Growing Great Ideas

Pitt applies conservative business sense, hands-on education, and University support to transform ideas—and the innovators behind them—into commercial successes.

Discovery is funny sometimes. Johnny Huard, associate professor in the University of Pittsburgh School of Medicine’s Department of Molecular Genetics and Biochemistry, never expected it, never really planned for it.

To a degree, it just happened.

While pursuing his quest for a way to treat the degenerative muscle disease Duchenne Muscular Dystrophy, Huard experimented with the idea of injecting healthy muscle tissue cells into patients with the disease. Although most of those cells died, a few seemed to thrive in their new environment.

Further tests confirmed Huard’s hunch: He had stumbled onto stem cells that could be extracted from healthy adult muscle tissue, cultivated, and used to regenerate muscles—not just in Duchenne patients, but in others as well.

It was a great idea, according to senior Pitt administrators, who then took the initiative to patent what they considered valuable intellectual property.

But that’s only the beginning of this story. Huard and his business-visionary colleague, Pitt Professor of Urology Michael Chancellor—with help from the University’s Office of Technology Management (OTM) and a large Midwestern medical technology company—transformed that idea in 2001 into the Pittsburgh-based company Cook Myosite.

Eventually, it could mean big business for the innovators, the University, and the region.

“They are the model for successful commercial innovation at Pitt,” George Klinzing, vice provost for research, says of Huard and Chancellor. “They made a great discovery and, through hard work and persistence, they’ve been able to transform it into a viable, well-funded local commercial entity that will employ people, generate revenue, and contribute greatly to Pitt, the advancement of science, and, just as importantly, Pittsburgh’s economy. It’s the best of all possible worlds.”

In the past several years, such ideas have been cultivated to the point where good collaborative science and good business, coupled with more comprehensive University assistance, are beginning to converge.

“As a major research university, the University of Pittsburgh supports many of the best scientists in their respective fields, and this has long translated into world-renowned basic science and innovation,” says Pitt Provost James V. Maher. “Today, such innovation is more important than ever as we embrace the service aspect of our mission. Growing great ideas—fostering great commercial innovation here at Pitt—is an important part of that mission.”

Growth in the Region

Western Pennsylvania, like many regions in the country, has turned its attention more aggressively toward its universities, with the hope that they will help lead the way in technology commercialization, particularly with transforming ideas into new local businesses, according to Donald Smith, vice president of economic development for both the University of Pittsburgh and Carnegie Mellon University.

“Really, what we have to sell in this region is our universities—access to the intellectual property that they create, access to the human capital that they develop, and the opportunity to partner with them,” says Smith, who also served as the interim president of the state-funded regional life sciences development consortium Pittsburgh Life Sciences Greenhouse. “Ultimately, you get your highest leverage in terms of economic development when the regional economy mirrors the strengths of the university, so that you really get the synergy between the two.”

Among those strengths, Klinzing asserts, are the ideas coming from Pitt faculty and staff—intellectual property that begins with an investment in research and often is transformed into products with commercial value. That investment, he acknowledges, is no small amount.

In fiscal year 2002, the University spent on research an estimated $436 million from external funding sources, according to figures submitted by OTM to the Association of University Technology Managers (AUTM). That investment translated into the submission of 91 invention disclosures from a diverse group of Pitt faculty. Invention disclosures represent the first step in a process designed to protect and, ultimately, license intellectual property. (That number is up from Pitt’s 2001 total of 84 disclosures, which exceeded the national average of 68.5 disclosures per research university.)

Pitt’s OTM also filed 87 U.S. patent applications in 2002, and the U.S. Patent Office issued 22 U.S. patents to the University.

Perhaps even more telling, though, is the fact that OTM secured 33 licenses and options for Pitt’s intellectual property in 2002, including licenses for five start-up companies. (That number was up from 2001, when Pitt executed 20 licenses and options, which equaled the national average, according to an AUTM report; it also spun out four companies, which was twice the average of the surveyed universities.)

