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Tips for entrepreneurs working with universities

on July 27, 2012 Source: Kauffman Foundation

One positive trend in life science entrepreneurship is that universities are increasingly partnering with entrepreneurs to help them bring new products to market.

“Universities are developing new models in how they work with individuals and government,” says Mike Beckloff, VP and general manager of Beckloff Associates, a scientific and regulatory consulting group owned by Cardinal Health. “Academic institutions are becoming more aware of the value of their R & D, and trying to find ways to capitalize on their investment to bring in more research dollars. We're on the verge of seeing some major changes in how drugs develop in university systems.”

Regis Kelly PhD, a former UCSF professor, agrees. “Increasingly, universities are deciding to come down from their ivory towers and deciding to do something about the problems of society,” says Kelly, director of the California Institute for Quantitative Biosciences (QB3).

QB3 is a partnership between the state of California, private industry, venture capital, and the University of California campuses at Berkeley, San Francisco, and Santa Cruz. QB3 is one of four California Institutes for Science and Innovation established in 2000 to ensure the future of the state's economy by promoting research and innovation.

Coupling innovation centers and universities is “a new model that is working very well,” says Kelly, who has led QB3 since its founding in 2004. With more than 200 researchers, QB3 has grown to over 220 research labs with 40 members of the National Academies and two Nobel laureates; helped launch 65 companies that have raised over $230 million in capital; and formed three major industry partnerships.

QB3 provides a number of services for startups. They include the QB3 Garage system (which provides lab and office space), QB3 Startup in a Box (a package designed to take entrepreneurs from an idea to a well-structured company), the QB3 Accelerator (in the works — a membership program for startups to reduce costs of operation) and financing through Mission Bay Capital, its seed-stage venture fund.

QB3 has a screening facility to assess the efficacy and safety of new drugs, Kelly says. “We have tried to 'de-risk' companies as much as possible.”

Nicholas Franano, M.D., CEO of Kansas City-based Novita Therapeutics, can provide an entrepreneur's perspective on partnering with universities.

Franano discovered a method of rapidly and persistently dilating blood vessels while a research fellow at Johns Hopkins Hospital.  After leaving Hopkins, Franano formed Proteon Therapeutics with a co-founder in 2001 and licensed the rights to the intellectual property.  Franano then set up Proteon to develop PRT-201, a recombinant human protein, for clinical use as a “biological stent” for patients with chronic kidney disease and peripheral vascular disease. 

Franano says the technology transfer office at Hopkins helped him through the licensing and startup process, “knowing that PRT-201 could generate over a billion dollars a year in sales and create millions of dollars per year in license fees for the university, even with a modest royalty rate.  If that occurs, the $40,000 investment in salary and lab support will have generated a very attractive return” said Franano. 

“If I could give one piece of advice to university technology transfer officers it would be to focus on helping commercial partners get products to market successfully, rather than achieving certain deal terms.”

The process of securing the license agreement with his university was a learning process for Franano. 

“What really helped me was educating myself about the process, and finding attorneys and advisors who were on a first-name basis with the technology transfer officers I was negotiating with,” he explains. “These consultants advised me on how the process worked at Hopkins. Hiring someone who was local and familiar with the university worked really well for me.”

Proteon, now headquartered in Waltham, Mass., negotiated a deal with Novartis AG in March that gives the Swiss company an option to buy Proteon for more than $550 million. The sale could go through in 2013, pending results from the phase 2 clinical trial of PRT-201. 

Franano says he has one regret: “relinquishing my royalty as the inventor, which I did to get the most favorable terms for the license.  I had venture capitalists advising the royalty was 'double-dipping', but if I had fought harder, I might have gotten to keep it.”

Franano's current company is developing medical devices for cardiovascular and renal diseases.

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