The Canadian Protein Engineering Network 1999-2000 ANNUAL REPORT Protein discoveries for the new millennium CONTENTS Chair's Perspective 1 Message from the Network Leaders 2 Network Overview 4 Research Program Overview 5 Profiles of our Success 13 Current Industrial Projects 15 PENCE Initiatives 17 Benefits to Canadians 17 Celebrating our Scientific Excellence 18 Extracts from Financial Statements 20 The PENCE Network 21 750 Heritage Medical Research Centre Edmonton, Alberta, CANADA T6G 2S2 Ph: 780/492-8851 Fax: 780/492-6995 email: [email protected] www.pence.ca CHAIR'S PERSPECTIVE PENCE has during the past year been using its experience to prepare for the future in view of the exit requirements for NCEs in their last period of support. Bob Hodges and his colleagues worked hard to determine how much income a protein research network could achieve from commercialization of the research output to continue the network after the end of the third period of support. Their analysis clearly showed that there was no clear path with the existing institutional structure by which the basic research networks in the biosciences could be sustained by income from commercialization of the new knowledge produced from research and the private sector. Based on our own experience in commercialization, we have explored the possibility of setting up a national commercialization institute linked to the biosciences networks that could facilitate the transfer of new knowledge from basic research to potential commercial application. In discussion with governments, the private sector and many scientists in the biological sciences such an institutional innovation is needed if we are to meet the commercialization objectives set by the government for basic research. If this can be established, the network NCEs can focus on keeping up with the exponential growth in new opportunities in fundamental research. This is enormously important for research in protein structure and function. PENCE has, therefore, two key objectives for the future: 1. Putting in place with other NCEs in the biosciences and the private sector, a non profit institute for commercialization which we have presented as CNBiocom. 2. Defining the new area of basic protein research that could make use of the network structure that has been built by PENCE to work in a sector of proteomics. With Bob Hodges stepping down as the leader of PENCE, Steve Withers has taken on the task of providing the scientific leadership for these new developments in research. Bob Church leads the commercialization development in collaboration with other board members and the entrepreneurial work of Graeme Macaloney in the PENCE office. During all these changes, the work of the staff, the board members, and the members of the PENCE network has been outstanding. We could not have been able to define the issues as clearly as we have without the leadership of Bob Hodges. He made a key contribution to these developments and I am very grateful for his contributions. Steve Withers has followed in the tradition of Bob and the late Michael Smith in providing leadership for the value of the NCE concept as a national network in basic protein research. Mike Smith was always concerned that because of the commercialization pressures, PENCE would lose its focus and base in basic research. He fully supported our approach to restructure PENCE to restore the basic research focus and reduce the steering effect of commercialization, but that in doing this, we should establish a national institution that creates synergistic balance between the fundamental research and commercialization. He was in full support of the approach we are taking. If we can achieve these objectives, it will be a tribute to Mike and his contribution to the fundamental research in biosciences in Canada and starting one of the very high quality NCEs in the biosciences. J.Fraser Mustard, Chair, Board of Directors 1 Message from the NETWORK LEADERS PENCE Inc., as a result of its Phase III Strategic Plan, was awarded 7 years of additional funding at a level of $18.7 million for the first 4 years (1998-2002), with subsequent funding (2003-2005) to be determined later. The second year of Phase III (April 1, 1999 to March 31, 2000) was another successful year for PENCE. A $4.5 million grant from the NCE, attracted $2.26 million in cash contributions from non-NCE sources. Researchers published 196 scientific articles and filed 7 non-disclosure agreements and 6 patent applications. Eight licenses were granted to, or were under negotiation with, industry. PENCE also negotiated equity in two start-up companies -Molecular Templates Inc. and Converzyme Inc. In addition, Exella Ventures Inc., a start-up seed venture capital Dr. Robert Hodges, company created in partnership with the Canadian Genetic Diseases Network CEO/Scientific Director (June 2000) (CGDN) and the Canadian Bacterial Diseases Network (CBDN), was incorporated. The lead partner, CGDN, is presently seeking funding for Exella. The past year has seen much change and progress