In Michigan, technology spun out of the University of Michigan is firmly entrenched in the startup success stories that get the most press: HandyLab, Accuri Cytometers, and the like. What’s less publicized is the key role Wayne State University’s technology has played in major companies like Asterand and the California-based SciClone Pharmaceuticals.

Wayne State is particularly renowned for its contributions to chemical technology, and, earlier this month, the university hired Harl Tolbert—a former pharmaceutical executive with an extensive business development, licensing, and IP management background—as its associate vice president of technology commercialization tasked with building relationships with startups.

“Once upon a time, I wanted to be a researcher,” Tolbert says. “Then I became drawn more to the business part of science. I made my way out of the lab to a medical clinic in Illinois, and that whet my appetite for understanding how science, medicine, and business intersect.”

Tolbert comes to Wayne State after working in sales and business development at Abbott Laboratories and Pierce Chemical, both located in Illinois. When a job opened up in the technology transfer office at Tulane University, the Louisana native jumped at the chance to return to his home state and raise his children closer to family. Then, about a year later, Hurricane Katrina hit.

“We decided to leave New Orleans,” Tolbert says. “It was really painful, but everything was so uncertain. We didn’t know if we’d be able to rebuild our home or even re-occupy our neighborhood.”

He and his wife had a pact to relocate to the first city that offered both of them a job, and that ended up being Rochester, NY. Tolbert served as the associate director for biological sciences in the University of Rochester Medical Center’s Office of Technology Transfer before landing the job at Wayne State.

Though Tolbert was only slightly familiar with Detroit before accepting his position, he was very familiar with Wayne State, thanks to mentors throughout his career who had intimate ties to the university.

“Wayne State has a reputation for great achievements in chemistry,” he adds.

Tolbert says he plans to increase the school’s efforts to commercialize its technology by pitching both fresh technology and older technology to startups, particularly those in the realm of life science applications that involve human cells or tissue. He’s also seeking ways to develop technology despite the relative lack of funding that university research typically receives, such that the technology is “one or two steps” beyond the earliest stages.

“There’s a need for more bridge funding,” Tolbert says. “That’s true for all universities, and it’s true for Wayne State.”

One advantage Wayne State’s Office of Technology Transfer has is that it’s located in TechTown, the university’s startup incubator and a hub for local innovation. Tolbert imagines that his proximity to TechTown’s entrepreneurs will lead to “a lot of brainstorming in the hallways,” and the chance to not only interact, but keep tabs on companies that are interested in licensing Wayne State’s technology.

“We want to work with more startups in Detroit and the Southeast Michigan region,” Tolbert says. “Entrepreneurs tend to be a little more receptive to early-stage technology. We just have to be creative in how we engage them so that we can help them, and they can help us.”

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When Ken Nisbet arrived at the University of Michigan in 2001, the Office of Technology Transfer (OTT) was an office in name only.

Like at most universities at the time, tech transfer at U-M was an afterthought, a low priority enterprise usually staffed by people with little or no industry experience.

But after witnessing the success of Stanford University and the Massachusetts Institute of Technology, the U-M began mining its intellectual property vaults for potential gold.

“We’ve always been a great research university,” says Nisbet, executive director of OTT. “We had all of this great stuff. But they don’t always translate into commercial opportunities. Being in the Midwest, we have to try a little harder.”

That extra effort has paid off. Under Nisbet’s leadership, the university has spun off 93 companies and generated about $168 million from royalty/equity income, including the sales of startups like HandyLabs and HealthMedia. The U-M enjoys a strong reputation from venture capitalists inside and outside of Michigan.

In the past “universities were difficult to work with,” says Koleman Karleski, the managing director of Chrysalis Ventures in Kentucky, an investor in HealthMedia. “But over the years, schools have become sophisticated in undestanding their technology and figuring how to structure intellectual property so it leaves the university. I think it’s clear that the University of Michigan has picked up on that.”

At the same time, the U-M faces long term questions over whether it can, or even wants to, be a commercialization powerhouse on par with elite institutions on the coasts. The school’s $1.2 billion in research expenditures is among the highest in the country yet its tech transfer output is relatively modest compared to other schools who spend far less on research.

“The U-M has done a fabulous job,” says Marc Weiser, managing director of RPM Ventures in Ann Arbor, who works closely with the university. “But I think it can do much better.”

Having lived in Boston, Seattle, Minneapolis, and Michigan, and having reported on technology across the country, I’ve observed an ambivalance towards tech transfer in the Midwest that’s not as prevelant on the coasts.

With the exception of the University of Wisconsin, Midwest research institutions like the University of Minnesota and Mayo Clinic don’t seem to have really embraced the aggressive entrepreneurship that could fully maximize the economic potential of their IP.

Nisbet also takes a measured approach to converting university IP into cash.

“We’re not trying to maximize revenue,” Nisbet says. “We’re trying to maxmize deployment of technologies and sometimes it’s leaving that last nickel on the table.”

Still, “we love to have huge exits,” he says.

U-M has certainly invested quite a bit of time and money positioning itself to be an economic powerhouse. Last year, the school debuted its Venture Accelerator, a 16,000 square foot maze of offices and wet lab space at the former Pfizer reseach and development facility on the north campus. The accelerator already houses three university spinoffs with two more on the way.

Nisbet has hired professional staff to vet technologies and recruited local entrepreneurs to advise startups. He also wants to tap the university’s 400,000 strong alumni network around the country to help out.

“We do all of this because we’re not Boston,” Nisbet says.

