Bill White Examines Rick Perry's Enterprise Fund

When Gov. Rick Perry announced the establishment of the Texas Institute for Genomic Medicine, a public-private partnership between the Texas A&M University System and Lexicon Genetics, in July 2005, he likened it to the creation of the internet. He said the $50 million genetic research center, paid for through the business development fund he oversees, would “attract millions of dollars for medical research and lead to the development of life-saving medical treatments and therapies” for everything from diabetes to cancer. Perry predicted biotech breakthroughs in short order, saying, “TIGM’s ultimate goal is not to study mice but to cure man.”

Five years later, depending on who you ask, TIGM (pronounced tig-um) has either been a massive taxpayer-subsidized boondoggle or a blessing to researchers across the globe.

On his Facebook page last month, Perry’s Democratic gubernatorial challenger, Bill White, called it “a sad story of a lack of accountability and worse.” White’s camp says TIGM has not created the jobs or the research opportunities Perry promised and that Perry used a nontrivial amount of grant money from the Texas Enterprise Fund — $50 million matches the fund's largest ever payout — to reward his supporters.

“This is classic Perry,” says White spokeswoman Katy Bacon. “He’s not giving taxpayers their money’s worth, but he is helping some of his donors and big corporations.”

Yet Texas A&M System Vice Chancellor for Research Brett Giroir calls TIGM “one of the jewels of American science.”

 

“It’s not a disaster, and there’s been no lack of accountability,” he says.  

Giroir says that while the initial hype about TIGM may have overpromised, the research facility is, in fact, making significant breakthroughs. “I don’t know what people were thinking with a press release five years ago. You know, we were supposed to cure cancer in the 1950s,” Giroir says. “Have we cured cancer or diabetes yet? Not yet, but we’re working on it.”

So what is TIGM? Put simply, it's a high-level mouse lab. Its researchers study genetically altered mice, known as “knockout mice” because specific genes have been turned off or “knocked out.” These mice manifest specific traits, allowing researchers to study the causes and treatments of various conditions.

TIGM was established as a non-profit. Under Perry’s Enterprise Fund arrangement, the biotech company Lexicon, based in The Woodlands, received $35 million to provide two copies of its mouse cell line library to TIGM. One copy would be housed at a new lab at Perry’s alma mater, Texas A&M University in College Station, the other at the Institute of Biosciences and Technology at the A&M System’s Health Science Center in Houston. Texas A&M received an additional $15 million to build the former and remodel the latter. The partners committed to creating 5,000 jobs in Texas.

In addition to the TEF money, TIGM's organizers believed it was well-positioned to double its funding with a soon-to-be awarded $50 million competitive National Institutes of Health grant for knockout mouse projects.

But nothing went as planned.

First, Lexicon’s involvement raised eyebrows. The Houston Chronicle reported that some major Lexicon investors — Houston Texans owner and energy mogul Robert C. McNair, businessman William A. McMinn and the family of businessman Gordon Cain, who died in 2002 — had helped finance Perry’s political career. A Perry spokeswoman told the Chronicle that donations had nothing to do with the award, which was focused on expanding the biotech industry in Texas.

Then, in 2006, TIGM failed to win the $50 million NIH grant, which turns out to have been its path to sustainability. In 2008, university auditors would conclude that receiving those funds was “essentially the business plan for the TIGM partnership and no contingency plans were considered.” (Giroir maintains that contingency plans did exist but were not adequately acted upon. “It was an implementation problem,” he says, “not a planning problem.”)

 

“Disregard of A&M System policies and procedures," the audit found, "and the lack of effective oversight provided … has resulted in financial difficulties for the partnership.” That year, TIGM gave up its nonprofit status and became a joint institute between Texas A&M University and the A&M System.

Two years later, TIGM still requires annual subsidies from the A&M System to operate. In projections extending out to 2013, the system says it could lose up to $2 million to $3 million each year. Giroir says that’s not unusual. “Core centers never make money — that’s not what they’re supposed to do,” he says. “They’re supposed to be a core to enable research.”

But when the university agreed to take on financial responsibility for TIGM, the faculty began to grumble. Professors questioned the money TIGM would siphon off. Years after TIGM was announced, the College Station facility had yet to be occupied. Additionally, former Texas A&M President Elsa Murano recalls, researchers were starting to have reservations about the technology. “They were not keen on using the embryo library. They thought it was technology that wasn’t as useful as other technology that had come out in the meantime,” she says. “From a technical, scientific point of view, that, I think, was the bug-a-boo.”

In July 2009, Giroir held a nearly three-hour faculty forum to address concerns about TIGM. “Outside of College Station,” he told those assembled, “TIGM has a pretty good reputation.”

Last week, in a telephone interview, Girour rattled off the successes of TIGM, which is now only under the purview of the A&M System Health Science Center. Embryonic stem cells or knockout mice have been delivered to 250 institutions in 23 countries. More than 4,500 individual investigators from 600 institutions in 35 countries have queried TIGM’s database. Home to 90 percent of the world’s embryonic stem cell knockouts, TIGM is the majority contributor to the International Knockout Mouse Consortium. “It really is a worldwide key scientific resource,” Giroir says. “If it wasn’t made available through the establishment of TIGM, [the mouse library] would still have been a private, proprietary resource, and the world’s science would have been delayed by a decade.” 

Despite its stumbles, the university system says it has at least met its job targets. Lexicon, now called Lexicon Pharmaceuticals, has not. Had everything gone according to schedule, Lexicon would have generated more than 300 new jobs by now. Instead, after an initial spike in revenues and jobs, both have declined. In 2008, the Enterprise Fund contract was revised so that the university system absorbed all of Lexicon’s job creation responsibilities until 2012. 

But Lexicon is still on the hook for the 1,616 jobs it promised by 2015. Perry campaign spokeswoman Catherine Frazier says the Enterprise Fund has “clawback provisions” to ensure tax dollars are protected if a company “doesn’t create the jobs agreed to under its contract.” TIGM already had to return a small percentage — $16,905 —of its award.

The worst-case scenario for Lexicon, if it fails to meet any of its job targets, is a maximum fine of approximately $14.2 million.

“At present,” Lexicon spokesman Wade Walke says, “we employ fewer people than in 2005, so we will have to increase our employment or potentially be subject to those repayment obligations.”

Political back-and-forth is nothing new for the Enterprise Fund. Bacon says it “has a record of failure,” while Frazier says it “has been an essential asset to making Texas home to more Fortune 1000 companies than any other state.”

In the last legislative session, the fund received extensive scrutiny as lawmakers puzzled over why another $50 million grant to the Texas A&M System — this one for the creation of the National Center for Therapeutics Manufacturing — had not gone through the proper approval process.

"These programs, if used in the right way, have the potential to make a big difference in Texas and the Texas economy, but something has to change," state Rep. Jim Pitts, R-Waxahachie, told The Associated Press.

Giroir has a different take. “To see these incredible scientific resources that are potentially going to help millions of people in the future get politicized — I never get used to that," he says. “It does affect the people who are trying to get a job done. It really does.”

Thus far, White’s team has mostly focused its attacks on the Lexicon portion of TIGM. “Certainly the Lexicon dollars and results are not what Perry promised to Texans,” Bacon says.

Perry’s camp responds by noting the irony of White using his Facebook page as the vehicle for attack. Facebook recently received $1.4 million in Enterprise Fund dollars to set up an office in Austin. In Facebook’s agreement, the company promises 200 jobs and $3.1 in capital investment — if all goes as planned.

“Bill White is using Facebook as the means to attack the very job creation program that is helping Facebook bring more than 200 jobs to Texas,” Frazier says. 

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