within the PENCE National Business Centre in terms of personnel changes and strategic planning, with a view to mapping out the next 5 years and beyond for PENCE research and commercialization activities. In February 2000, Taryn Campbell our Manager of Marketing and Communications departed PENCE for new horizons. On the Board we said goodbye to Julia Levy of QLT Phototherapeutics Inc., whose energies were needed closer to home to oversee QLT's rapid growth and product development. Steve Withers, In December of 1999, Dr. Robert Hodges announced his intention to step down CEO / Scientific Director (July 2000) as the PENCE Inc. CEO and Scientific Director, ending his 5-year tenure, effective June 30, 2000. Bob's dedication and contributions to PENCE have been enormous. Under his leadership PENCE was incorporated and renewed for Phase III, receiving the highest funding of any network in the NCE program. PENCE partnerships with industry also reached new heights as is evident in this and previous years statistics. Bob has taken a leave of absence to carry out research at the University of Colorado Health Science Center. Dr. Stephen Withers was identified after an extensive recruitment to replace Dr. Hodges. Steve will act as interim Scientific Director and CEO, assisted by Brian Sykes, Director of the PENCE Alberta Centre. Steve is a member of both the Chemistry and Biochemistry Departments at the University of British Columbia, where he holds the Khorana Chair of Biological Chemistry. He is a founding Dr. Graeme Macaloney, COO/Network Manager member of PENCE and has served on the Board of Directors for the past 4 years. 2 2000 ANNUAL REPORT In reviewing the future of PENCE, the Board and Management followed on from last year's Task Group meetings with Principal Investigators, Board members, Management, and key outside stakeholders to capture the review and planning process in a "Strategic Plan: Future Vision for PENCE and the Life Science NCEs". This was crafted with the input of Gordon MacNabb O.C., P.Eng., past federal government Deputy Minister, past President of NSERC and past President of PRECARN. Key recommendations from this were the creation of an International Research Advisory Committee (IRAC), the re-focusing of PENCE as a proteomics oriented research network, and the creation of a new national commercialization network involving other life science NCEs. The mandate for IRAC is to advise PENCE leadership on the network's future focus in protein research and to position it at the leading edge internationally. IRAC is a critically important committee because it uses an independent, peer review approach to ensure that PENCE research is at the forefront internationally. IRAC members are: Dr. Cyril Kay, Chair, (Canada), Dr. Michel Chrétien, (Canada), Dr. Chris Dobson, (United Kingdom), Dr. Kurt Drickamer, (United Kingdom), Dr. Jack Greenblatt (Canada), Dr. Robert Hodges, (Canada), Dr. Howard Schachman, (United States), Dr. Michael Smith (Canada). The development of the proteomics initiative awaits the capable direction and leadership of Steve Withers. The commercialization initiative has begun with a long-term strategy of engaging a variety of private sector, NCE and government stakeholders - communicating the benefits of a new national commercialization initiative and receiving feedback. The ultimate goal is to obtain federal government, provincial government and private sector funding for the initiative and spin it off as a separate but linked agency to PENCE and the life science NCEs. Although many changes have occurred and will continue to do so, some basic concepts remain, for PENCE: protein research will remain at the forefront of biotechnology; excellence of science and networking of strategic discovery research from across Canada will enhance the development of new products, services and technologies; training and retaining personnel in Canada is key; and bundling of technologies from multiple institutions will enhance the technology transfer process, company creation and venture capital investment in Canadian technology. Finally on a sad note, we wish to pay tribute to the recently deceased co-founders of PENCE Inc., Michael Smith, Nobel Laureate (October 4, 2000) and Larry Weiler, former head of the Chemistry department at UBC (April 28, 1999). It was through their efforts that the PENCE proposal was assembled, and Michael, of course, served as the leader of PENCE during its first four year term. They are both greatly missed. November 2000 Bob Hodges, Steve Withers, Graeme Macaloney, CEO / Scientific Director CEO / Scientific Director COO / Network Manager (June 2000) (July 2000) 3 NETWORK OVERVIEW The PENCE Network PENCE Inc.'s PENCE Inc. (The Canadian Protein Engineering Network) is a dynamic network of top researchers specializing in the study of protein technologies. As an incorporated, non-profit, discovery strong commitment research and commercialization company, PENCE represents a unique partnership of 18 universities, research hospitals and research institutes across Canada.