But could it be? In 2009, the U-M spent $1.02 billion on research, topping schools like … Next Page »

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Plymouth Ventures Partners stands to cash out big from Becton, Dickinson’s (NYSE:BDX) pending acquisition of Accuri Cytometers in Ann Arbor, MI.

But the University of Michigan, where the technology originated? Uh…not so much.

Plymouth was one of Accuri’s first investors when the company spun out of the university in 2005, providing around $2 million in funding and helping to raise about $1 million more.

The investment firm, based in Ann Arbor, MI, currently owns about a 6.2 percent ownership stake in Accuri, according to founder Ian Bund.

BD did not disclose a purchase price for Accuri, though it stands to reason that Plymouth and other local investors like Arboretum Ventures will soon get a big check—or at least a big upfront check followed by future milestone payments.

In 2009, BD bought HandyLabs, another medical device startup in Ann Arbor, for $275 million.

Accuri is a private company and does not release key financial measurements like sales, profits, or year-over-year sales growth percentages. But the company has displayed strong growth in recent years, expanding beyond its core markets in the United States and Europe into Asia and South America.

In May 2010, Accuri announced it sold its 500th cell counting machine, which can cost anywhere from $49,000 to $71,000 per unit. So we’re talking about $25 million to $35 million in theoretical historical revenue, based on today’s prices.

The U-M, however, apparently has left some money on the table. Despite owning equity in most of its startups, the school does not hold any stake in Accuri.

The school structures deals that will best suit the needs of its spinouts, which can include equity and/or royalty streams. Usually, that equity ownership gets watered down into the low single digit percentages over time as outside investors put more money in, taking lots of new shares in return, and diluting the value of the original stake granted to the university.

Historically, when U-M spinoffs get acquired, that means the university gets hundreds of thousands of dollars to a couple of millions of dollars in revenues.

Winning big payouts is not the primary goal of the university, says Ken Nisbet, executive director of the school’s technology transfer office. Rather, the university hopes to deploy its technology to benefit society in the quickest and most efficient manner possible, he says.

Still, investment exits are not a bad thing, Nisbet says. The school has reaped financial benefits from sales of other university spinouts, including HandyLabs, Arbor Networks, and HealthMedia.

Nevertheless, Nisbet says, in hindsight, he wishes the school would have owned a piece of Accuri.

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“Many people watching tonight can probably remember a time when finding a good job meant showing up at a nearby factory or a business downtown,” President Obama said during his State of the Union address last night. “You didn’t always need a degree, and your competition was pretty much limited to your neighbors.”

“If you worked hard, chances are you’d have a job for life, with a decent paycheck and good benefits and the occasional promotion,” he continued. “Maybe you’d even have the pride of seeing your kids work at the same company.”

For the people of Detroit and Michigan, this America of years past holds special resonance. Yet the once almighty automobile industry that has defined this region for so long is a shadow of its former itself.

As the new editor of Xconomy Detroit, I offer a simple message: Get. Over. It.

That’s not to say we should ignore the Big Three, which have recently shown signs of a sustainable turnaround. And I’m sure plenty of Michiganders, most way smarter than me, are already going about the business of getting over the auto glory days, pinpointing Michigan’s ills and working on creative ways to overcome them. Indeed, more often than not, it’s the rest of the country that identifies Detroit more by its past than its future.

But having spent the majority of my career in the Midwest, I’ve observed a natural tendency among its people to lament over yesterday, an almost inbred nostalgia that cripples ambition and reinforces inertia. In Minneapolis, where I worked at MedCity News and the Star Tribune, that nostalgia manifested in sometimes odd ways.

People stubbornly called companies by their old names: Target was Dayton’s, U.S. Bancorp was First Bank, Wells Fargo was Norwest. I (half) joked I would punch the next person who told me Medtronic founder Earl Baaken invented the battery powered pacemaker in his garage as if it had happened yesterday instead of five decades ago.

Minnesota, though, enjoys the benefit of a highly diversified economy that includes 20 Fortune 500 companies, including retailers (Target, Best Buy), banks (U.S. Bancorp), manufacturing (3M), food (General Mills, Cargill), healthcare (UnitedHealth)and most importantly, medical devices (Medtronic, St. Jude Medical).

Michigan does not have that luxury. Ten of the state’s 18 Fortune 500 firms … Next Page »

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The Dana-Farber Cancer Institute in Boston made headlines earlier this month after siding with Novartis in a brewing legal battle with a Dana-Farber spinout, Gatekeeper Pharmaceuticals. The disagreement stems from both companies claiming they are the rightful licensees of certain intellectual property (IP) created by Dana-Farber researchers.

The IP, originally committed to Gatekeeper via an option agreement, was later determined to fall under a broad 2005 alliance with Novartis, which granted the pharma exclusive rights to certain Dana-Farber projects. This dispute over who controls the licensing rights to a potential cancer drug is sure to bring attention to the issues inherent in broad strategic alliances between academia and industry.

It’s common for companies to sponsor the work of an individual lab or to support a specific project, but these types of broad institutional strategic alliances that grant rights to wide areas of technology were once rare, even controversial. But they have been proliferating in recent years. Washington University in St. Louis (Pfizer), Cancer Research UK, the University of Pennsylvania (AstraZeneca) and the Salk Institute (Sanofi-Aventis) are a few who have inked deals within the last couple of years. While many of these academic institutions are wading for the first time into this style of arrangement, the Scripps Research Institute has managed large strategic industry alliances for the better part of the last three decades and currently counts Pfizer and Novartis as major corporate partners.

