RD276 - Commonwealth Research Commercialization Fund: Advancing Technology and Economic Development in Virginia by Investing in Priority Research and Commercialization Activities Annual Report July 1, 2013 – June 30, 2014

Executive Summary:
*This report was replaced in its entirety by the Innovation and Entrepreneurship Investment Authority on October 1, 2014.

In accordance with Code of Virginia Sections 2.2-2233.1 G and 2.2-2221 (18), and on behalf of the Innovation and Entrepreneurship Investment Authority (IEIA), the Center for Innovative Technology (CIT) respectfully submits this report regarding the performance of the Commonwealth Research Commercialization Fund (CRCF) in FY2014. The CRCF accelerates innovation and company formation in the Commonwealth, while solving important state, national, and international problems through technology research, development, and commercialization.

During the 2013 session of the General Assembly, $4.8 million was appropriated to CRCF for FY2014 for the purpose of advancing science- and technology-based research, development, and commercialization to drive economic growth in Virginia. CIT issued two FY2014 solicitations resulting in $4.2 million invested in 52 projects (*1) and leveraging the Commonwealth’s investment with approximately $7.4 million in matching funds. CRCF projects are performed by young companies, universities, and research institutes across the state and align with Virginia’s key strategic technology priorities as outlined in the Commonwealth Research and Technology Strategic Roadmap.

Program Impact

FY2014 CRCF awards, along with awards made in FY2012 and FY2013, tackle major challenges in sectors such as life sciences, cyber security, advanced manufacturing, and energy. Multiple CRCF awards, for instance, hold promise for innovative new diagnostics and treatments, including for brain, pancreatic, and urogenital cancers and for diabetes. Cyber security continues to be a critical focus of CRCF projects, from products targeting cyber security assessments to solutions that monitor and detect cyber attacks and malicious intrusions. These projects, with CRCF support, have the potential to have a profound and lasting benefit to citizens of the Commonwealth and to society at large through enhancing quality of life and in job, company, and intellectual property creation in Virginia.

Most CRCF projects are underway or have been recently completed, yet CRCF investments have already resulted in companies created, products launched, intellectual property developed, graduate students recruited, and other outcomes beneficial to Virginia. Public and private colleges and universities are participating in technology commercialization; Randolph College, the Virginia Military Institute, and Washington and Lee University, for example, are among new CRCF awardees whose students and faculty are collaborating with companies. FY2014 reports identified several early returns on the Commonwealth’s investment.

• Products/services introduced to market. In FY2014, at least two new products and/or services have been brought to market in life sciences and modeling and simulation; at least one additional product/service is anticipated for near-term release. More than 12 organizations reported being engaged in active discussions with companies and other organizations interested in licensing products.

• New company formation. At least four new companies in the life sciences and cyber security industries, some of which are university spin-outs, have been formed during FY2014 in the Commonwealth. Additionally, at least one CRCF recipient has expanded its operations into multiple locations across the state, and at least two non-Virginia companies have located all or a portion of their operations to the Commonwealth.

• Additional funding leveraged. CRCF award recipients reported over $30 million in additional investments made in research and technology work after the conclusion of the CRCF projects. At least seven companies have noted sales and/or revenue, with reported totals of more than $3 million, combined.

• Partnerships formed. Several notable partnerships have formed between CRCF recipients and other organizations, including, but not limited to: Reliant Medical Group, EMC, Amgen, Dominion Virginia Power, Bracco, and Northrop Grumman, as well as with colleges, universities, large pharmaceutical companies, and small businesses in and outside of Virginia.

• Intellectual property created and licensed. As reported in FY2014, more than 50 patents have been filed or are pending, including both full and provisional patents; 12 or more patents have been issued; more than ten invention disclosures have been issued; five or more products or technologies have been licensed; and other discussions have circulated around trademarks and trade secrets.

• Publications prepared and accepted. There are more than 100 total publications and symposia by Fund awardees. Of these, more than 70 publications and presentations have been published and accepted, respectively, as reported in FY2014; an additional ten publications have been submitted and are awaiting publication and nearly 20 publications are in preparation.

