This article first appeared in the St. Louis Beacon, March 13, 2013 - When it comes to faculty researchers bringing technology from the workbench to the market, Kevin Whittington says it’s all about making a difference, not about making a buck.
“Their hope in entrepreneurship is not, ‘Oh, I’m going to get rich off of this.’ It’s, ‘I’m going to make the impact I’ve always wanted to make,’” said Whittington, founder of Portfolio Partners, a company he created in 2011 to help facilitate innovations from campus to commercialization. “The best way to do that is to … have a commercial engine under whatever you are creating in your laboratory.”
Fueling that engine can mean a bumpy path going from academia to commercialization but in the age of the entrepreneurial university, it’s a road that seems increasingly worth taking for educational institutions, researchers and entrepreneurs across the country.
That includes those here in St. Louis, where an increasing focus on biotechnology has brought with it a new appreciation of the city’s research universities and a desire to promote what’s known in the industry as technology transfer, the process of getting a new discovery from the research environment of bottles and beakers to the bottom-line world of cash and commerce.
"Faculty are, by and large, the scientists,” said Brad Castanho, assistant vice chancellor for research and director of the Office of Technology Management at Washington University. “They certainly take an active role in the foundation and the founding of the company. But in general, it takes an entrepreneur with business experience to move that technology down the commercial track.”
The valley of death
Finding that route to commercialization has been a topic of intense focus for Castanho’s institution in recent years as Washington University has worked hard to become a major player in the entrepreneurial university scene. From the foundation of the Skandalaris Center more than a decade ago up through the seeding of the Biologic Therapeutics Center in 2011, Wash U has been making a push towards building a bridge from the campus to the marketplace.
The basic process is simple enough in concept. When a discovery is made using university facilities, the educational institution typically helps establish a provisional patent. If the technology shows promise, that might eventually be followed by a more expensive full patent. At that point, the university will retain the intellectual property but may license it out to another entity for use in eventual commercialization. That could be an existing company, an entrepreneur interested in a startup or the faculty members themselves.
Under Wash U’s policy, 65 percent of royalties from the license go to the school with the rest to the creators.
“At the end of the day it’s our ability to connect with the licensees that fit the technology that allows us to be more efficient and effective in our licensing process,” said Castanho. “That’s certainly a difficult thing to do, creating the right technology and the right fit for a company, whether a startup or an established company, to execute the kind of collaboration and agreement that you want to put together. It’s sometimes very challenging.”
But it’s not the only challenge. New technology is risky technology and no one knows how it will play out when it goes live.
"In many cases we are filing and starting to do the patenting process very early before it is clearly understood what in fact the technology might do, might fit and what the product would ultimately be," Castanho said.
The university ends up assuming a degree of that risk. However the folks with private capital resources may not be as accommodating.
“There’s something called the valley of death,” said Dr. David Curiel, director of Wash U’s Biologic Therapeutics Center, which was founded to help address so-called “translational research” issues. “Someone can develop a patent, use that to form a small company and even accomplish a phase I human trial.”
But initial trials only measure toxicity, not efficacy. To find out how well a product actually works, you need larger, more expensive trials and often that requires a pharmaceutical partner, which can be hard to find. The result is that the gap between phase I and phase II trials can be littered with the remains of small entrepreneurs who couldn’t find a way to climb to the next level.
“The [National Institutes of Health] is creating some mechanisms specifically designed to address the valley of death with more sensitivity to the fact that the problem really isn’t the startup anymore,” he said. “It’s sustaining the enterprise.”
Castanho said that funding issues can often plague translational research.
“The federal government funds that to some level but not to the magnitude that allows for this to be fairly routine and an easy thing to get funding,” he noted. “Venture capital used to provide what they called seed funding for these kinds of activities. But with the (current) economy they’ve moved downstream to more established investments with proven technologies.”
One way to combat the problem at Wash U is the Bear Cub Fund, which helps faculty who need translational research support but can’t secure dollars from NIH or the National Science Foundation.
Curiel said that schools are increasingly working with incubators and initiatives like Cortex and the Center for Emerging Technologies to provide infrastructure to budding entrepreneurs.
“A number of universities have seed grants for divisions or departments to have little pots of money that will help the entrepreneur through the additional legal and corporate pieces,” said Curiel. “I think universities have a bigger budget to file patents. That’s critical.”
Meanwhile, the universities themselves need money. Wash U’s Office of Technology Transfer reported 143 invention disclosures by faculty in 2012 with 98 patents filed. The university collected some $6.2 million in revenue from licensing agreements, a healthy figure but one that has fallen significantly since the onset of the economic crisis.
Castanho said that many schools aren’t as fortunate as Wash U on the research front. Unless one happens to stumble onto a “blockbuster” like the next Google or a big pharma discovery, most universities don’t see commercialization as an engine of revenue generation anyway.
