Crain's Detroit Business - December 19, 2011 - (Page 20)

Page 20 CRAIN’S DETROIT BUSINESS December 19, 2011 New CEO expects an exciting ride at Lycera Lycera Corp., a spinoff Jersey-based drug giant from the University of Merck & Co. Inc. that Michigan that is developwould pay Lycera an uping drugs to fight such aufront fee of $12 million toimmune diseases as luand up to a total of $295 pus, rheumatoid arthritis million in milestone payand psoriasis, first made ments if research went as big headlines in April hoped. 2009 when it announced it In June, Lycera moved had closed on a Series A from the Michigan Life Sciround of venture capital ence and Innovation Center investment of $36 million. incubator in Plymouth That number was eyeTownship to the UM catching in and of itself, North Campus Research being one of the largest in- Kathleen Metters, Complex at the former Lycera Corp. vestment rounds in state Pfizer Inc. campus in Ann history. But what made it Arbor. In October, it anparticularly newsworthy nounced the hiring of was the timing: It came when capi- Kathleen Metters, Merck’s former tal markets had shut down world- head of worldwide basic research wide, frozen by the recession and and a holder of 29 patents, as its fears of another Great Depression. president and CEO. Adding to the buzz was the qualMetters talked with Crain’s reity of the brand name VCs that had porter Tom Henderson about her joined the round: InterWest Partners plans for the company, whether it LLC, a Menlo Park, Calif., firm with will need to raise more venture $2.8 billion under management; capital and her expansion plans Arch Venture Partners, a Chicago- for a Boston office. based firm with almost $1.5 billion; and Clarus Ventures, a CambridgeHow did you come to join Lycera? Mass.-based firm with $1.2 billion. Was it a result of the development Lycera, founded by Gary Glick, deal announced in March? No. I was a professor of organic chemistry at headhunted. It’s interesting. I neUM, had come a long way since gotiated the Merck deal before I getting a small amount of seed cap- left. I presented the scientific ratioital from Ann Arbor-based EDF nale for doing the deal. But that Ventures in 2006. had nothing to do with taking this In March, Lycera made more job. I was headhunted later. I got headlines when it announced a re- this offer. They said, ‘We’ve got search collaboration with New this interesting opportunity for you to look at.’ Because I’d done the due diligence on the science, already, obviously I was very interested. When you were head of basic research, you had 3,000 people under you. Now you’re at a tiny university spinoff. Why take the leap? There were several attractions for me. One was the therapeutic area. Although I had been head of Merck basic research, my specialty is in immune responses and inflammation, which is what Lycera specializes in. This has always been a passion for me and is an area with a lot of unmet needs. There are 80 to 120 small and medium-size diseases that fall into the autoimmune bracket for which there currently is no treatment. Rheumatoid arthritis is a big market, but there are smaller niche and orphan markets, too. It was attractive because I was going to be working with very good, experienced researchers. There are a lot of ex-Pfizer researchers here. We have very strong chemists. I’m a biochemist. And then there was the opportunity to move into being a CEO. I’ve never raised money or been involved in the venture capital world, so that will be interesting. Lycera stunned folks locally when it closed on that $36 million VC round when no one in the world was raising money. I know that the money was contingent on hitting milestones and that at least two tranches of money came in since the deal was announced. Do you still have dry powder left from that round? And will you need to be going back to your investors for a B round? We’ve still got one tranche of the Series A round left. The upfront money from Merck allowed us to hold off on using that, so we won’t need to raise any money for a while. What I want to do is build a sustainable drug company, and that is extremely difficult in any economic climate, particularly this one. I’ll need to raise both dilutive and nondilutive money. The dilutive includes money from Merck, from grants, from partnerships. But I don’t have a complete strategy just two months in. Where are you at in terms of drug development? We’re working with several molecules from several chemical classes and going through safety and efficacy tests in animals. We’ve identified some that are very effective in autoimmune diseases, including arthritis. The preferred option to getting them to market is to license them to Big Pharma. Big Pharma prefers some clinical data, and as we add that, that’s where you get maximum value. Tell me a little about the Merck deal. The target is a molecular master switch for different forms of immune-related diseases. It’s a pathway with a lot of preclinical validation … Merck will do clinical development. This is in preclinical development now, with a joint team. Merck pays for seven full-time equivalents, which amounts to about $300,000 per person per year, including equipment and supplies. It also funds seven FTEs the second year and five FTEs the third year. Has Lycera been adding jobs, and is it looking to hire now? We’ve got 25 employees. We hired about 10 employees this year, and we have a few selective positions open for 2012. I’m currently recruiting a chief medical officer, which will probably mean opening an office in Boston. That’s the biotech capital of the world, and quite frankly it’s going to be hard to get the candidate we want to move to Ann Arbor. The thought is, ‘If something happens to Lycera, what other job can I find there?’ In Boston, they can always find another job. I haven’t been in pharma for 23 years without knowing it’s one of the riskiest businesses on the planet. But at the end of the day, this is all about people. We have great people, and it’s going to be an exciting ride. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2 Michigan companies to help build community near Baghdad MICHELLE MUÑOZ SPECIAL TO CRAIN’S DETROIT BUSINESS Michigan companies are on tap to help build a city within a city of sorts in Iraq. Firms in the state stand to benefit from a planned $5.5 billion urban development outside Baghdad after signing a memorandum of understanding with the National Investment Commission of Iraq. Mich Development, a consortium of Michigan companies and companies that have worked extensively in the state, was organized by the Prima Civitas Foundation to pursue this and other export opportunities. Now it is leading the search for Michigan companies to continue with the project, said Prima Civitas’ director of international programs, Patrick McRae. Prima Civitas is a nonprofit organization founded by Michigan State University to advance state economic opportunities. Mich Development consists of 20 companies with expertise in architecture, engineering, construction and finance. Members include Albert Kahn Associates Inc. and Mannik & Smith Group Inc. of Detroit; Capital Strategies Group of Birmingham; C2AE International LLC of Lansing; and The Archinomics Group of Winnetka, Ill. “A lot of management services would be provided by Michigan firms,” McRae said. “I think the reasonable export potential for Michigan goods and services is in that $1.5 billion range.” McRae said the Iraq deal was set in motion about eight months ago during a visit to Lansing by Sami Al-Araji, the chairman of the investment commission and an MSU alumnus. He asked MSU and Prima Civitas to create a proposal that could address the housing shortages facing Iraq, McRae said. The project is a planned 15- to 20square-mile community including schools, housing, commercial, recreational and civic components. If fully realized, the community would have about 100,000 housing units. McRae said that the full plan would take about seven to 10 years. The first phase — about 600 to 1,000 housing units — would take six to 12 months. McRae said the group is now looking for more companies to take part, a process it hopes to complete within 90 days. “It’s such a wide spectrum of need, we’ll have to reach into a wide and deep supplier pool,” McRae said. “We’re in the process of selecting the captains of our team who will in turn select their players.” The scope of the project will require major companies to move forward. Not all of the services needed can be provided by Michigan companies, McRae said, but there is plenty of opportunity. Area defense contractors get year-end boost Congress passed a 2012 defense bill last week that authorizes more than $6 billion toward programs that benefit Southeast Michigan defense contractors. The House voted 283-136 on Wednesday and the Senate voted 8613 on Tuesday to approve the National Defense Authorization Act for the 2012 fiscal year. The bill as modified last week now goes to President Barack Obama, who has said he will sign it in its current form. The bill authorizes $154 million this fiscal year to fund the Joint Light Tactical Vehicle program, to develop and manufacture more than 50,000 next-generation vehicles to replace some of the U.S. Army and Marine Corps’ aging fleet of military Humvees. But it also largely defunds a separate military program to refit and modernize 1,362 other Humvees. The bill adds more than $255 million to a previous allocation for the M1 Abrams tank program, which would allow Sterling Heights-based General Dynamics Land Systems to continue production work at its tank manufacturing center in Lima, Ohio, to the end of 2013 or early 2014. That work was expected to halt in June 2013 for at least three years under an Army budget proposal. The conference report also preserves about $658.4 million in funding for the Stryker, a mainstay vehicle for General Dynamics Land Systems, and about $36.2 million of the $53.3 million funding originally requested for the Armored Multi-Purpose Vehicle, a program BAE Systems Inc. is pursuing through its Michigan operations. The bill also authorizes $449.4 million for development of the Ground Combat Vehicle, a next-generation replacement of the Bradley Fighting Vehicle. The Ground Combat Vehicle already is in development through industry teams led by GDLS and BAE. General Dynamics and BAE are expected to take part in bids on the next development contracts for the JLTV vehicle in early 2012, along with possible rival bids from teams that include Oshkosh Defense or Navistar Defense. Funding for the Mine Resistant Ambush Protected vehicle — a line item that includes both maintenance on conventional MRAPs and production on the MRAP AllTerrain Vehicle or M-ATV — is now $2.6 billion. — Chad Halcom http://www.youngbasile.com http://www.youngbasile.com

Table of Contents for the Digital Edition of Crain's Detroit Business - December 19, 2011

Crain's Detroit Business - December 19, 2011