Outside Erie

8 Responses to “Kanzius in Popular Science”

1. Scott Bremner
   May 14th, 2008 at 12:54 pm

   Peter,
   I’ve run two stories with John this week.
   The first says that in 8 weeks a manuscript will be released claiming that researchers have successfully targeted four major cancers with protein-covered nanoparticles.
   The second is John’s assertion that a new “full body” prototype is being drawn up at Industrial Sales and Manufacturing.
   If successful, this new approach (more extensive and expensive in John’s words) would multiply the economic impact to a community from 10 billion to 100 billion dollars.
   John says the governments of Canada, Texas and others have all offered now to fully fund the remaining research at no cost–as long as the manufacturing is done there.
   The question of where Rendell, Casey, Specter and English have been on this is the focus of my blog this week.

2. Peter Panepento
   May 14th, 2008 at 1:20 pm

   Scott –

   You are right that Kanzius has been working to keep the project centered as much as possible in Erie and that he hasn’t gotten much support from local or state government. Sen. Specter helped get some early money for the research back in 2005 — and I interviewed then-Sen. Santorum about his interest in the project around that time, as well. Canada offered Kanzius quite a bit to relocate the project there — and he held off.

   The progress continues — and in dramatic ways. And, still, Erie’s leaders have yet to come up with a meaningful plan to make sure the project gets local support.

3. MGR
   May 14th, 2008 at 1:47 pm

   Do either of you guys know how much money John needs? When I attended his symposium he had laid out a need for $3MM, which is pretty small by capital market standards and still modest as a major medical product venture capital investment. No cost government financing is a generous offer, but it is not the only game in town. If John wants to plant the Therm Med, LLC headquarters in Erie, I bet we could get this financed privately at a pretty minimal cost relative to the potential of the project and while retaining control. Because of the failure rate on research, this can be difficult, but as his project continues to clear hurdles, the likelihood that it will have some application is growing. If I am reading the reports correctly, it seems as if they are almost past proof of concept.

4. Jim Russell
   May 14th, 2008 at 2:45 pm

   Start canvassing the Erie Diaspora for venture capital.

5. MGR
   May 14th, 2008 at 3:15 pm

   That’s not a bad idea, but given the potential on this project, I doubt we need the investors to live or have roots here. That being said, the Erie community has FAR more accredited investors (net worth $1MM or annual income > $200K) than the average resident realizes including several that have to be above or just below $1B in net worth. For some reason, our high net worth individuals haven’t formed committed investment funds to invest in private businessses formally, but that is a topic for another day.

   I don’t envision the group flocking on board to make hefty donations to a foundation, but I have a hard time believing they couldn’t be enticed to make some investments in this project, especially as the potential for return seems to be growing and the associated risk appears to be dropping.

6. Scott Bremner
   May 15th, 2008 at 9:36 am

   To MGR,
   The appearance on Sixty Minutes significantly increased the funding and web site hits. BTW-60 Minutes is looking to revisit Kanzius for a summer update, perhaps in July.
   Already the funding has increased the researchers at MD Anderson from two to eight, and cut the time to human trials (hopefully) from four to two years.
   I’ve heard numbers of a total price tag left of seven million dollars, which may be why many governments are now willing to step in.
   Seven million up front to lure an industry worth billions? No brainer,
   despite the fact it’s still speculation and could still fall short during human trials.
   But it has shown no signs of that yet, which makes me ask again.
   Gov. Rendell, Sens Specter and Casey, Rep English, where are you?

7. Dale
   May 15th, 2008 at 10:33 am

   Here’s a piece ot the ETN’s article on Kanzius’ attempts to obtain grant money from the Federal Gov’t through Phil English. It certainly doesn’t seem to me that Mr. E. is nearly as enthusiastic about the possibilities as he should be, especially in an election year.

   Kanzius and Pat Fetzner, a foundation board member, met Monday with U.S. Rep. Phil English, of Erie, R-3rd Dist.

   English said he will talk with fellow House Republicans about getting the project some money through an appropriations bill, but cautioned that it’s early in the process.

   “We have to see what money is available,” English said. “John and his people put together an excellent proposal. …We think it’s something that is worthy of federal support.”

   Having Kanzius’ device featured on “60 Minutes” might help secure funding, English said.

   “It brings home to people that this is not some theoretical exercise,” English said. “It lends some credibility to the project.”

   Is he sincere, or is this just his typical political double-talk? I guess actions will speak louder than words.

8. MGR
   May 15th, 2008 at 10:33 am

   Scott,

   Thanks for the response, I agree that for $7MM, I am surprised no one from the state has stepped in. Maybe Philadelphia’s pharmaceutical industry is lobbying hard against it because they don’t want to see the healthcare balance of power shift from Southeast PA to Northwest PA?

   I don’t know John, but it seems to me that he really wants to locate his company in Erie and make something great happen here. My point is that if the PA government doesn’t want to step up to the plate - maybe they can’t handle Erie becoming the medical epicenter of the state instead of Pittsburgh or Philadelphia, rather than moving the project, let’s finance it privately. I haven’t heard anyone in the media or from John’s foundation discuss this approach and I am greatly concerned if no one involved in the project is evaluating this option. This is my profession, so I would be glad to help if needed.

   There are many complicated facets to pursuing private investment for a project at this level and he has to be ultra-cautious for obvious reasons. John has to be ultimately concerned with retaining full control, avoiding dangerous covenants, and not undervaluing the venture which could lead to selling too much ownership early in the company’s life cycle and not retaining enough for future growth.

   Possibly the best way to maintain local control and satisfy John’s needs would be to establish a private investment partnership/hedge fund. This is an SEC exempt entity under section 3(c)1 or 3(c)7 of the Investment Company Act of 1940 primarily because investors must be accredited (or qualified purchasers). The partnership should be formed as an LLP and the limited partner shares are then sold to investors. The shares could be sold to businesses, foundations, and high net worth investors. For example, Sorce Financial could offer shares to their accredited investor clients and certain trusts. Any business with an investment portfolio that is allowed to invest some of their capital in venture projects could buy LP interests - think Erie Insurance, Northwest Savings, or any number of pension funds . Investments typically have a lock-up period, which could be set to match estimated time to market. Additionally, this fund would only invest in Therm Med shares so a proper valuation and risk/return calculation would have to be performed to determine what % of stock to be acquired.