Research to Revenue
By Jay Weiner
Photographs by Mark Luinenburg
|Erik Cressman (left), an assistant professor of radiology in the U’s
Medical School, had been trying to get his thermochemical ablation
invention into the hands of physicians for several years. Then he met
medical device entrepreneur Mike Selzer (right) through the U’s Office
for Technology Commercialization.
The meeting had all the makings of a classic confrontation between two traditionally polarized spheres: pure science vs. aggressive business, lab coat vs. suit coat. The venue was the cluttered office of Erik Cressman in the University of Minnesota’s Mayo Building. A stack of teetering medical journals here, scribbled ideas on a whiteboard there, and, for Cressman—an assistant professor of radiology in the U’s Medical School—frustration everywhere.
It was late 2009, and Cressman was peeved at the progress—or lack thereof—he had made in convincing someone, anyone, to embrace his thermochemical ablation process to fight liver cancer. He had been wanting to get his invention into physicians’ hands for three years. But, he says, “I wasn’t thinking in terms of business. I was thinking in terms of science.” But business, he has come to understand, is what gets science to market.
This is where Mike Selzer entered the picture—and Cressman’s bursting office. The two got together, the scientist and the entrepreneur, through the U’s Office for Technology Commercialization (OTC), which helped bring in more than $95 million in revenue in 2009 from University intellectual property. The OTC sits at the intersection of groundbreaking scientific discovery and creative business development, at the crossroads of the strengths and challenges of the modern public research university.
Selzer is a Twin Cities–based entrepreneur who has vast experience with biomedical devices and start-up companies. He was a founder of ConcepTx Medical, which helps develop medical device businesses, and is a former Medtronic vice president and former CEO of Urologix, Inc. He was a perfect fit for a special role in the OTC’s unit known as the Venture Center. Selzer was serving as a CEO-in-Residence, one of a half-dozen seasoned business leaders brought in to aid the OTC’s staff in evaluating discoveries and inventions made by U faculty and researchers.
|Tim Mulcahy (front), vice president for research at the University, and Jay Schrankler, executive director of the Office for Technology Commercialization, have created an entrepreneurial culture at the U and have brought experts from the business community to campus to help evaluate the market potential of U discoveries.
These CEOs-in-Residence meet every Wednesday morning at the OTC offices in a low-slung office park just west of Highway 280 in Minneapolis, midway between the U’s Minneapolis and St. Paul campuses. Under a cloak of confidentiality agreements, the CEOs-in-Residence evaluate the market potential of University intellectual property, and there’s lots of it: about 900 disclosures of new processes, findings, or devices by researchers between 2006 and 2009 and more than 250 patent filings by the U for those ideas over the same period.
Cressman had developed a technology in which a heated device inserted into a cancer patient’s liver would destroy tumors. Selzer had examined Cressman’s invention but had a new idea based on work he’d done previously with ConcepTx. While liver cancer affects about 22,000 Americans per year, chronic venous insufficiency, or CVI, a condition caused by damaged valves in leg veins, is treatable in 9 million Americans.
Selzer wondered if Cressman’s invention could be modified to benefit people with CVI . Simply put, could a heated device stimulate the vein wall and increase blood flow in patients’ legs? Such a remedy could have a market potential of $700 million.
The grim reality was that the market potential of using Cressman’s device for people with liver cancer was too small and the time and cost in obtaining FDA approval too great. A viable business with that initial application would not get off the ground. Cressman agreed to try it for CVI, and the two shook hands right there in Cressman’s tiny office. Seven months later, XO Thermix Medical was born, with Selzer as CEO and Cressman a partner. It became one of 11 start-ups launched by the OTC over the past two years (read about all 11 start-ups beginning on page 32).
The race for revenue
The OTC is the “tech transfer” hub at the University. It competes with similar operations nationally, including the highly successful tech transfer office at the University of Wisconsin–Madison. A unit of the Office of the Vice President for Research, the OTC is led by former University of Wisconsin biological sciences professor and research administrator Tim Mulcahy.