At Scripps, these deals have evolved to include research funding and IP licensing components. They provide important benefit to both Scripps and our corporate partners. Scripps gains valuable research and discretionary funds, used to seed early research projects and recruit/retain top faculty, in addition to enabling access to expertise and infrastructure more prevalent in a pharmaceutical company (e.g. specialized animal models). In turn, our partners gain access to the kind of transformative research that is uniquely enabled in academia.

Despite the obvious benefits, broad research alliances such as these can also present challenges-inadequate communication, misalignment of incentives and a community perception that the academic partner is inaccessible to other potential industrial collaborators. These challenges need to be managed properly if both parties are to realize full value from the relationship.

Broad alliances involve a large amount of information exchange, the sheer volume of which necessitates regular attention. Systematic, frequent and open communication … Next Page »

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One common complaint I hear from biotech entrepreneurs is that negotiating a license agreement with a university can be a nightmare. There are universities—some of them within the very top echelons of academia—that are infamous for having technology transfer people who are described as very difficult to work with.

It’s not that surprising that these two factions of the life sciences ecosystem—the intellectual property generators in academia and intellectual property seekers in companies—clash over their perceived value of this key asset.

Usually, entrepreneurs and investors come to the negotiating table arguing that a discovery they seek to license, while extremely promising, is a huge bet. Patents for laboratory-based discoveries are seldom supported by exhaustive preclinical research, let alone evidence of efficacy in humans. A startup licensing IP has a lot of work to do, and hundreds of thousands of dollars to spend, before it really knows whether the discovery will lead to a drug candidate. Also quite often a patent is but one small piece of the IP arsenal a company needs to gather, so its individual value may actually be quite small, even if it is crucial that the company claim hold of it.

Universities, on the other hand, have to put in a significant amount of money financing patent applications, so they want to recoup that early on when licensing to a company. The cost to get a single US patent can be $30,000 to $60,000, says Cathy Innes, director of the Office of Technology Development at the University of North Carolina at Chapel Hill. “The university owns all the IP, so very quickly it can end up with $200,000 to $300,000 in IP costs and you’re not making money on the company yet,” she says. Aware that only a small percentage of life sciences discoveries ultimately succeed, but that those which do can become real cash cows, universities also want a good deal on royalties in the event a discovery turns into a popular drug or device.

So, as usually happens, these two factions, through their lawyers, end up spending a lot of time negotiating terms, tugging and pulling at this and that clause, with each side trying to squeeze a better deal for themselves while thinking the other side is greedy. A lot of time is wasted exchanging documents that sit with the other party for days or weeks before coming back. People who do these kinds negotiations for a living say that each and every time it feels as if they’re reinventing the tech transfer wheel, even though, for the most part, the same issues come up again and again. That can’t be too much fun.

That’s why it’s so refreshing to see Innes and her team at UNC take up the tech transfer world by storm with their newest invention: a one-size-fits-all express licensing agreement. They call it the holy grail of tech transfer, though critics, I reckon, think of it more as heresy. Either way, it’s gutsy.

The terms are non-negotiable and the licensing agreement is offered to every UNC-based startup—the company can decide to take it as is, or leave it and negotiate the old-fashioned way. The terms are not very sweet for the university: a 1 percent royalty on products requiring FDA approval following clinical studies and a 2 percent royalty on all other products. The university takes … Next Page »

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If only funding for biofuel startups were as omnipresent as spilt oil in the Gulf. That’s not the case, of course, as biofuel firms have struggled to find cash. Yet Qteros, a Marlborough, MA-based developer of cellulosic ethanol, has a plan to remove some of the typical financial aches from its business.

Qteros, which has raised nearly $30 million in venture capital to date, has developed an experimental process for making ethanol from plant waste and other non-food sources that could someday make the cost of biofuels competitive with fossil fuels. John McCarthy, CEO of the startup, joined the company in January after engineering a $90 million partnership between his previous employer, the Cambridge, MA-based biofuel developer Verenium (NASDAQ:VRNM), and the energy giant BP (which is, of course, at the center of the oil spill crisis in the Gulf of Mexico).

In an interview yesterday, McCarthy said that Qteros doesn’t need as much capital as some of its competitors to succeed.

Lebanon, NH-based Mascoma, for one, has fallen behind schedule in raising money to build a cellulosic ethanol plant in northern Michigan, company CEO Bill Brady told Xconomy last month. Brady said that such facilities cost north of $100 million, but he declined to reveal exactly how much his firm needs to finance the project.

Qteros, conversely, doesn’t want to build or operate ethanol plants. The 50-person firm wants to make money from licensing its technology to other companies that have, at least in some cases, already invested in building ethanol facilities, McCarthy said. The startup needs capital to fund its research and development, but that amount will be way less than the amount needed to erect ethanol plants.

In Qteros’s licensing model, some ethanol producers would incorporate its technology into their existing plants. McCarthy said that retrofitting existing facilities to use his firm’s technology would be less expensive than … Next Page »

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Seems everybody is getting what they need out of medical device startup HistoSonics, a University of Michigan spinout that recently collected $11 million in Series A financing.

Ken Nisbet, executive director of the U-M Tech Transfer office, got what he calls a “dream come true,” a kind of poster child for everything his office can do to help good ideas leave the lab and enter the marketplace.

Chris Gibbons, the company’s president and chief operating officer, found a new company to jump right into after the success of her last U-M-launched startup.

A group of top U-M scientists get to see their ideas produced in the real world-and not simply in academic papers.

Oh, and men who suffer from enlarged prostate might find relief through a device that can noninvasively both image and attack their condition, without the need for incisions or surgery.

First, the news: The $11 million Series A round came in January and was led by Venture Investors, based in Ann Arbor, MI and Madison, WI. Also on board with the financing are Fletcher Spaght Ventures, Hatteras Venture Partners, Early Stage Partners, and TGap Ventures.

