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UM's Life Sciences Institute Seeks to Fund Tech Development Through Philanthropy

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The University of Michigan’s Life Sciences Institute has launched a philanthropic fund that seeks to raise $10 million over the next five years to speed the commercialization of technologies developed by its scientists, particularly in the areas of neurodegenerative disease, diabetes, and cancer.
 
The program, called the Innovation Partnership, follows in the footsteps of similar programs established by US universities and non-profit research institutions in recent years in an effort to bridge the so-called funding gap and move innovations from the lab to the marketplace.
 
However, the Innovation Partnership will rely solely on philanthropic donations without giving the donors a financial stake in commercialization of the research — a structure that most closely resembles a non-profit disease research foundation.
 
LSI, a multidisciplinary collaborative institute that operates as an independent entity of UM, has thus far raised approximately $1.6 million in donations for the Innovation Partnership program. The cash, which LSI started raising late last year, has come mostly from members of the LSI Leadership Council, which comprises alumni, VCs, private equity investors, politicians, university professors, financial analysts, foundation heads, attorneys, and others.
 
The first awards, which will range from $200,000 to $500,000 apiece, are expected to be made by the end of this year, LSI said. For its part, the institute will provide lab space, equipment, and scientific support reflecting 50 percent or more of donor funds.
 
Proposals from LSI faculty will be evaluated by a committee comprising venture capitalists and business executives with experience managing scientific enterprises, the institute said. Priority will be given to projects that address a “critical medical need” and appear to have high commercial potential, according to the institute.
 
“We had a couple of faculty members that had projects that looked like they were kind of ready, but not quite ready, to form companies,” LSI Director Alan Saltiel told BTW last week. “The one thing that these [faculty] didn’t want to do was go off-site and try to start something that would be a big distraction to them.”
 
Saltiel said that the Innovation Partnership aims to “solve this problem of the energy activation needed to get something started.”
 
Donor capital and LSI’s matching resources will allow researchers to navigate their innovations through the crucial proof-of-concept stage and with the goal of attracting investment by venture capitalists.
 
Saltiel said that the institute expects donations from venture capitalists, UM alumni, current and former associates of the LSI, and generous individuals with an interest in the type of research being conducted at the institute.
 
“We have a lot of people who are just friends of the university and friends of the institute, and people who are supporters and would make donations anyway to the institute to support research,” Saltiel said. “The interesting thing is that the kinds of people we get donations from are somewhat interested in this kind of approach because they are frustrated with the pace of research and want to see things move to the clinic.”
 
Paul Meister, co-chair of LSI’s external advisory board and CEO and co-founder of New Hampshire-based private investment firm Liberty Lane Partners, said in a statement that “there is a huge need to fund research activities after [National Institutes of Health] funding typically stops and before [funding from] venture capitalists typically begins. Philanthropy is the only way to fill this gap.”
 
Philanthropy might not be the only way to fill the so-called funding gap, and the LSI is not the first university or non-profit research institute to try it. Moreover, the Innovation Partnership is not the first academic program to tap into its alumni network for funding or other commercialization assistance.
 
For instance, University of Rochester Medical Center and Strong Health vice president and COO Peter Robinson recently hinted that his institute may turn to alumni for either philanthropic donations or traditional investments to fuel life science research and commercialization.
 

“Philanthropy is the only way to fill [the] gap” in funding that begins when NIH awards dry up and ends when venture capitalists become involved.

“Successful people often want to give back in the way that they became successful, which is why we are more frequently turning to alumni and philanthropy,” Robinson said during the New York Biotechnology Association annual meeting last month. “Campaigns will start including targeted endowments,” he added, noting that it might take a decade or so to gather enough resources from this approach to effectively fill the funding gap (see BTW, 5/21/2008). 
 
Also, Harvard University last year established an evergreen Technology Development Accelerator Fund with $6 million in private donations to enable promising technologies to perform proof-of-concept studies — a program that Saltiel said inspired the Innovation Partnership.
 
In February, Harvard announced the availability of $1.3 million from the fund to support new projects. That capital followed an initial $1.3 million investment made last year that went to several projects at the university. Harvard expects to announce new grant recipients next week (see BTW, 2/13/2008).
 
In addition, Cornell University is attempting to establish a network of potential angel investors culled from the school’s extensive alumni network. The program, dubbed the Cornell Angels Network, will use the Internet to connect with alumni in order to establish a private investment community for Cornell life science startups (see BTW, 5/14/2008).
 
Back in Ann Arbor, UM’s technology-transfer office recently established an internally developed database comprising more than 1,000 experts worldwide — many of whom are UM alumni — available to consult or provide services for entrepreneurial researchers. Called the Catalyst Resource Network, the program does not provide funding from alumni, per se, but offers university labs crucial early-stage services such as business development and market and technology assessment (see BTW, 9/24/2007).
 
But the school’s Innovation Partnership will differ from most of these initiatives because donors will not have a financial stake in a technology if and when it wins funding or is commercialized.
 
“We will not be giving them explicit rights,” Saltiel said. “Their donations will really be regular donations to the universities, and will be fully tax-deductable. And although we expect to be close to them, we don’t expect them to have any kind of explicit right to the technology if it [gets commercialized or] matures and … spins off into a company.
 
However, insofar as the donors will likely be “advisors, friends, and engaged people, we expect that when it comes time to start something on the commercial side, they’ll be in the know,” Saltiel said. “They won’t have any outright advantages over other investors, but they’ll have the advantage of knowing what’s going on.” Some of these donors, Saltiel added, may then want to further invest in the technology.
 