Spinning off companies like XO Thermix Medical isn’t the only measure of success for the OTC. Creating an entrepreneurial culture among U researchers is what Mulcahy and Jay Schrankler (B.S. ’88), executive director of the OTC, are most interested in promoting. They figure that infusing the passion for discovery with entrepreneurial innovation can’t help but drive research and revenue.
|“We had to take the tech transfer
operation from an anemic state
and put it on steroids,” says
Tim Mulcahy, vice president
for research at the U. “If we
wanted to play in the big leagues,
we needed to step up and be
much more deliberate in our
planning, our resourcing, and our
strategies around technology
OTC-generated companies reflect a growing desire of the University to be an equity partner in enterprises that can eventually move to public offerings and, in most cases, be sold to larger firms, especially in the biomedical and pharmaceutical sectors. Software isn’t a bad prospect either; just ask Stanford University about its initial stake in something called Google, which generated more than $300 million when the university sold its shares a few years back.
The pressure to find new revenue sources is the harsh new reality for public research universities today. In Minnesota’s case, the state has drastically cut funding to its land-grant institution. At the same time, scientists are generating lifesaving ideas that the University owns and, by federal law, must commercialize. But which discoveries will pay off is unpredictable, and the business of tech transfer requires a different kind of state support.
Since 2000, the University has garnered more than $400 million in royalties from the AIDS drug Ziagen, which was developed by Robert Vince, a professor of medicinal chemistry at the U. But by 2014, when Ziagen’s patents expire, the revenue from the drug’s manufacturer, GlaxoSmithKline, will trickle to zero. In 2009, when the OTC brought in $95.2 million in gross revenues from 306 revenue-generating agreements from licensees, all but $8.7 million came from Ziagen.
The OTC and the University are in search of another scientific and revenue home run, and soon. The race is on to replace the Ziagen income. “We have a little fun ahead,” Schrankler says wryly.
From invention to IPO
Over the past two years, 11 nascent companies have emerged from the Venture Center at the University of Minnesota’s Office for Technology Commercialization. Most are in an R&D mode, two to four years away from the regulatory approvals that would launch them into the marketplace.
Founded in February 2009
Using infrared detection technology developed by Joseph Talghader, a U of M professor of electrical engineering, Ascir is at work on a handheld instrument that can identify harmful gases from a safe distance. The device, known as a microbolometer, is expected to have great potential for military, civil defense, and public safety applications, as well as for the mining, chemical, waste management, and automotive industries.
Founded in May 2009
A proprietary approach to biocoating—using engineered microorganisms to neutralize unwanted chemicals or toxins—is BioCee’s stock in trade. This technology, invented by former U of M biochemistry professor Michael Flickinger, is first being applied to liquid fuels. Indeed, BioCee is on the verge of reaching pollution reduction guidelines for diesel in most of the developed nations. A lab on the St. Paul campus is working to bring the process to a scale that could impact refineries and, ultimately, air quality around the world.
La Jolla, California
Founded in May 2009
Under an exclusive license, Celladon is testing a University-developed approach to treating advanced heart failure via genetically targeted enzyme replacement therapy. U of M biology professor Dave Thomas and researcher Razvan Cornea are the scientists behind the treatment, in which patients who once might have needed heart transplants may be given one-time outpatient therapy in a cardiac catheterization lab.
Founded in August 2009
R8Scan’s technology, based on the work of University biochemical engineer Friedrich Srienc, will permit medical and biotech researchers to track the growth rates of individual cells and study the dynamics of cellular development in unprecedented detail. Benefits are expected to include streamlined processes for pharmaceutical labs and improved treatment strategies for cancer and other diseases.
Hennepin Life Sciences
Founded in October 2009
Microbiology professors Ashley Haase and Pat Schlievert announced in March 2009 that they had identified a naturally occurring compound that could prevent the sexual transmission of the primate form of HIV, known as SIV. Hennepin Life Sciences, under a licensing agreement with the U, is using that research as it works to develop a topical microbicide for human use, which could have an enormous impact on global public health.