Project Samplings

CIT tracks projects during their period of performance and for five years after conclusion, as economic and technological outcomes are often realized a few years or more after a project is completed. The majority of projects from the FY2012 rounds have been completed, while most projects awarded in FY2013 are nearing completion or were recently finished. Projects awarded in FY2014 are almost all underway. Projects showcasing the Fund’s effectiveness in contributing to the economic, technological, and well-being of the Commonwealth follow.

• Cavion, formerly Tau Therapeutics, of Charlottesville, has developed a unique and safe adjunctive therapy that enhances conventional and targeted cancer therapies and has the potential to significantly improve the standard of care for glioblastoma, the most common and deadly type of brain tumor. Research has shown that pre-treating patients with the drug mibefradil prior to administering chemotherapy has shown a dramatic increase in lifespan in animal models and overcome drug resistance. In the year since project completion, the Cavion team has raised $3.55 million in angel investments, received $200,000 from the Commonwealth to partner with researchers at the University of Virginia and Virginia Commonwealth University to define an optimal dosing schedule for a clinical trial, garnered approximately $2 million in sponsorship by the Yale Cancer Center for a new Phase I clinical trial, and connected with major pharmaceutical and venture firms to fund the drug development program. Cavion continues to hire new staff, primarily in Virginia.

• In FY2012, Virginia Tech was the recipient of a CRCF award that supported the recruitment of Dr. Robert Gourdie, a leading heart regenerative medicine scholar, to the university and the Virginia Tech Carilion Research Institute. Throughout the course of the project and in the year since the project concluded, the team has secured nearly $3 million in additional grants/investments and nearly $9 million in pending grant applications, recruited three cardiovascular researchers to the faculty, hired seven lab employees, published 21 papers and edited a book, and filed two patents and executed options on seven licenses. Dr. Gourdie’s company, FirstString Research Inc., established a location in Roanoke, recruited its first employee there, and attracted $7 million in grant funding. Additionally, and of major note, the team has completed three Phase II clinical trials which have achieved respective primary and secondary endpoints, and FirstString is in discussions with the FDA for approval to proceed with Phase III clinical trials. For the accomplishments of the Phase II clinical trials, the team has been accepted for publication in the Journal of Investigative Dermatology, a milestone representing the first successful pharmacological targeting of a gap junction protein – the proteins responsible for direct communication between cells.

• Power Fingerprinting (dba PFP Cybersecurity), a Virginia Tech spin-out company, is creating game-changing cyber security solutions to assess the integrity of a variety of critical platforms and detect attacks. PFP’s unique air-gapped approach enables critical embedded devices, such as cyber-physical systems, to be directly monitored for intrusions. The approach is effective even when the devices have limited resources and are based on legacy platforms not supported by current monitoring solutions. Furthermore PFP is developing options to detect counterfeit semiconductors, such as relabeled or used parts, as well as chips tampered with hardware Trojans. PFP’s technology has been validated in multiple platforms and scenarios, including a pilot with Savannah River National Lab. Recent efforts have culminated in the near-term release of the P2Scan, a commercially available, portable scanner for critical infrastructure, capable of extracting baselines and performing run-time monitoring on industrial control systems. In addition to CRCF support, PFP has received funding from the Defense Advanced Research Projects Agency, Department of Homeland Security, U.S. Army, U.S. Air Force, and National Science Foundation. The company continues to raise funds to accelerate commercialization efforts; $1.15 million has been raised to-date, with plans to raise a second round from strategic investors.

• The University of Virginia and Charlottesville-based company Neoantigenics LLC are conducting research on a specific protein expressed in a broad range of human cancers in order to develop antibody-based drugs directed at this tumor marker and diagnostic tests that will guide personalized patient therapy decisions. Based on results from ongoing projects surrounding this work supported by CRCF, a pharmaceutical collaborator has made a parallel equity investment in Neoantigenics, in addition to in-kind expertise and access to key proprietary technology through a three-year collaboration. To-date, the teams have raised $1.7 million to fund this R&D work. A Series A funding round is planned for mid-2015, with interest expressed from multiple pharma venture firms to participate or syndicate in the round – a rare occurrence for a Virginia-based biotech firm. Through a CRCF Eminent Researcher Recruitment award, UVa was able to on-board to its faculty Dr. Eusebio Pires, a critical hire to the cancer-oocyte antigen research being conducted at UVa and advanced through the University and Neoantigenics. The research has led to a fundamental new insight into the nature of cancers originating in a wide variety of tissues.

