Peter Schultz (left) and Steve Kay like to fish together. Now, they've teamed up to run the Scripps Research Institute.

Peter Schultz (left) and Steve Kay like to fish together. Now, they've teamed up to run the Scripps Research Institute.

Steve Kay

Scripps hooks duo to lead major biomedical institute

A pair of old fishing buddies is now steering the ship at the Scripps Research Institute, one of the world’s largest private basic biomedical research institutes. Today, Steve Kay, formerly the dean of the college of arts and sciences at the University of Southern California (USC) in Los Angeles was announced as Scripps’s president, whereas Peter Schultz, currently a Scripps chemist and director of the California Institute for Biomedical Research (Calibr) in San Diego, was named CEO. Kay will be in charge of day-to-day operations, whereas Schultz will lay out Scripps's long-term strategic plan.

The announcement likely brings to a close a contentious chapter at Scripps, which has campuses in San Diego, California, and Jupiter, Florida. Just over a year ago, Scripps faculty led a revolt against the institute’s former leadership amid financial troubles and merger discussions with USC. The appointments also portend a new push aimed at marrying the institute’s historical strength in basic biomedical research with translational medicine designed to turn research leads into novel treatments.

“It’s a very exciting move,” says Peter Kim, formerly the head of the Merck Research Laboratories and now a biochemist at Stanford University in Palo Alto, California. In addition to running Calibr, Schultz previously led the Genomics Institute of the Novartis Research Foundation (GNF), and has been a founder of eight startups involved in using robotics and other high throughput technologies to advance biomedicine and materials science. Before joining USC, Kay also worked with Schultz at Scripps and GNF. Together the pair has raised well over $1 billion in backing from pharma companies, foundations, and private donations in their recent positions.

Scripps is “very fortunate” to have landed both to share the top duties at the institute, Kim says. Phil Baran, a Scripps chemist and member of the search committee that selected Kay and Schultz, agrees. “I think everyone here will be relieved that we have icons charting the course of the ship, which will let us go back to doing science,” he says.

The ship’s previous course got a bit turbulent. Last July, Scripps's board of trustees called off merger talks with USC after the Scripps faculty revolted. The potential marriage was offered as a way out of the red for Scripps, which had seen a sharp drop in research funding from the National Institutes of Health (NIH). USC at the time was flush, in the midst of a $6 billion capital campaign. The university also has a medical school, which meant potentially easier access to clinical research for Scripps’s stable of basic biomedical researchers. But Scripps faculty feared loss of autonomy and objected loudly to news of the merger talks. Ultimately, Scripps’s then-President and CEO Michael Marletta resigned, cell biologist Jim Paulson was named as an interim president and CEO, and a search committee was formed to find a new direction.

An emphasis on translation

The centerpiece of this new direction, say Kay and Schultz, will be a long-term push into translational research. Like most academic institutions, today Scripps sticks mainly to basic research, discovering the molecular underpinnings of health and disease. Pharmaceutical companies, by contrast, focus most of their efforts at the other end of the drug development pipeline, moving potential drug compounds through human clinical trials into the market. The space between basic science and drug approval—the translational piece—has come to be known as the “valley of death,” because many promising findings never make it to market. Translational researchers must take promising early-stage compounds and go through a host of refinements to improve measures such as how long compounds last in the body and how well they move through the bloodstream, find their targets, and minimize their toxicity.

Kay and Schultz say they plan to form alliances with Calibr and other institutes to ease the path for Scripps faculty to do much of this translational research in house. By doing so, they say, this will ensure that more compounds make it into human trials, bring extra licensing royalties into the institute, and, ultimately, improve the lives of patients. “If we are successful, not only are we making new medicines that can help people, we are potentially creating additional financial resources [for Scripps],” Schultz says.

Scripps already has a strong track record for getting medicines into the clinic. According to the institute, eight compounds originally discovered at Scripps are now on the market, while another 30 are in various stages of clinical development. Those were developed, in part, as a byproduct of previous alliances in which pharmaceutical companies payed for rights to develop would-be drugs discovered at Scripps, as well as through the more traditional approach of licensing early-stage compounds to startup companies that then raise money to develop them further.

That model, particularly finding institutional backing from pharma companies, “probably no longer works,” Schultz says. Today, large pharma companies are more averse to risking money on unproven therapies, and thus more apt to sit on the sidelines until compounds advance at least until early-stage human clinical trials. That forces biotech companies that license compounds to do much of the translational research themselves, something they aren’t always best suited to do.

To make matters worse, when research institutes license their promising compounds very early in development, the terms of such deals often aren’t great for the basic researchers. The institute doesn’t get much money, and researchers lose control over what happens to their compounds, says Patrick Griffin, who runs a translational research center at Scripps in Florida. Many compounds then go on to fail—not because they aren’t effective, Griffin adds, but because companies decide to move in a different business direction. “If you can move a [would-be drug] along in a nonprofit, you can nurture it so it has a better opportunity to advance,” Griffin says. “Fewer will fail, and you will have more shots on goal,” of making it to market, he says.

Those extra shots are critical, Griffin and others say, because 95% of all would-be drugs fail during development. When costs of the failures are added in, the price of bringing a new drug to market is well over $1 billion. That has not only caused large pharma companies to back away from early-stage drug discovery, but it has forced them to pursue primarily large-market blockbuster drugs for common conditions such as heart disease and cancer, while avoiding medicines for rare diseases.

As a nonprofit focused on translational research, Calibr has already begun to change this arrangement in a small way. Today, the institute, which opened in 2012, has a staff of only about 110 people and an annual budget of some $25 million. But thanks to early progress on would-be drugs for neglected diseases, Calibr has already attracted funding from nonprofit foundations such as the Wellcome Trust, the Bill & Melinda Gates Foundation, and the Juvenile Diabetes Research Foundation. Schultz says the institute expects to put four to six drugs into the clinic over the next year or two.

Cutting costs

Schultz and Kay plan to take more immediate actions to shore up Scripps’s finances. According to a July report by Fitch, a bond rating agency, Scripps’ finances are “stable.” But the institute has operated in the red for years, and has been forced to cover its deficit by drawing down its endowment, which shrunk from $430 million in fiscal year 2012 to $397 million in fiscal year 2014.

One move that could save $12 million annually would be to replace nearly 37,000 square meters of leased lab space with two newly constructed buildings owned by Scripps. Schultz and Kay say they continue to explore an existing plan to raise more than $100 million to pay for the buildings. “That would have a big impact pretty quick,” Griffin says. But ultimately, he says, Scripps’s stability will be decided on how effective Schultz and Kay are in hooking together formerly disparate parts of the drug development pipeline, and how many would-be drugs the fishing buddies manage to snare in their net.

*Correction, 18 September, 3:07 p.m.: This story incorrectly identified Scripps as the world's largest basic biomedical research institute. It is among the world's largest private biomedical research institutes.