Founded in February 2010
This is no doubt the start-up with the highest public profile, as it’s based on the work of Doris Taylor, who made international headlines in 2008 by, in lay terms, creating a new rat heart in her U of M lab. Taylor’s “decellularization/recellularization” technology has myriad potential applications, including the replacement of all or a portion of a human heart, liver, kidneys, lungs, and pancreas. Miromatrix’s first product: an acellular cardiac-derived biomesh for hernia repair and breast reconstruction.
Founded in March 2010
Using the science of Philip Portoghese, a professor of medicinal chemistry in the U’s College of Pharmacy, Neuroendo Pharma is developing drugs targeted at a constellation of increasingly common metabolic disorders known to be risk factors for coronary heart disease: obesity, type 2 diabetes, prediabetes, and atherogenic dyslipidemia.
Founded in June 2010
This start-up garnered widespread media attention last summer largely because of the youth of its starter-uppers. In 2009, in a Carlson School of Management course called Applied Technology Entrepreneurship, then-undergrads Joe Mullenbach and Alex Johansson were introduced to a biocatalytic water purification technology developed by U of M biologists Lawrence Wackett and Michael Sadowski. Soon, a company was born. NewWater, in which the University holds an equity stake, aims to market the technology—which uses patented enzymes to trigger bacterial metabolism of the corn herbicide atrazine, breaking it down into harmless byproducts—to municipal water plants and private well owners.
XO Thermix Medical
Founded in June 2010
Radiology professor Erik Cressman developed a technique called exothermic ablation to attack cancerous tumors of the liver, a relatively rare condition. When it was determined that the procedure and device might also be used to treat a leg problem known as chronic venous insuffiency—which affects about 9 million Americans—a large-scale entrepreneurial venture began to take shape.
In-House Software Start-Ups
The OTC has kept two software start-ups in-house and expects eventually to spin them off to outside operators.
CaSTT: Commerce and Search for Technology Transfer
Founded in February 2010
www.license.umn.edu (search for CaSTT)
Originally designed for internal use by the OTC, this is a web-based e-licensing, administration, and management application for technology transfer offices, of which there are hundreds across the nation.
Early Learning Labs
Founded in May 2010
This web-based tool, created at the College of Education and Human Development, allows educators to track the language progress and literacy readiness of preschoolers using a quick, efficient, repeatable process known as IGDIs (for individual growth and development indicators).
The path from discovery to marketplace can be long and winding, expensive and risky. The University, through the OTC, can garner millions in revenue on critical discoveries, but the institution is also on the hook for bad decisions. Many were made in the years before Mulcahy and Schrankler arrived on campus, in 2005 and 2007, respectively.
Every time an idea is patented, it can cost the OTC between $15,000 and $20,000 in legal fees. And sometimes patents don’t produce any revenue. In the years before Mulcahy and Schrankler, the OTC started up 120 companies, Mulcahy says, but only one grew enough to have an initial public offering.
The journey from the lab bench to the patient or customer can take from a couple of years to—in the case of some pharmaceuticals—a decade or longer. Schrankler describes six stages between the time an inventor has an idea and a deal is closed on a license or is launched as a start-up company. Each stage is navigated by the OTC’s staff of strategy managers and marketing managers, who first must learn of the invention from a researcher and then determine the commercial potential for it. That is followed by an initial patent application to protect the intellectual property; the development of a market strategy and securing an “innovation grant” of, perhaps, $250,000 to keep the research and development going; acquiring worldwide patents and courting prospective licensees; and then deciding whether to grant a license to an established company or to create an OTC start-up.
It’s during these stages that midcourse corrections might be made to the technology and the target market. XO Matrix Medical moving from a liver cancer application to leg veins is a good example. Another is start-up Neurendo Pharma, which is based on a molecule created by U professor of medicinal chemistry Philip Portoghese, whose research focus is anesthesia. But entrepreneur and inventor Lance Ehrke and diabetes expert Tom Clemens, both based in Wisconsin, realized the same molecule, in small doses, could benefit patients with obesity and type 2 diabetes.
