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Peter Schultz’s vision for Scripps Research: Financially secure, independent

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This is the second part of a question-and-answer session between The San Diego Union-Tribune and Peter Schultz, president of The Scripps Research Institute in La Jolla. Go to j.mp/schultzquanda1 for the first portion.

In this second segment, Schultz discusses how he leveraged clinical development knowledge he gained at the Genomics Institute of the Novartis Research Foundation (GNF) to swiftly build up a drug pipeline at the nearby California Institute for Biomedical Research (Calibr). He’s importing that knowledge into TSRI, with Calibr serving as its translational medicine arm.

Schultz discusses the financial rewards of carrying a potential drug all the way into clinical trials before signing a commercialization deal. It’s much more profitable than doing a preclinical licensing deal, such as has been done with a number of TSRI spinoff companies.

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Biotech companies have been known to hold on to drugs through the early stages of clinical trials so as to minimize their risk of problems. But for a biomedical research institute to do this takes a long breadth of vision, from investigational research to getting a molecule in people -- and beyond.

Schultz also discusses relations with Scripps Florida, philanthropists here and elsewhere, the important of keeping TSRI independent, and collaborating with other San Diego biomedical centers.

The interview with Schultz took place at his office on Wednesday, Oct. 19. The interview has been edited for clarity.

A vision for commercialization

Q: We’re talking about a long road here.

A: Once you get a molecule into the clinic, and you show it’s safe in people, and you have any sign of efficacy, you’re talking nowadays of deals between half a billion up to many billions of dollars. So there’s a huge difference in the ability to put a molecule into human testing, and everything that has to be done to do that, and partnering a molecule at a very early stage. Which we’ve done, historically. We did Receptos. We did Ambrx. We did a lot of these other companies. But when you license a molecule at that stage, there’s a massive dilution factor.

When you license a molecule post-Phase 1, it’s a different story. If you can do that twice a year, and you do it for the next 20 years ....!

Q: Where do you get the people to do that?

A: We hired ‘em. That’s what I did at GNF. I spent well over $1 billion learning how to do this when I ran GNF. The chairman of the board called me and told me how much I spent. He said it’s probably the best investment they ever made.

The point is, I was the first employee, and we learned how to do this from scratch. So we actually took all of that know-how, and all of those tools and technologies, and put ‘em into Calibr. We hired a number of GNF people. We hired the head of global development of Novartis to help us.

We raised roughly $250 million since we started in funding for preclinical research, which is pretty good for 130 people. We now actually have a pipeline, not of one molecule, but of eight. Nobody’s done that, that I know of, in academics.

Herb Boyer, founder of Genentech, probably the greatest biotech company in history of the United States, just joined our board. He’s like, If you guys are going to do this in the nonprofit sector, what we did in Genentech in the for-profit sector, this is exciting. Because if you pull this off, the money will make this whole thing evergreen and go back and fund new drugs and new research for the foreseeable future.

Strengthening the endowment

Q: What would be a good endowment?

A: I want to have more money than we can spend for great science and making new drugs. And I’m also talking about forming some startup companies for multiple sclerosis and for cancer.

If I’m successful in putting eight (drugs in the clinic) -- and not all of them but just two (succeed) -- I think that’ll be a billion dollars.

Is a billion dollars enough? If I can do two more the following year, and two more the following year, then we’ve created something nobody’s ever been able to create in the nonprofit sector.

You can get there like Harvard did by getting many tens of billions of dollars of endowment. But to create those kinds based on your own success -- and at the same time you’re making new medicines that saves people’s lives -- that’s a different model. That’s why we’re getting people like Bill Gates and Will Hearst interested.

We’re also talking with Gerald Chan. Gerald spent days looking at what we’ve done. We spent eight hours straight going through all the science and all the opportunities. And when Gerald came out of that, he said, I want to be involved with you guys because you’re going to change the world.

So we’re getting a lot of people involved like that, including chairmen of the boards of major biotechs and others. I think it is because they’re seeing for the first time a model that could really change the way nonprofits not only fund their science, but create new medicines. And the reason I took this job on wasn’t simply to fix a $20 million a year deficit.

Q: Are you saying it’s plausible the institute could have an endowment of several billion dollars… ?

A: Within the next 5 to 10 years. In fact, if we don’t, I’ll be disappointed in myself, in the model.

Q: What is the endowment now?

A: The endowment here now is a mixture of all kinds of things. It’s probably pretty hard to quantify, because it involves a lot of chairs, it involves some restricted funds, it involves some unrestricted funds, but it’s not in the billion-dollar range yet.

Because Scripps, as you know, was built on pharma deals. And those pharma deals required the money to be spent. Novartis gave a lot of money, Pfizer gave a lot of money. That money could not be used to build an endowment because pharma needs it to produce science.

Richard (Lerner, the former TSRI president) used it very thoughtfully to hire a terrific group of people and build a great reputation. And now what we’re doing is taking those great people and that great reputation and coupling it with a translational research capability, and marrying the two.