Indeed, the Innovation Partnership model closely mirrors non-profit disease research foundations, which have recently been more active in providing research funding and even tech-transfer funding and services to universities and non-profit research institutes for translational research in their specific diseases of interest.
 
Saltiel said that LSI will focus on a few broad disease categories such as neurodegenerative disease, diabetes, cancer, and infectious disease, and has created a list of candidate projects deemed suitable for first-round funding. This list, Saltiel said, may provide potential donors with a taste of the type of research that will be conducted (see details below).
 
UM officials conceptualized the LSI in 1999 as a hub for collaboration between various UM scientists in a variety of life science disciplines to focus on translational science for human health problems. The institute opened four years later in a $100 million wet lab building on the UM campus.
 
According to Saltiel, the institute now houses some 30 faculty members and 400 total employees in an approximately 250,000-square-foot facility on the UM campus. Saltiel said that LSI brings together researchers from disciplines such as chemical biology, computational biology, structural biology, genetics, physiology, and cell biology.
 
The institute is an independent entity of UM, although all of its faculty have joint academic appointments in one of UM’s schools or colleges. As a result, any IP that is developed at LSI or through the Innovation Partnership program will be owned by the university, but LSI will capture two-thirds of any revenues while the individual investigator will capture the other one-third.
 
“And we will push this out the door through our tech-transfer office at the university,” Saltiel said. “Because they’re working on this with us from the beginning, I think we’ll get a little more attention from them.”
 
Any revenues derived from eventual licensing deals or royalties on technologies developed through LSI would likely be pumped back into the Innovation Partnership “to try and sustain this thing,” Saltiel said.
 
LSI has produced some 40 to 50 invention disclosures to date, but it has yet to spin out a company or execute a licensing deal. In comparison, UM as a whole in 2007 disclosed 329 inventions, executed 91 licensing or option agreements, and launched seven startup firms.
 
“We’ve got a couple of things cooking that I can’t really discuss in terms of some of the technologies,” Saltiel said. “We only started this institute four or five years ago, with about five faculty members. I spent most of my time in the last couple of years recruiting new faculty. Now we’re filled up and are trying to think about the next phase in our development, so that’s what this is all about.”
 

 
The University of Michigan Life Sciences Institute has identified four candidate projects it believes may attract first-round donations through its new philanthropic tech-commercialization fund, the Innovation Partnership.
 
Project: Novel anti-metastatic drugs for cancer therapy
PI: Stephen Weiss, research professor, LSI; professor of medicine and oncology and chief of molecular medicine and genetics, UM Medical School
Problem: In solid tumors, the hallmark of malignancy is the tumor's ability to penetrate a barrier layer known as the basement membrane and gain access to blood vessels that carry cancer cells throughout the body.
Discovery: Weiss and his colleagues found that tumor cells use three enzymes that act as "molecular scissors" to cut through this membrane.
Potential Fund Project: Develop inhibitors to disrupt these enzymes.
Goal: Within two years, determine the value of using selected enzyme inhibitors as the basis for a spin-off company.
 
Project: A new approach for treating neurodegenerative diseases
PIs: Jason Gestwicki, research assistant professor, LSI; assistant professor of pathology, UM Medical School; and Andrew Lieberman, assistant professor of pathology, UM Medical School
Problem: Neurodegenerative diseases such as Alzheimer's and Huntington's arise from misfolded proteins that damage brain cells and trigger a progressive decline in cognitive abilities and motor function.
Discovery: Gestwicki and his colleagues found that stimulating a natural protein called Hsp70 protects against protein misfolding in cellular and animal models of neurodegenerative disease.
Potential Fund Project: Find and develop other chemicals that eliminate misfolded proteins.
Goal: Within two years, create the first class of drug-like molecules that directly targets the underlying cause of neurodegenerative diseases.
 
Project: Novel anti-cancer compounds derived from bacteria
PI: David Sherman, research professor and director, LSI Center for Chemical Genomics; professor of medicinal chemistry, UM College of Pharmacy
Problem: Certain cyanobacteria produce a compound called cryptophycin, a potential anti-cancer agent. Despite the agent’s promise, high production costs have stymied efforts to commercialize it and other, more potent, analogs.
Discovery: Sherman and his colleagues have engineered a series of cryptophycin analogs that possess the compound's anti-cancer properties and may also enable practical and economical manufacturing.
Potential Fund Project: Test the engineering techniques to determine if they are scalable for analog development and commercial drug production.
Goal: Within 18 months, determine if new cryptophycin analogs could be used to treat particularly aggressive and lethal cancers, such as pancreatic and gall-bladder cancer.
 
Project: New approach to treating bacterial infections
PI: David Ginsburg, research professor, LSI; professor of internal medicine and human genetics; Howard Hughes Medical Institute investigator
Problem: Group A streptococci bacteria cause 700 million infections worldwide each year, including more than 500,000 deaths. The bacteria invade human tissues in part by dissolving protective blood clots.
Discovery: The Ginsburg laboratory has identified several compounds that block the bacteria's ability to dissolve blood clots, thereby preventing the infection from spreading.
Potential Fund Project: Identify additional compounds, optimize the best candidates, and test them in mice.
Goal: Within two years, have candidate compounds ready for testing in large animals such as horses (which suffer from a similar infection), with an eye toward eventual human trials.

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