“We discovered there was a more efficient use for Phil’s molecule,” Ehrke says. “It was a ‘eureka’ within a ‘eureka.’ ” With that discovery, Ehrke worked with the OTC and Portoghese to start Neurendo Pharma in early 2010. With diabetes and obesity rates on the rise throughout the world, the market potential for the new drug is eye-popping.
Business leaders who have had contact with the OTC in recent years say the operation has become more focused and business friendly since Schrankler, a former Honeywell executive, took over. Rob Cohen is a former executive at St. Jude Medical and now CEO of U start-up Miromatrix, Inc., which is exploring groundbreaking regenerative tissue research by Doris Taylor, director of the U’s Center for Cardiovascular Repair. Cohen has dealt with numerous tech transfer offices around the nation.
“I frankly think it’s spectacular,” Cohen says of the U’s OTC. “It is among the very few times I’ve ever dealt with a tech transfer office that understands how business is done. Most places don’t, and that’s what normally screws up a transaction.”
A natural marriage
Transforming research into commercial opportunities that benefit the University and the public is what Tim Mulcahy lives for. As the U’s vice president for research, Mulcahy eagerly anticipates the future but is also somewhat annoyed with the lack of understanding on the part of legislators and other critics.
When he arrived in the Twin Cities almost six years ago, Mulcahy was confronted by a business community that believed the U was an “impenetrable” institution, a black hole of unreturned voicemails and unreachable officials, that needed to be more fully engaged in the economic development of the region. North Carolina’s Research Triangle, Wisconsin’s Biotechnology Center, and Boston’s 128 Corridor were pointed to as models Minnesota should emulate.
“We had to take the tech transfer operation from an anemic state and put it on steroids,” Mulcahy says. “If we wanted to play in the big leagues, we needed to step up and be much more deliberate in our planning, our resourcing, and our strategies around technology commercialization.”
Still, lawmakers in St. Paul have been impatient for U innovations to translate into new companies and jobs and until recently haven’t invested in helping the OTC develop businesses or offered tax credits for investors who will. “The thing that frustrates me, quite frankly, is how naïve some of the critics are about what’s involved in launching a start-up company that will ultimately culminate in sustainable jobs,” Mulcahy says. “There seems to be an assumption that starting up a company in a university is a cost-free enterprise.” Not so.
| Marc von Keitz, an engineer with the U’s BioTechnology
Institute and director of its Biotechnology Resource
Center, is helping to navigate start-up company BioCee’s
path to the marketplace.
Creating jobs is just one way to measure tech transfer. And Mulcahy says state leaders must pay attention to Minnesota’s business “ecosystem” and more effectively invest in University discoveries.
Besides the external challenges, there remain lingering, albeit fading, internal tensions. Some faculty members are wary of the influences of the corporate world on their research. Others have questioned putting energy into commercialization when they have a full plate of other professional demands. As a way to offer incentive, soon after Mulcahy arrived, “technology transfer” activities were added as one of the planks for a faculty member achieving tenure.
“There should be a natural marriage between science and business,” Mulcahy explains. “Some think there should be no influence of the outside world, but the states and federal government are investing with the idea that this research is going to help the country. This is not a social welfare program. There is an inherent expectation that what we do here is going to get commercialized.”
Says Schrankler: “The whole idea for research is that it benefits the public good. That’s what we’re here for, to help get it out to the public.”
Meanwhile, XO Thermix Medical continues to wend its way to the marketplace. It continues to seek investors. The exothermic process needs to be further tested. Then there are the tricky matters of the FDA approval process and whether medical insurance will reimburse for the procedure. Selzer figures XO Thermix’s leg vein innovation won’t make it to market for three to four years.
By then, however, hundreds more University discoveries will have reached the OTC, and dozens of suit coats and lab coats will have come to the table to talk innovation and business.
Jay Weiner is a Twin Cities–based writer and author of This Is Not Florida: How Al Franken Won the Minnesota Senate Recount.