Nisbet beams like a proud parent when it comes to HistoSonics. His office, along with the Coulter Translational Research Partnership at the U-M Department of Biomedical Engineering, provided initial funding and know-how to help the inventors take their project to the next level. They did that by matching them with experienced executives and mentors. The Coulter Project teamed a urologist from the U-M Medical School with the biomedical engineers. And the Tech Transfer Center provided a “mentor-in-residence” in the form of Jim Bertolina, a medical device expert from Kalamazoo who is now the company’s chief technology officer.

That’s where Gibbons came in. She had been involved in the launch of U-M startup Sensicore, a company that developed sensor networks for water testing. As chief financial officer, Gibbons helped guide Sensicore through to its acquisition by General Electric in 2008. So, she was ready for a new challenge. Or, as Gibbons puts it, “What do I do when I grow up?”

She found the answer at Venture Investors in Ann Arbor, where she landed a gig as an … Next Page »

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From Adamis to Zogenix, we’ve got the A to Z in San Diego life sciences news. Here’s your chance to catch up now.

—Zogenix said it has raised a total of $71 million for the anticipated launch in January of its needle-free, drug-and-device delivery system for migraine and cluster headaches. The San Diego life sciences company, which said it had raised $51 million three months ago, disclosed that it had raised an additional $20 million from Chicago Growth Partners.

—Nexus Biosystems, a life sciences tools company based near San Diego in Poway, CA, announced plans to acquire Aurora Biotechnologies of Carlsbad, CA, for an undisclosed price. Both companies specialize in the storage and management of biological samples used to study genetic traits and human disease, among other things.

—The FDA’s rejection of an insomnia drug for the second time this year must be keeping some executives awake at night at San Diego’s Somaxon Pharmaceuticals (NASDAQ: SOMX)). The FDA says that Somaxon’s doxepin (Silenor) wasn’t effective enough to meet the agency’s standard for approval.

—Luke profiled Scott Forrest, the 32-year-old director of business and technology development (i.e. tech transfer) at The Scripps Research Institute. Since joining Scripps 10 months ago, Forrest says his goal is to do a better job of spinning out its renowned biomedical science into startup companies, as well as its potential drug candidates that might someday be commercialized.

—There’s a new biotech in town, Pfēnex, which was spun out by Dow Chemical with venture backing from Signet Healthcare Partners. The San Diego biotech specializes in developing a variety of protein-based drugs, vaccines, diagnostic reagents, and biosimilars using technology derived from a bacteria that secretes a fluorescent pigment.

—Adamis Pharmaceuticals of Del Mar, CA, has agreed to a merger with San Diego’s La Jolla Pharmaceutical, which recently dropped efforts to get its shareholders to approve its liquidation plan. Under a reverse merger by the boards of both companies, La Jolla Pharmaceutical shareholders will get as much as a 30 percent ownership of the combined company.

—Luke described the work of Tony Manning to develop “bispecific” antibodies at Biogen-Idec, which is based in Cambridge, MA, and operates a San Diego research facility. Manning spearheads a group that is engineering a new class of antibodies to hit two disease targets on cells, not just one.

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Against the backdrop of a broad decline in venture investing nationwide, some concerns have been raised about San Diego’s hometown VCs and whether they are continuing to actively invest. But San Diego remains a vibrant community for venture capitalists to invest.

We enjoy diverse industries including biotech, wireless, software, cleantech, and more. Good money follows good deals. Great companies find a way of getting funded. Recently the San Diego Venture Group hosted a cleantech panel that consisted of three eminent venture capital partners located in the Bay Area and Los Angeles who are investing in clean technology. Each one oversees a portfolio that includes promising companies in our region. They were astounded at the 600 people who registered for the San Diego event, and the quality of some of the entrepreneurs they spoke with afterward.

Currently, we simply face limited liquidity in our markets. As a result, many venture capital firms are focused on nurturing the existing companies in their portfolio so they can survive this challenging funding cycle. Those firms that have the capacity to invest are finding it’s a great time to do so, with valuations being more realistic.

I have a greater concern about fostering innovation in our region. We need an efficient technology transfer process in our university system to commercialize some of the exceptional intellectual property we have in this region. Stanford University has mastered this process. Innovation is one of the most critical components to economic recovery in our country. Improvements that drive productivity are critical, and technological innovation will play a major role in putting the financial stability of the nation back on the right track. History indicates that the countries and companies that invest in innovation and research and development during an economic downturn will be best positioned to benefit when the economy recovers. Innovation has been one of the leading drivers of economic growth for the past few generations. Technological advancements have helped create a global economy, raise average incomes in many countries and lifted millions of people into the middle class.

The Obama administration has an opportunity to boost U.S. economic competitiveness and spur broad-based economic growth through targeted reforms of our country’s patent system, scientific research-and-development, and workforce development programs. Our patent system and today’s federal programs were designed to address 20th-century problems, not the new challenges posed by globalization and worldwide economic distress.

Today, VC firms outside San Diego are funding the majority of new venture deals in the region. Many are delighted to come here to work with innovative companies. Our regional challenge is not necessarily the VC’s who live and work in San Diego. Our challenge is to stimulate more innovation that can be commercialized out of our IP-rich universities, companies and DoD environs. Highly innovative companies solving real problems with a large market opportunity will attract money. Money follows great deals.

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[This is the second part of a series on how the process of identifying venture-backed startups and commercialization opportunities at the University of Washington is evolving---Eds.]