Philanthropy

Q: Do you think the endowment will benefit from not just from the royalties and sales of molecules, but from private donations, both from local donors and from donors around the world?

A: Yes. The vast majority of my time has probably been spent describing this model to various people. And I would say we’ve met with a huge amount of enthusiasm, not only locally with folks like Denny and Irwin and others who have contributed amazingly to various institutes in the area.

There’s a lot of people who are incredibly generous ... They’ve been somewhat frustrated that in their lifetime, they don’t necessarily see the results of the drug. They see a lot of research, but the kids (still) have Type 1 diabetes. What they now see is not only an opportunity to do great science, but actually move that into new medicines.

So we’ve gotten really terrific feedback, even from people locally. Ted Waitt came to the dinner we had with Bill Gates (in the summer), because he was so interested in the model. Ted’s on the Salk board ... and then I had dinner with Ted.

So the good news is that the model of turning science into great new medicines not only potentially can help fund Scripps, but it also attracts a lot of interest from very generous philanthropic individuals in the institute.

It also attracts people to some of the other interesting things we’re doing, like education. We’re helping to build an institute in China called the Global Health Discovery Institute that’s funded by the Gates Foundation with the government of China. Calibr is heavily involved in that. Tsinghua is involved in that.

And now Tsinghua wants to start a joint graduate student program with Scripps. We just signed an MOU and we had the president of Tsinghua here two weeks ago, (with) 16 people. And they were like, we want to have a great relationship with you, not only to train people, but to learn how you guys are doing this.

Florida operations

Q: Let’s touch on Scripps Florida. (Reference to Sanford Burnham Medical Discovery Institute’s decision to pull out of Florida)

A: My view on Scripps Florida is a little bit different from Perry’s, from what I read. We’re actually the fourth-highest recipient of NIH funding in the state of Florida, which isn’t bad for a pretty young, small institute.

Secondly, I’m going in the opposite direction. I actually think Scripps Florida and Scripps (La Jolla) were evolving a little bit separately. Now we’re putting together a strategic plan for every department to be joined at the hip between Scripps Florida and here. We’re going through a process where we’re integrating chemistry, we’re integrating neuroscience, we’re integrating structural biology, and working very closely together.

I think Scripps Florida has a terrific reputation. I was out there talking with government leaders and civic leaders and people in West Palm Beach who are very interested in philanthropy. There’s a real enthusiasm for what we’re doing in Florida. We have very high net-worth people offering to host dinners for us to bring the West Palm Beach community together to support Scripps.

There’s a person in Scripps Florida who has a very interesting molecule for fibrosis, who just came out here. Another one has a really interesting molecule for stomach cancer, who is coming out to see how we can work together to develop it. Another person has a really interesting molecule for autoimmune disease. He’s been out here; we now have a collaboration.

So there’s this huge number of really interesting scientific and translational opportunities that have been developed in Scripps Florida.

Uniting San Diego bioscience

If you think about the real centers of science and biotechnology, you think about the Bay Area with UCSF, Berkeley and Stanford. You think about Boston, with MIT and Harvard. What we really need to do is make San Diego the equivalent of one of those.

We have smaller institutions. Salk and Scripps and Sanford-Burnham aren’t the size of Berkeley, Stanford and UCSF. We do have UCSD, which is our UCSF. But what’s interesting is that they’re close together and they complement each other well

.So I want to not only focus on Scripps, but focus on how Scripps can work together with Salk, and Burnham and UCSD and La Jolla Institute( for Allergy & Immunology).

Q: And Calibr too?

A: Calibr too.

Calibr is a collaborative institution. Scripps is collaborative. I have collaborations with Rusty Gage at Salk. We have a desert meeting every year in Palm Springs that we’ve used for science. And now this year we’re going to host all the local institutes, bring everybody together to figure out how we can better work together.

What you see with philanthropy from Irwin and Denny and others is to make San Diego a great science center, and for the institutes to work together. So what we’re doing at Scripps with Calibr, what Sanford Burnham’s trying to do, what UCSD is trying to do -- what we really want to do in the end is have San Diego be like Boston and be like the Bay Area … It’s really important because it creates new jobs, it creates a really interesting culture, and it just does a huge amount for the community.

A firmly independent Scripps

Q: Would you welcome a bigger life sciences presence here by the University of Southern California? (USC had earlier explored a merger with or acquisition of TSRI).

A: We’ve had discussions with USC, we’ve had discussions with Cedars-Sinai, a major hospital. I think we would be delighted to work together with any outstanding research organization or hospital. But what we really want to do is control our own destiny.

And now that we have a model that is different and potentially can generate huge resources, that can take Scripps to a totally different level -- Richard did a great job but we can take it way higher -- why would we want to enter into a relationship where we don’t control our own destiny? It just doesn’t make sense.

We have work to do, but we have the resources to get us through the period where this model really begins. So I have no qualms about the short term, and I have a huge amount of optimism about the long-term model we’re building.

bradley.fikes@sduniontribune.com

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