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May 24, 2011
KANSAS CITY, Kan. Gov. Sam Brownback today said that a key to boosting the Kansas economy will be improving the state's higher education and research institutions, particularly in the area of biosciences. He also said reducing the state's income tax would be critical for fostering job growth.
Brownback's remarks came during the Governor’s Economic Summit on Life Sciences at the University of Kansas Medical Center. It was the third of seven economic summits planned by Brownback to discuss job creation and economic growth.
About 250 medical workers, educators, legislators and health industry leaders attended the three and a half hour meeting.
"We've got to improve," Brownback said in his opening remarks. "This is a key for us to grow as a state — to get these Regents institutions moving, increasing their rankings. They suffered three (years of) budgetary losses in a row. This year they did not. The Regents are seeing an increase in funding this year in a tough economic time. That's on purpose and that's expected to produce results. We're putting the funds there and we're looking for things to happen...we want this to create jobs and opportunities."
Reducing income tax
Brownback also said that developing bioscience and other medical research facilities in the state would require policies — namely reducing the state income tax — that make Kansas more attractive for people, businesses and venture capital.
"I'm troubled by the venture capital...leaving to go to other places, to other countries because of a lack of opportunity. We need to create those opportunities and policy environments here to attract that capital," he said.
KU Vice Chancellor Barbara Atkinson said that in the past several years, the medical center had made significant strides. She said it had grown its doctors' professional revenue from $86 million in 2005 to $182 million last year, had increased research income from $69 million to $100 million in the same time and had climbed from 75th to 60th (out of 210 schools) in the National Institutes of Health rankings since 2006.
Atkinson said KU's top priorities now should be to lead the nation in drug development and to support the KU Cancer Center's application for National Cancer Institute (NCI) designation, which it plans to submit in the fall. The NCI designation, she said, would help Kansas keep testing jobs and income that currently are shipped elsewhere.
Over the last 30 years, she said, NCI has formulated 17 new cancer drugs — eight of which were developed through KU-based research.
"But none of them were tested in Kansas," she said. With the NCI designation, "we can formulate drugs and test them ourselves."
"Drug development is a key program of our cancer center. It's really the thing that differentiates us the most from other cancer centers. There are very few academic medical centers that actually can do drug development. But because of our pharmacy school in Lawrence, which has been known for years to be able to formulate drugs of a variety of kinds...we can test it ourselves in Kansas."
Atkinson said KU is already boosting Kansas' economy. In the last five years, she said, KU Med has added 383 employees at an average salary of $60,000. KU Hospital has added 1,242 jobs in the last five years, she said.
"We calculate the impact of that at...$106.4 million annually of new Kansas jobs. And if you calculate economic impact, usually you double this number as it gets spent in the community."
Size of the pipes
Atkinson said other priorities for Kansas should be to expand the number of medical professionals the state trains and to seize the opportunities — such as pioneering telemedicine techniques — afforded by Google's announcement that it would launch its ultra-high-speed Internet service in Kansas City, Kan.
Milo Medin, Google's vice president of access services, told the crowd that technologies pioneered in the coming years in Kansas City likely would be as unforseeable as those today were when dial-up interconnections were the status quo.
Medin said he thought telemedicine — using video conferencing to connect patients with far-away doctors — was one technology the Kansas City area was well situated to pioneer and so grow its economy.
"Really high-end video conferencing can be transformative in how patients interact with doctors," Medin said.
"Speed is critical to competitiveness. Much of our economy is moving to an information-based system. Jobs and commerce flow like water — they can flow out of a community or into a community and it depends on the size of the pipes that that community has," he said.
Another speaker at the summit — Steven St. Peter, managing director of MPM Capital which invests in pharmaceutical and medical device startups — said Kansas historically has done a poor job of attracting venture capital. He said the state is currently about 20 times underinvested per capita — only .05 percent of United States venture capital comes to Kansas companies, while Kansas has about 1 percent of the U.S. population.
"Where does the capital come from? It does not come from the Midwest, which is a systematic problem," St. Peter said in his presentation. "In Kansas City, we can build $400 million performing arts centers, we're very civic oriented, but in terms of understanding where these pools of risk capital come from to build companies...they're coastal sources of money that feed that."
"With what the Kansas Bioscience Authority has done, the angel tax credits, it's an unusual environment where there's so much public activity — but where's the private activity in terms of new fund formation, new ways to fund businesses to grow. The things that you find on the coast quite frankly, where is that?" St. Peter told KHI News Service after the meeting.
"Financing life sciences is a different model than a lot of people are familiar with, in terms of how much risk capital and equity has to go in," he said. With life sciences, $50 million is a realistic starting point for investment, as opposed to say $2 million for other businesses, St. Peter said.
"Like pizza franchises, you can organically grow that business — whereas with life sciences it's a lot of risk capital, and if you don't go all the way, you go back to zero. The (Food and Drug Administration, which approves new pharmaceuticals after they're tested) is never impressed with 95 percent of the work. It has a lot to do with getting people to understand what that model is."
Time to make a move
Nick Franano — chairman of KU's Biological Sciences Advisory Board and CEO of Novita Therapeutics — said he thought the time was right for Kansas to make significant strides in medical industry entrepreneurship.
"I've been on the east coast and I've seen the venture capital funds and the angel networks and the incubators and the university spin-off partnerships, I've seen all those resources that Boston and San Francisco have. When I came back here in 2000, I saw that we didn't have very much of that," Franano said during the meeting's open discussion period.
"Now, we've actually made a lot of progress while the coasts have stalled some," he said. "I think it's time for the public sector to challenge the entrepreneurs in the private sector to build companies."