The founders of Convergen Life Sciences Inc., including a political contributor to Gov. Rick Perry, had invested only $1,000 of their own money into the company when they asked for $4.5 million from a Texas technology fund, a newspaper reports.
Under the Texas Public Information Act, the Austin American-Statesman obtained documents pertaining to the company’s application on Wednesday.
Founded in April 2009, Convergen asked the Texas Emerging Technology Fund for the money in July 2009 to help develop a new lung cancer-fighting drug using nanotechnology. Created by the Legislature in 2005 at Perry’s request, the fund invests public money in promising startup firms and is administered by the governor’s office.
Perry’s management of the fund became an issue in last year’s gubernatorial campaign following news reports that some grants went to companies with ties to Perry’s campaign donors. The Dallas Morning News first reported in the fall the fund’s grant to Convergen despite its rejection by a regional review board. The statewide advisory board recommended in 2010 giving the company the grant despite the previous rejection.
In April, State Auditor John Keel said Perry needed to do a better job of monitoring investments in the fund and should make the grant process more open. In response, the Legislature passed a bill requiring more transparency and putting four lawmakers on the fund’s 17-member advisory board.
Perry spokeswoman Katherine Cesinger said Thursday that the technology fund is frequently the first outside investor in a new company.
“The (technology fund) bridges the gap between founder investment and later stage venture capital or private equity investment, which is one of the major attributes of the fund,” she said in a statement.
She also said that it was allowable for the company to appeal the regional board’s decision to the statewide advisory committee.
Convergen was founded by David Nance, who calls Perry a close friend and who has contributed $100,000 to Perry campaigns since 2000, and Dr. Jack Roth, a researcher at MD Anderson Cancer Center in Houston.
The company’s application listed three members of its board of directors, including Nance. The other two told the newspaper on Wednesday they had never served on the board. Thomas Kowalski said he was invited to join the board, but is not a director. Sha’Chelle Devlin Manning said she had agreed to serve on the board, but had to resign without attending a meeting because of business and family obligations. She said she had no role in Convergen’s application.
The newspaper reported that it is unclear whether Nance has recruited new board members.
Messages left by The Associated Press for Nance, Convergen’s executive chairman, and Roth, its chief medical and scientific adviser, were not immediately returned Thursday.
Rodney Varner, Convergen’s lawyer and an investor, declined an interview request from the newspaper, but said in an email the company “applied for an award from the Texas ETF in order to advance anti-cancer technologies invented at and licensed from the University of Texas MD Anderson Cancer Center. Promising results from a recently completed Phase I clinical trial in lung cancer patients have been reported from MD Anderson investigators. A later stage clinical trial at MD Anderson testing the company’s drug candidate in combination with other cancer drugs is planned in the near future.”
After the American-Statesman requested Convergen’s application and other documents under the Public Information Act, Attorney General Greg Abbott ruled in January that the information was public. Convergen then sued Abbott in an effort to keep the information secret. The company released the documents to the American-Statesman on Wednesday to settle the lawsuit.
The state paid Convergen half of the $4.5 million last August, when Perry, Lt. Gov. David Dewhurst and Speaker Joe Straus approved the grant, the second largest ever from the Emerging Technology Fund. The state paid the company the rest of the money Tuesday.
Straus’ communications director, Tracy Young, defended the award to the newspaper on Wednesday, saying, “We supported the grant based on the potential the technology offered in fighting cancer.”
Dewhurst said in a statement Thursday to The Associated Press that he’d performed an independent review and was impressed with the company’s drug.
“I was impressed that Convergen has advanced clinical trials and is not a start-up company,” he said.
Convergen’s 2009 application does not mention the bankruptcy of Introgen Therapeutics Inc., where Nance was a founder and CEO. Introgen failed in 2008 after the Food and Drug Administration denied its application to market a cancer therapy based on Roth’s research.
The statewide advisory committee noted that among its reasons for recommending the $4.5 million award were that “the committee knows and respects Convergen’s founding management team, having successfully launched other biotechnology companies in the past.”
According to the documents, Roth has been working on the new drug for lung cancer for 10 years, with the help of $23 million in federal research grants.
Information from: Austin American-Statesman, http://www.statesman.com