Nevada Cancer Institute sold to school

After receiving no counterbids, U.S. Bankruptcy Court Judge Mike Nakagawa has approved the sale of the Nevada Cancer Institute to the University of California, San Diego.

On the surface, the terms make it appear that UCSD will acquire the clinical operations and the main building for little or nothing. UCSD will pay
$18 million, but received pledges that the institute's fundraising arm would try to raise $20.8 million for the school over the next five years. The promise is backed by a rewritten grant from the Engelstad Family Foundation that totals $15 million.

However, given the long-term nature of the fundraising promise and the cash coming up front to the cancer Institute for distribution to creditors, the institute comes out well ahead with calculating the time value of money, Chief Restructuring Officer George Pillari said.

Also, there are no guarantees attached to the $5.8 million gap between the target and the Engelstad grant, originally tagged solely to fund lung cancer research but changed to bail the institute out of its financial emergency.

Court papers outlining the sale called the fundraising commitment a "critical component" of the deal. "UCSD was not willing to proceed with a transaction without this philanthropic commitment," according to the papers.

The original demand was for
$15 million, but that was later upped to $20 million, with the Engelstad donation as collateral.

Court papers also noted that the institute had hired two investment advisers who spent more than a year searching for buyers, but came up with only one other party that was interested. Negotiations proceeded with UCSD as the better offer.

UCSD will fold the operations into its Moores Cancer Center, but has stated that it will not disclosed its plans until the purchase closes, expected by the end of the month. In court papers, the institute said UCSD might continue research but only if scientists could pay for their work by obtaining outside grants.

Pillari said about 135 people now staff the institute, with about 35 engaged in research. After its financial troubles forced drastic layoffs last year, the institute retained only researchers who could finance themselves through grants.

After the sale, the institute's bankruptcy estate will be left with some vacant land and the three-story, 183,000-square-foot research lab. The lab, bearing the Engelstad name thanks to another grant, was touted as a forum for "bringing cutting-edge cancer research to the forefront."

However, the interior of the third floor was never finished and the rest of the building sits empty.

Contact reporter Tim O'Reiley at
toreiley@reviewjournal.com or 702-387-5290.