Behind those numbers are Pitt faculty and staff who are entrepreneurial by nature and thrive on creating ideas that have commercial potential.

But many of them also have no desire to give up their academic lives.

Pitt’s Academic Entrepreneurs

You could say that Marlin Mickle, an electrical engineering professor at Pitt since 1962, is the consummate academic entrepreneur. For years, he has been developing intellectual property in telecommunications, producing market-able products and even launching a couple of companies along the way.

“I just like to do things that are new and different, creating things that have an impact, things that are used,” says Mickle, who admits to an innovative curiosity that began when he was a youngster who enjoyed dismantling transistor radios. “To me, the innovation process is intellectually rewarding, and some of the ideas are financially rewarding.”

Mickle says he gets many of his ideas from spending time with people from industry and learning about their needs, desires, and problems.

“A lot of people think you need to take a sabbatical to get new ideas and new directions in your research, but to me, it’s the industry people who provide that intellectual stimulation,” Mickle says.

Mickle’s latest adventure revolves around radio-frequency antenna technology that he developed. He presented that technology at Cool Devices 2003, an on-campus poster reception, where he met a local investor and entrepreneur who acquired an option to the technology. The result was a spin-off, start-up venture called Firefly Power Technologies. The company’s motto, according to Mickle, is “Delivering Power to a Wire-Free World.”

Still, Mickle is staying right where he is at the University, acknowledging what he considers his own entrepreneurial limitations.

“Just because you’re able to develop something doesn’t mean you can run a company,” he says. “I’m staying where I can make the most contributions.”

You don’t have to look far to find similar examples throughout the University, as more and more faculty embrace commercial innovation as part of their academic endeavors.

Consider the following:

• Pitt Professor of Chemistry Dennis Curran developed an enabling fluorous technology that helps chemists in drug discovery and development to solve molecular separation and synthesis problems. The University licensed the technology to a spin-off, start-up company called Fluorous Technologies, based in the University of Pittsburgh Applied Research Center in Harmarville. The OTM put the deal together in collaboration with a company called Albany Molecular Research, which provided funding for the start-up. Both Pitt and Curran hold equity in the company.
• Sanford Asher, another Pitt chemistry professor, combined nanoscale and mesoscale quantum dots, colloids, macromolecules, and molecular recognition molecules to develop new photonic crystal materials for optical switching, optical memories, and chemical detection devices. His flagship device is a noninvasive glucose sensor that is applied via a contact lens and changes color according to the level of glucose found in a diabetic patient’s body. Asher is in the process of commercializing the technology through a start-up venture called Glucose Sensing. The technology also offers such testing applications as measuring the levels of certain metals or chemicals in water.
• Robert Getzenberg, a Pitt professor of pathology and director of urological research in UPMC’s Prostate and Urologic Cancer Center, developed a diagnostic technology for bladder cancer that was licensed to an established biotech company called Eichrom Technologies, in Darien, Ill. The product currently is undergoing Phase III clinical studies. Meanwhile, Getzenberg also is developing diagnostic technologies for renal, prostate, and colon cancer. The latter two have been licensed to the start-up venture Tessera Inc.
• Faculty from the Learning Research and Development Center developed a computer software package that provides instructional aids for elementary and secondary education. The University licenses the software to public school systems across the country.
• Staff members in Pitt’s Center for Instructional Development and Distance Education (CIDDE), in an effort to replace a collapsed computer system for managing its entire audio/visual equipment and media services function throughout Pitt, couldn’t find an adequate and reasonably priced new system, so they developed their own. Called OPUS—Order Processing System for University Media Services—it worked so well that staff members began to talk about it at national conferences, according to CIDDE Director Diane Davis. When other universities expressed an interest in the software, the group began working with OTM and the Technology Commercialization Alliance (TCA) in the Office of the Provost to prepare the software for licensing and to explore licensing options.

In Support of Tech Transfer

The U.S. Congress passed a law in 1980 called the Bayh-Dole Act, which was created to foster collaboration between academia and the private sector and to standardize the legal and financial provisions of transferring technology from a university to the private sector.