How does the University of Washington Tech Transfer office view its ongoing relationship with venture capitalists?

On Wednesday, we reported on how venture firms around town are going about their business, working with researchers at the UW and looking for the next big startup. The focus was on recent changes at UW TechTransfer—with the high-profile hires of Linden Rhoads and Janis Machala, both prominent leaders in the tech-business community—that seem to have led to increased involvement with industry and venture capital. I wanted to hear Rhoads’s top-level perspective on this, as well as some more specifics from a few local VCs. I also dug up a couple intriguing bits of news, and things to look for down the road.

Rhoads first stressed the importance of outreach to the community. “We’re hosting many representatives from area firms, as well as Boston firms and other areas, and venture arms of pharmaceutical companies, but given the economic realities, none of that activity has turned out to be the most important to us,” says Rhoads. “Most important to us is the depth of our relationships with our traditional VC partners. It goes far beyond their actual portfolio companies.”

In this “far beyond” realm is the work that Seattle-area venture capitalists do to help recruit star faculty, serve on UW committees, and, of course, meet with the school’s researchers to advise them on commercialization possibilities.

Last month, UW TechTransfer held its first half-day retreat (including an advisory board meeting) since Rhoads took the helm. She says they hosted about 50 top business leaders in a room on campus for five hours: people like Nick Hanauer of Second Avenue Partners, Bob Nelsen of Arch Venture Partners, Matt McIlwain and Greg Gottesman of Madrona Venture Group, Ron Howell of the Washington Research Foundation (WRF Capital), Cameron Myhrvold of Ignition Partners, Bill McAleer from Voyager Capital, and Chad Waite from OVP. (The list of who’s who keeps going— Alan Frazier, Carl Weissman, … Next Page »

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We’ve been writing for months about the renaissance in startup activity at the University of Washington since Linden Rhoads came to campus to run tech transfer.

The big ideas, and the fire in the belly, are easy to find coming from UW these days (Arzeda and EnerG2 pop to mind), but as any businessperson will tell you, starting companies is hard. Joe Eichinger, one of the savvy entrepreneurs Rhoads is leaning on to advise UW faculty, told me he’s been cautioning researchers to think things through a little more, nurture their ideas a little longer, before taking the leap with a startup.

“One of my sore spots is that things sometimes come out of the UW too soon, before the intellectual property is fully developed,” Eichinger says.

Spinning out too soon with a promising idea can create lots of problems, says Eichinger, a veteran medical device entrepreneur with CoAptus Medical, AcousTx, Therus, and Ekos. The faculty inventor might envision one narrow application of an idea, without seeing other potential uses that might be a lot more valuable. If all the far-reaching IP gets licensed to one startup focused on the first application, and that startup drives an extremely hard bargain on licensing other applications to other companies, the idea could get bottled up forever. UW could miss the opportunity to start several companies. And young faculty members otherwise on the tenure track could see their careers derailed from research and teaching by getting wound up in a misguided venture, Eichinger says. “They can get starry-eyed over startups sometimes,” he says.

He ticked off a list of intriguing technologies that aren’t quite ready to emerge in the commercial arena:

—Imagine contact lenses that could be embedded with tiny electrical circuits, powered by small amounts of sunlight. This is the kind of thing featured in The Terminator. The potential applications are endless. The military might want these circuits to detect when soldiers step into a biowarfare chemical zone. They could help people with poor vision surf the Web. They could pick up on subtle biological signals, like whether a diabetic’s blood sugar is out of whack, or whether pressure is building behind the eye that might cause glaucoma. The gaming industry, obviously, sees potential for virtual reality to immerse players in games.

The technology for such lenses has been brewing in the labs of two promising young UW faculty on the tenure track—Babak Parviz in electrical engineering, and Teung Shen in ophthalmology. “It’s breakthrough technology,” Eichinger says. “They are going to be superstars in the future.” But some fundamental questions … Next Page »

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On Monday, Bellevue, WA-based Intellectual Ventures signed an agreement with the Indian Institute of Technology-Bombay to license some of the university’s inventions and to work on technology commercialization strategies with its researchers, as reported by CIOL, Express India, TechFlash, and other outlets. It’s not really big news by itself—Intellectual Ventures has formed similar partnerships with other institutes in India, as well as in China, Japan, Korea, and soon, Singapore—but it fits into the broader strategy the firm is pursuing around the world to foster invention.

Last fall, Intellectual Ventures opened offices in five Asian countries in an effort to gain access to a much wider pool of inventors and talent. Led by global head of technology Patrick Ennis, a physicist and former managing director at Arch Venture Partners—and other members of Intellectual Ventures’ senior leadership team, including co-founder and president Edward Jung—the company is building relationships with prominent academic scientists in Asia, and setting up partnerships whereby it can license certain inventions in exchange for helping with patents and commercialization. The strategy reminds me a lot of Microsoft Research, which has set up labs in China and India in the past 10 years and built partnerships with local university researchers and administrators. (This blueprint is not surprising, given that Intellectual Ventures’ co-founder and CEO Nathan Myhrvold was the founder of Microsoft Research.)

The reception Intellectual Ventures is getting also reminds me of Microsoft Research. While most university officials see the partnerships as benefiting their researchers and increasing the flow of innovation, critics have rolled out the standard “patent troll” fears that the company is coming in to buy up all the best intellectual property—which will only be assuaged by years of relationship building and repeatedly demonstrating that these sorts of deals can benefit both sides.

Nevertheless, Intellectual Ventures’ Indian operation seems to be off to a strong start. It is now staffed by about 15 people, led by Ashok Misra, the former head of IIT-Bombay and a highly respected polymer materials scientist.