• At the College of William & Mary, R&D is underway on a technology that will benignly displace problematic birds from airfields in order to reduce bird strike risks and, on secondary and tertiary levels, minimize agricultural losses due to pest bird foraging and displacing nuisance birds that cause extensive repair and chronic clean-up costs. In early testing, the “sonic net” technology, which uses non-linear acoustics, has reduced the presence of flocks by approximately 50%, and more research is underway. A Williamsburg, Virginia company, Midstream Technology LLC, has licensed the patent-pending technology and together the teams are seeking additional funding for larger-scale field tests, potentially in partnership with Dominion Power who seeks solutions for keeping birds away from power substations and the Federal Aviation Administration, among others.

• CRCF-funded ClearEdge 3D, Inc. is developing and commercializing the first automated modeling software to create fully three-dimensional computer models of buildings, streetscapes, and entire cities. Prior to ClearEdge technology, it could take hundreds of hours and tedious manual tracing of laser scans or photogrammetry point clouds to create a full 3D model of an average city building; with the company’s product, 3D modeling time is reduced by up to 90%. The widespread availability of fully 3D city models and streetscapes will have a profound impact on the personal navigation, commercial real estate, design/construction, first responder, security, and defense industries.

• A research team at the Virginia Military Institute is working closely with Attochron, a California company that has recently relocated operations to the Commonwealth. Together, VMI and Attochron are in the inaugural phase of exhibiting a revolutionary wireless telecommunications technology that will increase the efficiency and data-carrying capacity to previously unattainable levels, while reducing costs. Currently, the team is in discussions with major wireless broadband telecommunications carriers and others in the value chain regarding the technology and its potential. Demonstrations at VMI and in the Lexington, Virginia area are planned for fall 2014.

• S34A, Inc., an Arlington-based small business focused on developing software and hardware solutions that provide investigators with the capability to conduct forensic analysis of solid state storage devices, has completed CRCF-funded work to validate, refine, and finalize design specifications for a set of hardware and software tools that can be used for hidden data extraction. Leveraging knowledge from the project, S34A won a $750,000 SBIR Phase II two-year contract from the Department of Homeland Security. The contract allows the company to employ two full-time researchers and additional part-time experts. Additionally, the federal and state labs that participated in S34A’s customer requirements survey agreed to beta test products.

• A University of Virginia team has developed an innovative approach and tool which addresses cyber threats by providing point defenses at the application layer using System-Aware Cybersecurity – a security layer embedded into a critical system to protect critical system functions in the face of ongoing cyber threats. The team has built a prototype of a secure application appliance platform, or System-Aware Sentinel, to provide additional protection to critical system functions on a mission-critical, unmanned aerial platform. As a result of CRCF and other funding, the team was successfully able to spin out Mission Secure, Inc., headquartered in Charlottesville, which was scheduled for launch in August 2014. CRCF funds allowed the team to attract successful and capable management personnel and high-net-worth angel investors to take research from the lab and bring it to production applications.

Program Overview

Since the inception of the CRCF program in 2011 legislation, 380 applications were submitted from all of the Commonwealth’s ten technology regions and from these submissions, 146 (*2) projects have been awarded CRCF funding. Funded projects cover all technology sectors.

Per legislative direction, awards made for CRCF projects must support technology sectors identified in the Commonwealth Research and Technology Strategic Roadmap; moreover, projects funded by CRCF seek to positively impact Virginia’s technology future. The Roadmap, a comprehensive planning tool Virginia leaders use to help determine research areas worthy of economic development and institutional focus, identifies technology sectors with the most commercial promise and that will drive economic growth throughout the state. The Roadmap is developed through a consultative process that includes the Commonwealth’s private sector technology community, academia and other nonprofit research organizations, and economic development professionals.