The following provisions, among others, are required by law: Universities must file patents on promising inventions they develop; they must have written agreements with faculty and staff requiring disclosure and assignment of inventions; they must share a portion of revenue with the inventors; and excess revenue must support research and education. In addition, universities must give licensing preference to small businesses, but must also receive fair market value and consider sustainability of the business.

Like many other universities, Pitt didn’t enter the technology transfer arena immediately following passage of the law. Instead, it waited until lawmakers sorted out the implementation of the law and applied regulations for compliance. In 1996, though, under the direction of Pitt’s provost and the senior vice chancellor for the health sciences, the University launched OTM and, over the next several years, began to lay the groundwork for effective commercialization of intellectual property.

Today, OTM focuses entirely on the business of managing Pitt’s intellectual property. It is guided by the mission “to seek the fair market value of the University’s intellectual property using best business practices for the benefit of the University, its faculty and staff, and the community.”

Good Business Sense

What this means, according to Maher, is that OTM now approaches the University’s intellectual property in a way that “makes good business sense. We’ve developed a good business model where, when deals are made, more attention is paid to marketability of the intellectual property and the long-range income and sustainability of the firm that is to commercialize the intellectual property. Now we’re covering the cost of patenting, and we’re seeing a break-even point. We’ve made significant progress in the last few years.”

Christopher Capelli, director of OTM since 2000, concurs that the independent committee that evaluates the intellectual property for commercial potential has become more and more judicious in its acceptance of viable technologies. Moreover, the University has adopted a more structured stance in its licensing deal-making than many of its peer universities, a stance that has been structured to conform to national best-practice norms.

Some outsiders are quick to criticize the stance, suggesting that Pitt should be more flexible in its deals—and more friendly to those who want to start new companies but have little or no up-front capital. But Capelli, a physician who himself has participated in the commercialization process many times over the years with his own inventions, makes no apologies. He asserts that haphazardly spinning out new companies—especially when they’re undercapitalized—often doesn’t make good business sense for the University or the community.

A new-product-development study published by the Product Development & Management Association in 1991 found, for instance, that only one out of 11 innovations typically succeeds as a commercial venture. Three of those 11 make it as far as the development phase, and only 1.3 actually are launched.

Capelli, who aims for improved odds against failure in the marketplace, says success depends largely on maintaining good business practices, which to him means making deals on well-developed ideas that are both financially sustainable and that pay back the University in a reasonable time. Most deals include an up-front payment, as well as maintenance fees, royalties, and milestone payments with certain requirements to move the technology forward toward commercialization.

An ideal situation, Capelli says, is when he can find a larger company interested in investing in a spin-off, start-up company that would be located in the Pittsburgh region. That’s how he set up Cook Myosite, for instance.

In the end—and after OTM recoups its patent expenses—the inventor receives 30 percent of any income, with the remainder being divided among the inventor’s department, the University, and a fund to support unlicensed patents. Patenting expenses alone sometimes can range from tens of thousands of dollars to occasionally hundreds of thousands of dollars.

“If we do our job well and follow good business practices, then economic development will follow,” Capelli says of the University’s role in economic development.

An Arduous, but Rewarding, Path

Given its mission, OTM does maintain a stringent patenting process as it culls the great from the not-so-novel, according to Getzenberg, a member of the independent Technology Transfer Committee that evaluates University inventions for OTM.

“The first thing we look for in a proposal is its scientific validity,” Getzenberg says of the invention disclosure forms completed by University innovators and submitted to OTM. “It isn’t the committee’s job to judge, but we can help facilitate the process. We may go back to the inventor and say, ‘You need to show data that demonstrates your claim,’ or ‘What clinical significance does this innovation have?’ The scientific strength of the application is very important.”

Just as importantly, Getzenberg says, the committee assesses whether the innovation has commercial potential. This may involve a discussion of which existing companies—or possible investors—might be interested in the innovation.