I caught up with the staff of Intellectual Ventures to hear about the workings of the Indian university partnership. Nicholas Gibson, one of the firm’s directors of business development in Japan, said via e-mail, “The agreement with IIT-Bombay is important as it gives [us] more direct access to top flight university-based Indian inventors. The deal also gives IIT-B access to commercialization possibilities … Next Page »

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It’s taken as a given that universities are integral to the innovation process. Researchers create technology, the university finds a licensee or a startup company is formed to develop the invention, and products are created that drive growth in the economy.

But that is a simplistic view of a complex system. And today, a select group of researchers from around the world is gathering at U.C. San Diego to help examine the process of university-industry interaction and technology transfer in more detail. Their focus is a series of questions—that have long been asked but have yet to be definitively answered and are of abiding interest here at Xconomy: What is the true connection between research universities and innovation, and how does it work? How does knowledge really move from the academic laboratory to industry? And are there new ways to improve and accelerate the process?

Sponsored by the Kansas City, MO-based Kauffman Foundation, the seminar is intended to help analyze a global research effort focused on what industry wants from universities, and how those goals can be achieved. The research, part of an onging multi-year study, consists of interviews and other data drawn from more than 90 companies in four countries where innovation and new technologies play a key economic role: the United States, Japan, Canada, and the United Kingdom.

“What we are trying to accomplish is for people to think about what incentivizes and supports a positive interaction between the university and industry,” says Mary Walshok, a UCSD Associate Vice Chancellor and a seminar host. The participants are “people who care about these things, and who are in a position to influence government policy in the U.S., Japan, Canada and the U.K.”

The three-day event begins with a presentation this evening by Larry Smarr, director of the California Institute for Telecommunications and Information Technology, which Walshok says operates as an example of university-industry “best practices.”  The invited participants … Next Page »

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One of the biggest startup ideas at the University of Washington is getting ready to leave the academic nest. Arzeda, which designs custom-built enzymes on computers that can do things Mother Nature never could, has recruited Michael Martino as its CEO and secured commitments from OVP Venture Partners and WRF Capital to anchor its founding $12 million Series A financing round, Xconomy has learned. (The deal hasn’t closed yet, but that’s expected in April, Martino says.)

I caught up with the company’s three scientific founders—Eric Althoff, Daniela Grabs, and Alexandre Zanghellini—earlier this week at their temp digs in the UW TechTransfer office. They were eager to tell me all about the company they are building, and why it has enticed an experienced public company CEO like Martino (formerly of Bothell, WA-based Sonus Pharmaceuticals) as well as the investors to get on board.

The first thing to know is that Arzeda (Ar-ZAY-duh)  is all about enzymes. These complex protein molecules do all sorts of essential jobs in the human body, and are found everywhere in nature. Enzymes in your stomach chop up the steak you eat for dinner, and break down drugs like aspirin in the liver. Scientists have manipulated these handy molecules for all sorts of industrial uses, from cleaning up oil spills to detergent ingredients. Denmark-based Novozymes is one example of a dominant player in the industrial market, while Cambridge, MA-based Genzyme has become one of the world’s biggest biotech companies by making engineered copies of important enzymes for people who suffer from hereditary deficiencies, like the one that causes Gaucher’s disease.

What those companies have in common is that they start from a cookbook dictated by Mother Nature, from which they can make incremental tweaks. But after a decade of research in the UW lab of biochemist David Baker, supported by supercomputers, the Arzeda trio has found a way to design custom enzymes on a computer screen, with all sorts of ideal properties beyond the scope of other companies that essentially start with an enzyme from nature. They have shown it can be done in publications in Science and Nature, and the next step will be to do this in a larger scale commercial setting.

“We don’t need a starting point with an enzyme. We don’t need to improve on the starting point. We design the starting point,” Grabs says. Zanghellini adds, “We are expanding on what nature does.”

Lots of things still need to fall into place before Arzeda can really start humming to execute on this vision. For starters, it is getting a license from the UW to an academic software program called Rosetta that has been modified for commercial use, as well as a few catalytic components for enzyme reactions, plus some full-blown patented enzymes the founders worked on with Baker at the university.

Then comes the financing. Besides OVP and WRF, Martino said he is still courting … Next Page »

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One of the world’s best-selling vaccines, Merck’s Gardasil, is quietly producing some serious money for an unexpected beneficiary—the University of Washington.

Thanks to some hard-fought patent litigation from the 1990s that ended up strengthening and extending the lifespan of a critical piece of UW intellectual property, the university is now raking in a windfall of royalties on Merck’s cervical cancer vaccine. This product’s success has been a driving force that has caused the licensing income UW gets from the Washington Research Foundation to more than triple in the past three years, to $38 million in 2008 from $12 million in 2006.

I learned about this story from Ron Howell, the CEO of the Washington Research Foundation, the Seattle-based organization that manages some critical UW intellectual property from the 1980s. While $40 million a year might sound trivial to an institution that has a $1 billion-a-year research enterprise, it is actually a critical resource to the UW because the cash doesn’t come with a lot of strings attached, and can be used for things like recruiting and retaining star faculty, supporting entrepreneur-in-residence programs to commercialize university inventions, and purchasing state-of-the-art equipment, Howell says. It’s all been a boon to Linden Rhoads and her team at UW TechTransfer, who are on a mission to make UW better at spinning off innovations into the business world.

“What it means is that we’re going to be able to support more scholarship and research,” Howell says. The WRF particularly wants to aim its gifts toward faculty that are approaching “tipping points” where they just need a little more research support to enhance intellectual property that could be the basis for a company, Howell says.

