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Kansas Bioscience Companies Prepare For State Sale

Courtesy Innara Health

The beginning of May was a roller coaster of emotions for Innara Health CEO Michael Peck.

The results of a promising trial of his company’s NTrainer product, which helps premature babies learn to nurse, were unveiled April 30 at the annual meeting of the Pediatric Academic Societies in Baltimore.

The next day the Kansas Legislature approved a bill to allow the sale of the Kansas Bioscience Authority — a quasi-governmental agency that nurtured and still houses Peck’s business — as part of an ongoing attempt to temporarily patch an underwater state budget.

Peck said his company is far enough along that it can weather the sale, but it will cause some hassles. And he sympathizes with KBA’s employees, whom he has enjoyed working with as his company grows.

“The rug has been pulled out from under them,” Peck said. “From our seat it’s not great, that’s for sure. I would rather that we don’t have investors in an impaired situation.”

The KBA, based in Olathe, was created in 2004 under former Gov. Kathleen Sebelius as a means of incubating startup companies in the fields of human and animal health — part of a “bioscience corridor” between Kansas City and Manhattan.

KBA supporters credit it for helping to woo the National Bio and Agro-Defense Facility to Manhattan and gain National Cancer Institute designation for the University of Kansas Cancer Center.

But it was hit by scandal four years ago when an audit determined that a former director spent some funds inappropriately. It also fell out of favor with some Republicans skeptical of investing public dollars in private sector startups.

Credit Andy Marso / Heartland Health Monitor
Heartland Health Monitor
The Kansas Bioscience Authority, with offices in Olathe, was created in 2004 to leverage Kansas City's animal health corridor and make eastern Kansas a destination for bioscience investment.

The state’s annual payment to the KBA dipped precipitously in recent years as its funding became a target for Gov. Sam Brownback and Republican leaders looking to balance budgets in the wake of large income tax cuts passed in 2012.

Last year, KBA leaders laid off half the staff and announced it would halt business investments.

Senate Minority Leader Anthony Hensley, a Democrat from Topeka, said the KBA had started with great promise and bipartisan support. Now it is one State Finance Council vote from being sold off as spare parts.

“It could have done a lot of very good things for Kansas, but the governor chose to basically starve it to death,” Hensley said. “Now (he’s) trying to use its carcass to generate money to put into the general fund.”

Legislators were told that the sale of KBA assets would bring in about $25 million for the general fund, but the true number will depend on what buyers are willing to pay.

At a news conference last week, Brownback said there will be “an open bidding process for the assets.”

He couldn’t say whether that would mean the companies currently in the KBA portfolio would move out of state.

“That’s a possibility,” Brownback said. “It’s a possibility somebody will take it over and try to draw more into the state.”

Peck’s company is one of five human health startups that will be part of the sale.

The NTrainer, invented by University of Nebraska professor Steven Barlow while he was working at KU, has shown potential to decrease babies’ stays in neonatal intensive care units by helping them nurse better and catch up in weight. That in turn has the potential to improve health outcomes and save hospitals money.

Investors outside the KBA have jumped on board, strengthening Innara’s position as the state prepares to sell the KBA’s share of the company.

“I don’t want to downplay what’s going on with the KBA — it’s not great,” Peck said. “But at the same time I’m not running around every day worrying about it. I have many shareholders. They’re an important one, they’re a big one, but they’re not the only one.”

Peck is using some of his time to prepare for the pending sale, though, and spending some of the company’s resources on legal advice about the sale.

Events in Topeka are not holding him back from doing business, he said, but they are a distraction.

Uncertainty about the future also looms. Peck said he’s not looking to leave Kansas. He was born here, went to KU and is raising his children here.

But he said he can’t predict the future at this point. Wherever the company lands, he will be proud that the NTrainer was developed in Kansas.

“What we’re doing in helping these kids get better — we’re impacting families and lives, and we’re doing something that has never been done before and has global applications to it,” Peck said. “And it started here. It literally started in Lawrence, Kansas, and is being developed in Olathe.”

Andy Marso is a reporter for KHI News Service in Topeka, a partner in the Heartland Health Monitor team. You can reach him on Twitter @andymarso

Andy Marso is a reporter for KCUR 89.3 and the Kansas News Service based in Topeka.
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