiting in the wings, a better formulation of the initiative’s commercial strategy would be helpful to the applicants and their potential investors, including the State of Ohio. The fourth ranked proposal is the Clinical Tissue Engineering Center, an ambitious initiative to address musculoskeletal tissue repair and regeneration in osteoarthritis, tendon rupture, fracture care, and chronic wounds. With some of the most experienced scientists in the field and a commercial advisory board of individuals with

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Review of the Biomedical Proposals to the 2005 Biomedical Research and Technology Transfer Partnership Award Program of the State of Ohio: Letter Report proven track records in patenting and bringing tissue-engineering products to market, the Center has impressive leadership. Nevertheless, for the purposes of the BRTT competition, the proposal to launch 23 separate research components is unrealistic. Cutting the program down to a few projects and focusing commercialization efforts on those would be a better approach. The committee suggests that Ohio should consider funding the Center, but recommends that the Center be asked to scale down its program to a budget of roughly half and focus on the most promising projects. Research components 1, 2, 8, and 15 are the most novel and the most likely to find a market in the near term. Revising the commercialization plan according to the questions in Appendix A would be a complementary exercise to the reformulation of the research program. One would like to see greater involvement by venture and industry partners; a more crystallized business plan would help to clarify issues of risk and future value for those investors. It is suggested that the State of Ohio hold all of the applicants accountable for providing answers to questions of commercialization planning before the state makes final funding decisions. Appendix A provides a list of questions and issues that each commercialization plan should address. ADDITIONAL COMMENTS NRC committee reviews of BRTT applications in previous years have commented on the inadequacy of the applications’ business plans. One way of improving the commercialization plans of the submissions might be a requirement to have them reviewed by a university business school or by one of Ohio’s business incubator operations. Another suggestion is to have the industrial partners and collaborators read and sign off on the sections of the application that address commercialization. This would force their active participation in the process. Another suggestion to guide the applicants is to limit the number of research components or projects in any given submission. The applicants seem to think that more is always better, when a few, highly-focused projects might be more desirable. The BRTT request for proposals notes that grants in the range of $5 to $8 million will be distributed. It might be worthwhile considering a lower dollar range for highly targeted initiatives that might be more achievable (both technically and in terms of getting matching industry funds) for applicants. The current proposals try very hard to identify potential commercial outcomes for every research goal without showing any market understanding, so they sound vague and unfocused. It is possible that, in part, applicants are requesting support for the development of infrastructure as opposed to specific projects with realistic product development opportunities. Applicants should also be encouraged to distinguish these two elements of their proposal, understanding that the “infrastructure building” aspects would have to demonstrate long-term value in establishing an environment conducive to

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Review of the Biomedical Proposals to the 2005 Biomedical Research and Technology Transfer Partnership Award Program of the State of Ohio: Letter Report the success of individual projects, including the ability to attract and retain outstanding people. Finally, from the perspective of the review committee, the budget pages and cost-sharing commitments are confusing, and are often prepared differently by different applicants. It is not easy to evaluate the cost of subprojects because the data are not presented in this way. Also, it is unclear whether the use of salaries as part of matching funds is appropriate, given the requirement that participating institutions to make a specific and new commitment to the proposed venture. A 1-2 page summary form that contains essential information about the budget, projects, and cost-share contributions would be an improvement. The committee appreciates the opportunity to make suggestions about the BRTT program. We hope that you find these comments and the individual assessments of the proposals to be helpful as decisions about the BRTT awards are made. Sincerely, Barbara Hansen, PhD Chairwoman Committee to Review Proposals to 2005 Biomedical Research and Technology Transfer Partnership Awards of the State of Ohio cc: Warren Muir Frances Sharples Appendixes: A. Commercialization Plan Questions B. Individual Summary Evaluations C. Committee Member Biosketches