So how did WRF come to be in this enviable position? The tale begins in the early 1980s, when UW researcher Benjamin Hall discovered a technique for making complex peptide molecules in yeast, one of the founding innovations of the modern biotech industry. This technique is today licensed to more than 50 companies, who use the method to make insulin, enzymes for detergents, proteins to make cheese creamier, or for modern vaccines.

This lucrative method was the subject of intense patent lawyering in the early 1990s, when a group of 10 companies from around the world challenged its validity in Europe, Howell says. The opponents included Novo Nordisk, the world’s largest maker of insulin for diabetes, Seattle-based ZymoGenetics, and Japan-based Takeda Pharmaceutical. “They knew the technology was valuable, and they scoured the earth to dig up dirt,” Howell says, to try to suggest that Hall and the UW didn’t really have a valid claim.

After about five years and millions of dollars of lawyering from both sides, the patent was overturned in Europe. But it was only a “pyrrhic victory,” Howell says, because all the investigation uncovered evidence that buttressed the UW’s claim in the U.S. to the point of making it “bulletproof,” Howell says. And, importantly, since this proceeding dragged on in legal limbo for so long, it meant … Next Page »

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Yesterday, we shared the first part of a conversation with Linden Rhoads, the University of Washington’s tech transfer boss. She talked about how she’s making the office hustle a lot more, in particular by brokering meetings between faculty and venture capitalists to brainstorm about the best research ideas with commercial potential.

Today, in Part Two, Rhoads talks more about how this is supposed to work in practice, and a little bit about what life is like at a huge institution after spending her career in startups. Here are edited excerpts.

Xconomy: How will you measure success in your first year?

Linden Rhoads: We are still measuring success, by all the typical metrics. But we’re also looking at the number of resumes that our venture capitalists send to department chairs. We’re looking at the number of faculty candidates that we helped recruit, or for whom we arranged meetings. We’re looking at the number of VCs and industry executives that we introduced to UW researchers, even outside of a licensing agreement. We’re tracking all of that.

X: When you first started, you said you were having a lot of meetings with Bay Area VC’s and the local VCs. What came out of those meetings?

LR: For one thing, in March, we’re going to have our first half-day retreat advisory board meeting since I joined. We’re going to have an entirely reconstituted advisory board that has very significant venture capital representation. This office will be looked on, given our new mandate for ourselves, as a vehicle for increasing the relevance of the university to the region. The members of the advisory board will see themselves as personally responsible for helping to see that an increasing number of researchers at the university are focused on translational research. The breakout topics at that meeting will be all about how to help us do that.

We’re seeing many more venture capitalists on campus now than I’ve ever seen before. It’s as staggering, in the case of some departments, as a 10-to-1 difference in terms of numbers of visits.

You’re obviously familiar with Janis (Machala). I think it would be fair to say before I recruited Janis, this university has never had anything like the Rolodex that I brought, or that she brought, or that the two of us collectively have brought. Or her capability. She’s just a very high-bandwidth individual who has tremendous capacity for coaching, and mentoring would-be entrepreneurs. She has a track record that engenders tremendous good will, and the university is benefitting from that work.

X: What kind of reception are you getting culturally? I know there are some people who say the university has a pure-research mentality that says business is full of a bunch of bad guys.

LR: I think there are still a few holdouts who wish we could put the genie back in the bottle. They wish, ‘Why won’t researchers just go back to being pure of heart?’ You know what? That really amounts to very few people anymore. Most people here … Next Page »

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Silicon is a wonderfully cooperative element. It takes relatively little energy to promote the electrons in a silicon crystal from their usual, docile orbits around the atomic nuclei into wild, free circulation. That’s what makes silicon a semiconductor—valuable for electronic switching devices such as transistors, sensing devices such as the CCDs in cameras and X-ray machines, and energy-generating devices such as photovoltaic cells.

But silicon would be more wondrous if it were even more responsive—if an incoming photon needed less energy to knock loose an electron, for example, or if a single photon could kick loose many electrons. In pursuit of this vision, chemists, physicists, and engineers have spent decades trying out various ways of modifying silicon crystals—for example, by doping them with atoms of arsenic or other elements that put more free electrons into the mix.

Almost ten years ago, graduate students in the laboratory of physics professor Eric Mazur at Harvard University stumbled across a new way of making silicon more responsive: they found that if they blasted the surface of a silicon wafer with an incredibly brief pulse of laser energy in the presence of gaseous sulfur and other dopants, the resulting material—which they called “black silicon”—was much better at absorbing photons and releasing electrons. And this week, after nearly three years in hyper-stealth mode, a spinoff company with an exclusive license from Harvard to commercialize the process has begun talking with reporters.

Executives for the company, called SiOnyx, believe that its technology will help semiconductor manufacturers build far more sensitive detectors and far more efficient photovoltaic cells, using essentially the same silicon-based processes they currently depend on—thereby revolutionizing areas such as medical imaging, digital photography, and solar energy generation.

The venture-funded startup has emerged with a bang, securing exclusive coverage by New York Times technology writer John Markoff in today’s edition. But SiOnyx CEO Stephen Saylor and principal scientist James Carey, a PhD graduate of Mazur’s lab, also showed me around their Beverly, MA, facility last week, on the condition that this post would appear after Markoff’s story.

“You’ve never been able to detect light the way this stuff detects light,” says Saylor, referring to black silicon’s remarkable sensitivity to incoming photons, especially photons at infrared energies, which pass through normal silicon as if it were transparent. That property could make it an ideal, and inexpensive, replacement for less-sensitive detectors in devices as varied as X-ray and CRT machines, surveillance satellites, night-vision goggles, and consumer digital cameras. “It means that you solve a clear and obvious pain point for a very large number of customers,” Saylor says.

