IU Research and Creative Activity Magazine
Indiana University Research & Creative Activity

On the Human Condition

Volume XXVIII Number 2
Spring 2006

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David Wilkes
Photo © Tyagan Miller

D. Craig Brater
Photo courtesy IU School of Medicine

Mervin Yoder
Photo by Sam Riche, Indianapolis Star

Paging Dr. Start-Up

by Eric Schoch

Here's one way to make David Wilkes laugh. Ask the Indiana University School of Medicine physician and professor if, 10 years ago, he would have considered turning his research discoveries into a business.

"Hardly," he says. And then he has a good laugh.

But starting a business is in fact what he's doing, following up on a patent application he made in 2001, which in turn was based on his lung transplant research that dates back 14 years. He's starting down the business road with a School of Medicine colleague, Michael J. Klemsz, associate professor of microbiology and immunology, who came to Wilkes with the idea. Klemsz was taking a business class on how to be an entrepreneur, and he needed a class project.

Business classes for scientists. Doctors filing for patents. Internal funding for experiments that the NIH won't pay for, but that potential business investors want to see. Dinners for budding faculty entrepreneurs. MBA students helping scientists create business plans. The entrepreneurial culture that many have credited for explosions of science and commerce in places such as Boston and Silicon Valley is budding at Indiana University, in the Kelley School of Business, the IU School of Law, and in particular, at the IU School of Medicine.

"It's a culture shift but it's a great one because the university can start to realize the promise of things people have done here," says Wilkes, who is Calvin H. English Professor of Medicine, professor of microbiology and immunology, and director of the Center for Immunobiology. "And the culture shift is very real."

The evidence is in the numbers, says Mark Long, president and CEO of the Indiana University Research and Technology Corp. (IURTC), which handles patenting, licensing, and other technology transfer tasks for the university.

Licensing revenues to the university from its scientists' discoveries have been rising steadily in this decade, coming in at a little more than $4 million last year. While the School of Medicine dominates those numbers, the proportion coming from licenses from other parts of the university is increasing.

More significantly, more faculty are choosing to take their ideas to market through new start-up businesses rather than licensing. From IURTC's birth in 1997 (as the Advanced Technology Research Institute, or ARTI) through 2002, there were a total of three start-up companies, Long says. In the last three years, there have been three a year.

That's a start, though it's not something to make America's high-tech business centers on the coasts nervous. Few would accuse Indiana's universities of pumping out new high-technology businesses on the order of, say, Stanford or MIT.

Ironically, the legal framework for universities and their scientists to commercialize their ideas has strong Hoosier origins, even if Hoosier institutions of higher education have been somewhat late to the game. The federal law setting down the ground rules for university technology transfer was created by the Bayh-Dole Act of 1980. The Bayh in this case was Birch Bayh, the longtime Indiana senator (1963–81) and father of the current Indiana Sen. Evan Bayh (the Dole was then-Sen. Robert Dole of Kansas).

The goal of the legislation was to help ensure that inventions with commercial potential were developed in ways that would benefit the public--rather than languishing in research labs--by giving research organizations the ability to retain patent rights and revenues from commercial developments.

But the ability to patent, promote, and license such technology and creating a culture that promotes such things are two different matters.

Part of the problem is training, notes Wilkes. Scientists and physician-researchers aren't trained to start businesses, or think about whether a laboratory finding has commercial potential.

But there's more to it than that.

Medical school faculty now find it acceptable to do well as well as do good, says Dr. Ora Hirsch Pescovitz, executive associate dean for research affairs at the IU School of Medicine. Traditionally, "it was almost like business was a dirty word for someone going into medicine, especially for someone going into academic medicine," she says.

But attitudes are changing, and not just about the notion of potential profits. Rather, there's a growing realization that starting a business is a way to translate the benefits of research more rapidly to the public.

Over the past several years, IU School of Medicine Dean D. Craig Brater has aggressively encouraged new entrepreneurial attitudes, in particular through collaborations with the IU Kelley School of Business and its Johnson Center for Entrepreneurship and Innovation, directed by Donald F. Kuratko.

For example, the School of Medicine has jointly promoted a course on business start-ups with the Business School, has arranged for MBA students to work with School of Medicine faculty, and has started organizing dinners for budding faculty entrepreneurs to meet with like-minded colleagues and officials of BioCrossroads, the state's life sciences development and marketing organization. The Medical School's internal online newsletter regularly includes relevant items, from information on obtaining Small Business Innovation Research (SBIR) grants to meetings of the local Biomedical Entrepreneurs Network.

"We see the challenges that are facing this region and the state," says Brater. "We are a public institution, so we have an obligation to figure out what we can do to help address the vexing economic issues the state faces."