CIT also leverages its programs to facilitate company creation and growth. In relation to other CIT funding programs, CRCF is part of a pipeline, working closely with the Federal Funding Assistance Program (FFAP) and the GAP family of funds. CRCF also complements other funding programs in the Commonwealth, such as the Virginia Innovation Partnership (VIP), a statewide network designed to accelerate innovation and economic growth and the Virginia Biosciences Health Research Corporation (VBHRC), a translational human health research accelerator program targeting collaboration between Virginia research universities and industry.

Two solicitations were offered in FY2014. The fall solicitation was a limited submission solicitation funded through FY2013 rollover monies and targeting the Commonwealth’s universities and research organizations; the Eminent Researcher Recruitment and Matching Funds Programs were offered. The spring solicitation expanded to include the private sector and political subdivisions; the solicitation included six programs: Commercialization, Eminent Researcher Recruitment, Facilities Enhancement Loan, Matching Funds, SBIR Matching Funds, and STTR Matching Funds.

• Commercialization Program

This program targeted young companies with product(s) in the proof-of-concept phase. Firms eligible for this program were established on or after January 1, 2012.

• Eminent Researcher Recruitment Program

This program targeted public colleges and universities seeking to acquire or enhance research superiority in qualified technologies through the recruitment of a top scholar to its faculty.

• Facilities Enhancement Loan Program

This program helped public and private universities and political subdivisions establish and/or upgrade facilities used to commercialize qualified research or technologies, including those developed at the institutions and by Virginia’s private sector.

• Matching Funds Program

This program helped public and private colleges, universities, other research institutes, and federal labs in Virginia leverage federal and private funds designated for the commercialization of qualified research or technologies. Funds could be used to advance research to readiness for intellectual property protection, private sector investment, and/or help to qualify institutions for funding competitions.

• SBIR Matching Funds Program

This program helped advance technology commercialization by young Virginia-based technology businesses that had won a Phase I and/or Phase II Small Business Innovative Research (SBIR) award in any one of six technologies identified below. Firms eligible for Phase I matching awards were established on or after January 1, 2011, while firms eligible for Phase II matching awards were established on or after January 1, 2009.

STTR Matching Funds Program

This program helped advance technology commercialization by young Virginia-based technology businesses that had won a Phase I and/or Phase II Small Business Technology Transfer (STTR) award in any one of six technologies identified below. Firms eligible for Phase I matching awards were established on or after January 1, 2011, while firms eligible for Phase II matching awards were established on or after January 1, 2009.

Technology sectors eligible for funding in FY2014 were program-specific; the Commercialization and SBIR and STTR Matching Funds Programs invited applications in six high-priority sectors: advanced manufacturing, specifically robotics, 3D printing, or remote monitoring and sensing; cyber security; data analytics; energy; life sciences; and modeling and simulation. The Eminent Researcher Recruitment, Facilities Enhancement Loan, and Matching Funds Programs were open to submissions in all technology areas identified in the Roadmap as strategic opportunities for the Commonwealth.

In FY2014, 96 applications were received for five of the six available CRCF programs, totaling $7.9 million; applications were not received for the Facilities Enhancement Loan Program. Applications represented nine of the Commonwealth’s ten technology regions and covered 11 strategically important industry sectors. Applications in FY2014 exhibited a strong emphasis on the area of life sciences, though a significant number also focused on advanced manufacturing and energy. Fifty-two awards were made, and 50 awardees accepted funding. Awarded projects represent nine of the ten regions and ten industry sectors: advanced manufacturing, aerospace, communications, cyber security, data analytics, energy, environment, information technology, life sciences, and modeling and simulation.

CRCF awards were selected by the CIT Board of Directors following a multi-step review process that included funding recommendations made by the Research and Technology Investment Advisory Committee (RTIAC). The RTIAC is a legislatively-established body comprised of representatives from higher education, economic development, research institutes, venture capital firms, and technology corporations.
(*1) 52 projects were selected for funding; two organizations declined awards
(*2) 146 projects were selected for funding since CRCF’s inception; seven awards have been declined