“It’s a very thoughtful process,” Getzenberg says. “It’s important for us as scientists not only to come up with important discoveries but also to make sure they’re novel and that they’re properly protected so that we can get them out there.”

The People Side of the Process

Fortunately for people like Huard, Mickle, and other innovators at Pitt, the Office of the Provost didn’t stop at shoring up OTM and its management of intellectual property. In 2002, it also launched the Technology Commercialization Alliance (TCA), the University-wide initiative aimed at providing entrepreneurial education, support, and outreach for faculty, staff, and student innovators in their development of commercial innovation.

Initiated by the provost, TCA was created to work in parallel with OTM in helping the innovators navigate the arduous path to commercialization, according to Vice Provost for Research George Klinzing, who oversees TCA. “The TCA is trying to effect change in our culture,” says Klinzing. “We are already getting faculty to think more and more about the commercial applications of their research discoveries, by offering such things as educational classes and access to internal marketing resources as well as by introducing them to potential external partners.”

Adds Capelli, “The quality of invention disclosures is much better, and the outcome is more deals. That is a direct result of TCA’s educational efforts because the research faculty now are understanding how the process works.”

The TCA is made up of an alliance of what Klinzing calls TCA Resource Partners, which are resources throughout Pitt’s campus that provide assistance to faculty. PantherlabWorks, within the Joseph M. Katz Graduate School of Business' Institute for Entrepreneurial Excellence (IEE), provides assistance with business and financial planning as well as with presentation packaging for innovators as they and OTM approach potential licensees and investors. The Office of Enterprise Development serves a similar role in the schools of the health sciences.

The Katz School’s Center for Executive Education also is working with TCA to provide a new education course for faculty and graduate students called Academic Entrepreneurship: The Business of Commercial Innovation. And the Swanson Center for Product Innovation in Pitt’s School of Engineering can help innovators design and build working prototypes of their inventions, as well as manufacture limited quantities of the final product.

In addition, Klinzing notes, TCA spends a lot of its time trying to bring together Pitt’s innovators with private industry and the investor community, as it did when two dozen faculty, staff, and students promoted their commercial innovations at Cool Devices 2003.

“We know how difficult the commercialization process can be, even in the best of circumstances, so TCA is there to make the experience as smooth and rewarding as possible for innovators at Pitt,” says Klinzing.

Why do the resource partners participate?

“It’s an exciting time to be a supporting partner in the commercialization process at Pitt,” says Ann Dugan, director of IEE. “With Pitt’s heightened drive for commercial innovation, we are focused keenly on using our vast years of experience in the business consulting process to help move innovations into the commercial marketplace in Southwestern Pennsylvania.”

For Carolyn Green, director of the health sciences schools’ new Office of Enterprise Development, the goal is to “expand faculty-centered commercialization activities now available through the Limbach Entrepreneurial Center at the University of Pittsburgh Cancer Institute and combine them with an industry-focused business-development initiative.” One of those activities is a commercialization facilitation group that will, according to Green, “take the most nascent idea generated in academia—be it a medical device or other technology—and help it through the necessary development phases to fundamentally reduce the risk and increase the value of that opportunity from a commercial perspective.”

Prototypes are just as important in the commercialization process, says Michael Lovell, associate dean of research, professor of engineering at Pitt, and director of the Swanson Institute for Technical Excellence.

“When someone is developing a new technology and going from an idea to a patent, they need a working prototype,” he says. “So we bring a lot of the theory into practice. It’s extremely important because we’re pushing the envelope to as close to commercialization as we can while also teaching our students to be innovative designers. We’re breeding the next generation of entrepreneurs.”

Mickle is quick to acknowledge the efforts of TCA and its resource partners when it comes to his commercialization success. In addition to meeting his key investor at the Cool Devices reception, Mickle also had attended the Academic Entrepreneurship course and worked closely with the Swanson Center to develop prototypes of his innovation. In addition, he received assistance from OTM and PantherlabWorks staffs to polish his business plan and marketing presentation. While this business is still in its nascent stage, Mickle is well on his way to becoming a model example of Pitt’s OTM-TCA teamwork in commercialization.