“In general, if you look across the board, there’s probably more tech transfer offices that are looking to break even than there are that are breaking even,” he said. “We are doing reasonably well at Wash U. Our revenues have been relatively high in the last several years, more recently, a little bit lower. But over the long haul we certainly have brought in revenue that far exceeds the cost of doing tech transfer."
Reflecting achievement
At the University of Missouri-St. Louis, Nasser Arshadi, vice provost for research, said he feels it is important that a school have its tech transfer office as part of the research arm of the administration as it is at UMSL.
“We know exactly who is working on what in terms of faculty research,” he said.
The numbers at UMSL aren’t as big as at Wash U, but the university did apply for three new patents in 2012 and has applied for 45 patents since 2002, 19 of which have been issued. Thirteen new invention disclosures were made by faculty this year, part of 116 such disclosures on record at present. Just over half are in chemistry and biochemistry with another 15 percent from the College of Optometry. About 24 invention disclosures have been licensed, and the university website lists six startup companies based on UMSL technology.
Arshadi said UMSL has worked hard to smooth its process to promote innovation, something he thinks is happening elsewhere as well. Still, he thinks that encouraging such activity means recognizing technology commercialization and patents as an academic achievement.
“The internal challenge for us still is how to incorporate accomplishments in invention into the university’s tenure and promotion process,” he said. “We have begun to do so, but it is not fully implemented yet. When a faculty entrepreneur is successful in inventing new technologies, we need to fully reflect that accomplishment in their dossier when they come up for tenure and promotion.”
Arshadi doesn’t think the issue is unique to UMSL. Not long ago, he moderated a panel at a conference in Florida on the issue.
“Traditionally, universities look at teaching, research and service in the evaluation of faculty performance. But this is a relatively new phenomenon and the guidelines don’t fully reflect that,” he said. “If we are encouraging our faculty to do this sort of work, we should really recognize them. You cannot make this promise and not live up to it.”
Having an impact
Back at Portfolio Partners, Whittington said that even with all the uncertainty involved, he believes that area universities are making a genuine effort to foster a culture of innovation.
“It’s relatively recent, but it is substantive, and there is considerable traction behind that,” he said.
The Ladue graduate said that a lack of capital is indeed a problem. Unlike Boston or the biotech hubs on the West Coast, the region has no megafund of risk capital that can provide hundreds of millions of dollars in investment infrastructure. That means brainstorms that begin at local universities might not remain here. He lauds initiatives like the Biogenerator for helping keep good ideas in St. Louis.
But the very act of chasing dollars can be a hassle for researchers as well.
“If you are a faculty member at a university, you have to spend most of your time getting funding,” he said. “It’s only in rare instances that your funding comes from an entrepreneurial or private source. Typically, it’s federally funded so most of your activity is going to be geared toward doing things that are going to get you federal funds.”
Whittington said that the good news is that those things have become more applicable to the real world. Over the past decade and a half, federal agencies, like NIH have undergone a strong cultural shift that have pushed them more toward research that has an end result.
“They were saying, ‘Look, everything has to be translational,’” he said. “’It actually has to impact human health.’”
Universities have also seen a new attitude. Whittington said the very process of entrepreneurship is now viewed as an academic discipline and entrepreneurial methodologies are beginning to mirror the hypothesis-driven ethos of scientific research.
“There was so much respect for Steve Jobs and all these guys who effectively became sort of pseudo academics,” he said. “They dropped out of school but they are really wonkish and it’s changed entrepreneurship. I think tech had a lot to do with that.
“You have to be kind of geeky now to be a successful entrepreneur,” he added.
Getting the people
Tim West, vice president of research and development for C2N Diagnostics, a 2007 startup that services pharmaceutical companies with an assay test for certain proteins in the brain, said that it can be tough to commercialize an advancement.
“We got lucky because when we started out, there were already several pharmaceutical companies that were interested in using our technology,” said West, who was hired into the company shortly after its creation. “We already had buyers lined up.”
Still, there were challenges. He said that, for one thing, validation procedures were much more demanding among pharmaceutical companies than in the academic world. For another, C2N needed to locate specific technical talent.
“Initially, it was difficult to find people to work at the company,” he said. “It’s a small city and we had very specific requirements in terms of the people that we needed. We were able to recruit somebody from Kansas City so we got lucky with that.”
The challenge for many startups isn’t finding individuals with scientific ability. It’s locating business talent. Back at Wash U, Castanho notes that while some faculty do go out on their own with an idea, that’s not the norm. Generally, they let someone else do the entrepreneurship or at the very least, they get a partner to handle the business side.
The biggest hurdle isn’t necessarily financial.
“You can always use more money and I think money is available from many different sources if the technology and the entrepreneur are right. I think money can be accessed from other parts of the United States, not just the St. Louis region,” he said.
In fact, having the right business talent on board can impress skittish investors just as much as the quality of the idea.
In any event, there’s another reason to have an entrepreneur in the picture. Faculty may want to make an impact, but they don’t always want to run a company.
“They are not leaving their day jobs,” said Castanho. “They are full-time researchers. They have a career.”