UT-Houston spawns pharmaceutical start-up

Houston Business Journal

A new drug company recently spun out of The University of Texas Health Science Center at
Houston gives the city another player in the lucrative pharmaceuticals market. And while it''s just a small, start-up company, economic development experts say the creation of GrassRoots Pharmaceuticals is a huge win for Houston.

Lenard Lichtenberger, president and CEO of GrassRoots, has been studying the gastrointestinal tract and ulcer diseases since he joined UT-Houston in 1976. His research led to the development of a new version of aspirin and ibuprofen that he says will be helpful to people whose stomachs are sensitive to those medications. The new drugs are also more effective than what''s currently available, he says. "My original goal was to be able to understand what protects the stomach," says Lichtenberger, a professor of integrative biology and pharmacology at The University of Texas Medical School at
Houston. "As we moved into drug development, then it occurred to me that we had something that was potentially viable."

Lichtenberger expects to compete against such big-name drugs as Vioxx and Celebrex. GrassRoots has 14 patents or sublicenses of patents in its portfolio, as well as one patent pending, he says.

"There area number of issues we feel we can effectively compete with them on," he says. "Our approach is a very natural approach, and it''s much less expensive."

The market for this type of drug is between $8 billion and $10 billion annually, Lichtenberger says. If GrassRoots'' drugs can snag at least 5 percent of that market, they could generate up to $500 million in annual revenue.

The drugs may not ultimately be manufactured in
Houston because Lichtenberger plans to license them to a major pharmaceutical house in exchange for royalties.

"We well understand that we would need their marketing prowess and resources to get a drug to market," he says.

John Walsh, president of BioHouston, says creating new companies is the single most important component in expanding the local life sciences industry.

"That is the most powerful, compelling factor that leads to further commercialization," says Walsh, whose BioHouston is an organization designed to develop the local biotechnology community. "That''s a huge win for
Houston. That''s incredibly important."

Depending on the definition used,
Houston currently is home to between 30 and 50 life sciences companies, Walsh says. Of those, only four are publicly traded.

Each newly-established company helps the city because research and development conducted by for-profit pharmaceutical and biotech firms generate eight to 10 times more company spin-offs than academic research and development does, Walsh says.

"If you track the development of strong life science regions, such as
San Diego, you see that it was the expansion of one company that made it big that spawned company after company after company," he says.

Life science companies also help generate the talent pool that attracts venture capitalists, and therefore are seen as essential to growing the industry.

"Those people come out of existing companies. They don''t come out of academia," Walsh says.

HEALTHY INDUSTRY

Paul Frison, president and CEO of the
Houston Technology Center, an organization that helps tech start-ups, says it''s important for more companies to spin out of the Texas Medical Center - especially pharmaceutical companies.

"I think there is a great importance to having more pharmaceutical companies coming out of our medical center because the pharmaceutical companies have such a high visibility as it relates to you and me - the retail world," Frison says.

"I think it''s very, very important that the name gets out there throughout the industry that broad-based life science products are emanating from the
Texas Medical Center. The more things we can get out there in the commercial world - the better," he says.

Over the last three months, the Greater Houston Partnership has had more inquiries from biotechnology and pharmaceutical companies than has been normal in the past. Five biotech related parties interested in
Houston as a site for expansion or relocation contacted the business group during that time period, says Pam Lovett, president of the partnership''s Economic Development Division.

"It''s exciting to see that kind of interest," she says. "We as a community have extremely high anticipation of what we''ll develop."

Bruce LaBoon, BioHouston''s newly elected chairman, says
Houston has some catching up to do in its number of biotech start-ups.

"We''re behind
San Diego and Charlotte, (N.C.), yet we have the largest medical center and some of the largest research institutions in the world," says LaBoon, a partner with the law firm of Locke Liddell & Sapp, who is also the outgoing chairman of the Greater Houston Partnership. "We hope to develop a number of these sorts of businesses in the next few months. We have very little in the way of biotech start-ups right now, and we have a tremendous opportunity."

As is tradition in university spin-offs, UT-Houston will retain an ownership position in GrassRoots - in this case, 35 percent. Lichtenberger owns a majority of the remaining 65 percent, along with his founding partners Harold Evensen, vice president of administration, and Roger O''Neil, who''s in charge of technical oversight and business development.

The company plans to start a new round of clinical trials in April with funding from the National Institutes of Health. Lichtenberger is actively seeking venture capital to fund the larger clinical trials required by the Food and Drug Administration for drug approval.

"It''s our hope that we may get a drug to market in the next two to three years," he says. "It''s very optimistic, but since we''re dealing with very safe drugs, it is possible."

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