The overt emphasis on business creation has emerged from the school's efforts to double the size of its research enterprise, both by adding some 400 scientists and by adding the space necessary for them to work. So far that has meant the completion of two new research buildings, a third nearing completion, and a fourth just underway.

In fact, Brater and Pescovitz see recruiting scientists as not only a boost to the school's research prowess, but an economic development effort in its own right.

Brater points to the recent recruitment of Zhong-Yin Zhang, new chairman of the Department of Biochemistry and Molecular Biology, who brought $1 million in grants, 11 new hires, and past patent success when he came to IU. It's much the same--perhaps more of a sure thing economically--as when a government lures a small business to the state, he says.

One of the most significant developments from the Medical and Business School collaboration has been the creation of a Johnson Center "outpost" at the IURTC's Emerging Technology Center in Indianapolis. Heading up that effort is Robert C. McDonald, a former executive with Eli Lilly and Co. and Anthem Inc. (now Wellpoint), who has had an appointment at the Medical School for 13 years. Armed with both M.D. and M.B.A. degrees, McDonald now heads Aledo Consulting Inc.

One of McDonald's first efforts was to link M.B.A. students from the Kelley School with nascent businesses emerging from the School of Medicine, helping the biomedical research faculty with business plan development. McDonald says he's seen the process repeatedly: Someone has a good idea, then comes up with a business plan, which lures a chief executive officer, who rewrites the business plan, which then brings in some money.

"What we're trying to do is get that first business plan. That gets you a professional manager," says McDonald.

Some early-stage money is also now available from the School of Medicine, which has put together $500,000 to fund start-up activities that academic funding sources, such as the National Institutes of Health, won't touch.

The first such investment was in EndGenitor Technologies Inc., the start-up created in 2005 by IU School of Medicine hematology/oncology researchers Mervin Yoder and David Ingram to commercialize their research on the stem cells that create the linings of blood vessels. The money was needed for proof-of-concept tests during the start-up phase. The seed funding was valuable, Yoder says, although he's not able to talk about the details for competitive reasons.

"At the time the Medical School gave us the money, it was an important part of the work that needed to be done to continue the enthusiasm for progressing to a company," he says.

Like his colleague Wilkes, Yoder says "starting a business would not have crossed my mind 10 years ago."

In fact, it wouldn't have crossed his mind recently, either, but for the visit by a representative of IURTC following up on the invention disclosure Yoder had made to the IURTC.

"He came to us and said, 'This looks interesting.' That's what was not present 10 years ago: encouragement to disclose IP [intellectual property], and follow-up from IURTC."

That reflects a culture shift at IURTC, Long says: "We have done a lot of fieldwork getting into the professors' labs rather than let the inventions roll in."

In Bloomington, meanwhile, Kuratko is reaching out to potential investors that now mostly prowl the East and West Coasts. He has set up a West Coast advisory panel of venture capitalists in the Palo Alto, Calif., area, and is creating a similar group in New York City.

"Schools like MIT and Stanford have created a community of investors around them," Kuratko says. "I want them to see what we're doing at Indiana University so eventually they will want to fly in here and have a closer look."

What's next?

First of all, the entrepreneurial spirit needs to continue to spread, says Brater.

"We have pockets where there is activity. In other areas there is none," he says. "For a lot of faculty, their reflexes are not geared to think about IP, to consider before publishing whether there's any IP they need to protect. We need to make it part of the daily thought process."

To encourage that thinking, technology transfer activities need to gain the same importance as traditional measures of faculty productivity such as publishing and obtaining external grant funding, says Brater.

Such metrics now are part of the annual reviews of departmental performance and budgets, he adds.

Ora Pescovitz says the school also needs to ensure that its conflict of interest policies and systems meet current needs, that they manage potential conflicts, and that they are helpful and supportive. As an example, faculty shouldn't be encouraged to apply for federal SBIR grants without also getting the school's help with the legal and other such requirements: "Faculty shouldn't have to figure out these things by trial and error," she says.

At the university level, says Long, IU needs to develop a seed capital investment fund to provide early-stage financing for its young start-up companies, similar to the Trask Fund at Purdue and funds at other universities. And Long isn't reticent about suggesting that his own unit needs more people and resources to keep up with the increased activity at the School of Medicine.

Finally, both the university and the Medical School need to continue recruiting the scientists who will keep the momentum going. Long also mentions Zhang, of the Department of Biochemistry and Molecular Biology.

"He's got his department cranked up. His department has put out 24 disclosures this year. It's infectious."

Eric Schoch is a science writer in the IU School of Medicine Office of Public and Media Relations.