Was it worth the effort?

“I’ve enjoyed it,” Mickle says. “I haven’t taken a vacation in years.”

Commercial Choices

Huard and Chancellor know all too well the difficulties of the process, even when assistance is available. Before they could take their idea to a potential commercial market, for instance, they had to decide how to position the technology.

Although Huard set out to treat Duchenne, a disease in which young boys’ muscles degenerate to the point when their hearts no longer can pump, Chancellor determined that a more viable commercial application—in the short term, at least—was to use the stem cells to treat female incontinence. The market, Chancellor said, was enormous; Huard says he was convinced when he saw how much Americans spend annually on adult diapers.

Finding the right company to further develop their muscle-derived adult stem cells also took initiative and well-honed persistence, particularly when it came to convincing potential licensees and investors to commit to their project.

The initial results for Huard and Chancellor were discouraging, they admit. Chancellor says he prepared a 35-minute PowerPoint presentation, only to find out that the investors would be available for only five minutes.  He learned to take cues from Capelli, however, who steered him away from a too-technical presentation.

Collectively taking advantage of their contacts in industry, Chancellor, Huard, and Capelli eventually contacted Cook Biotech, in West Lafayette, Ind. That meeting eventually led to the start-up company Cook Myosite, which currently employs four people, including two from Huard’s own lab.

Huard and Chancellor, meanwhile, remain at Pitt but sit on Cook Myosite’s advisory board. Both are looking forward to the first human trials, scheduled to take place in Toronto in late 2004.

It’s still too early to judge this venture’s success, but such efforts, in general, could have far-reaching benefits for the University and for all those pursuing their innovations at Pitt.

“If you look at the universities that have been most successful in growing their endowments, a huge amount of the contributions come from successful entrepreneurs,” says Smith. “There’s a great deal of wealth being generated through entrepreneurship.”

Prescribing Entrepreneurship

Since its formation in 1984, the University of Pittsburgh Cancer Institute (UPCI) has grown from a vision into what University officials describe as a world-class facility for cancer research and state-of-the-art clinical care and, now, the region’s only National Cancer Institute-designated Comprehensive Cancer Center.

But in a move that demonstrates just how serious the institute is about converting its research into marketable, commercial tools for the diagnosis, treatment, and prevention of cancer, UPCI launched in 2001 what became the Limbach Entrepreneurial Center (LEC).

To launch the center, UPCI received funding from longtime UPCI council member and local entrepreneur Scott Limbach.

“Mr. Limbach’s vision for the center was to provide education to faculty that would help them to guide scientific discoveries toward clinical use,” says Carolyn Green, who was named by UPCI Director Ronald Herberman as the founding director of LEC. “Scott believes that academic research will not achieve its full impact until it makes the connection with private industry. Only through commercialization can our greatest discoveries truly succeed in enhancing the lives of cancer patients.”

Today, more than 600 scientists and health professionals in more than 30 disciplines are conducting research and treating cancer patients at UPCI’s new flagship facility, the Hillman Cancer Center, which was built with funding from many individuals, foundations, and corporations within the region. The Hillman Center serves as the hub in a wide-reaching network of cancer facilities that last year saw more than 25,000 new cancer patients.

The LEC supports UPCI’s research efforts with entrepreneurial education, one-on-one support for inventing scientists, biotech industry networking events, and through proactive industry outreach efforts.

In 2002, LEC expanded its efforts and formed a successful partnership with Alan Russell, Pitt professor of surgery and chemical and petroleum engineering and director of the McGowan Institute for Regenerative Medicine, to serve the institute’s 200-plus faculty members.

More recently, the LEC joined an even bigger commercial innovation effort when it became part of the newly established Office of Enterprise Development, which offers its services to all of the health sciences schools.

“We’re partnering with our research faculty to go from reactive to proactive mode when it comes to technology commercialization,” says Green, who now heads the Office of Enterprise Development.