And because black silicon is just silicon that’s been roughed up a bit by femtosecond laser pulses and chemical treatment, SiOnyx’s technology could theoretically be integrated into existing semiconductor fabrication lines without much disruption. “You can do everything we’re talking about without extraordinary, Herculean effort, and you can do it in a way that fits with high-volume manufacturing flows,” says Carey.

SiOnyx was incorporated in 2005, secured the Harvard license in early 2006, and obtained $11 million in venture financing from Harris & Harris, Polaris Venture Partners, and RedShift Ventures in 2007. The company is going public with its story because “we have enough momentum now both with strategic partners and with the technology that it makes sense at this point to share a little more about what we are up to,” say Saylor.

Harvard, for its part, is holding up SiOnyx as one early result of the ongoing overhaul of the university’s technology licensing efforts. The school gained a reputation early in this decade as being unresponsive, even hostile, toward faculty and students who wished to commercialize discoveries made in the university’s labs, especially in areas outside of biotechnology and drug development. For years after the discovery of black silicon in Mazur’s lab, the school’s technology transfer office “wasn’t very excited” about the work, according to Carey.

But in 2005 the university brought in university licensing veteran Isaac Kohlberg to rebuild its technology transfer operation from scratch. Saylor and Carey say it was Kohlberg and his staff who finally understood black silicon’s potential and ironed out the licensing deal that made SiOnyx possible.

“The exciting steps being taken to develop [black silicon] for commercial application serve as even more evidence of the entrepreneurial energy that continues to gel and accelerate at Harvard,” Kohlberg says in a press release set to be issued tomorrow by SiOnyx and Harvard’s Office of Technology Development.

Bob Metcalfe, a general partner at Polaris Ventures who sits on SiOnyx’s board, thinks Kohlberg is right: “Harvard seems to be getting its act together in patent licensing,” he says.

Exactly what makes black silicon such an effective absorber of photons is a question that even Mazur and Carey couldn’t answer at first. The material is one of many offshoots of work going on in Mazur’s lab in the late 1990s using femtosecond lasers—devices that can emit an intense pulse of light lasting only a millionth of a billionth of a second. Mazur lab researchers found that zapping a silicon wafer with such pulses in the presence of sulfur hexafluoride gas—an experiment initially carried out on a whim—left the wafer festooned with tiny cones. Silicon roughened in this way soaks up almost all of the light that strikes it in visible wavelengths, appearing black—hence the name.

“It took several years for us to begin thinking properly about what we had,” says Carey. “The original thought was that the surface roughening process was what created the advantage.” The researchers hypothesized that photons were bouncing from cone to cone—and that the more times they bounced, the higher the likelihood that they’d be absorbed, thus dislodging electrons. But then Carey and his coworkers realized that black silicon was also absorbing infrared light, “which you can’t explain just by … Next Page »

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Linden Rhoads of the University of Washington isn’t the only person in town trying to push a powerhouse research institution to become a hotbed for startups. Ulrich Mueller joined the Fred Hutchinson Cancer Research Center in Seattle almost a year ago to be its vice president for industry relations and technology transfer. His mission: Forge more collaborations with the biotech and pharmaceutical industry without selling the institution’s soul.

The “Hutch,” as it is known, is one of the world’s leading biomedical research centers, with 2,844 employees and an annual research budget of more than $308 million in fiscal 2009. Yet it doesn’t tend to spin off companies like its peers around the country. One startup emerged from the Hutch in 2006, while the Mayo Clinic spun off nine, Massachusetts General Hospital created eight, and M.D. Anderson Cancer Center gave rise to two new companies, according to an annual survey by the Association of University Technology Managers.

Mueller previously had been managing director of technology transfer at M.D. Anderson in Houston. He has a doctorate in cell and molecular biology from Baylor University, so he can speak the language of the lab. He also was closely involved with forming two startup companies there, so he has learned how the venture capital game is played. I sat down with him at his office to ask how about what he aims to accomplish at the Hutch.

Xconomy: What kind of situation did you inherit here in terms of technology transfer? What did the lay of the land look like?

Ulrich Mueller: My predecessor did a great job of really setting up a good office and good practices as far as looking at and evaluating technologies being developed here. A real focus had been on finding startup opportunities, and obviously we’ve had some successes there with Ikaria and Apoptos. So it was very nice for me to walk in to an office that was well set up.

X: What was really your mandate when you came in, from Lee Hartwell (the center’s president, and a Nobel Prize-winning cancer biologist)?

UM: Both Lee and our board are really interested in seeing us continue to expand our activities. They want continued consistency in terms of helping develop technologies, and really bringing ways to expand new opportunities for our scientists, potentially through interesting new industry collaborations. It’s not just about what we can out-license, or build up and out-license to companies, or maybe even do startups every now and then when we find the right opportunity. It’s also about where we may be able to bring in technologies from companies to help some of our research programs.

X: Does that mean bringing in more sponsored research dollars from companies?

UM: Yes, in some cases. Where companies are interested in developing certain capabilities in, say, molecular diagnostics, where we have a good discovery engine. Where can we set up really collaborative, sponsored research agreements where they would fund some of that work and potentially get rights to developing products from that work.

X: What’s the biggest challenge in this job? What do you need to improve around here?

UM: A lot of what we do is an educational process for both sides. We have a lot of scientists who are very well-versed in entrepreneurial activity, but a lot of other scientists aren’t very familiar with it, and don’t understand the potential value of finding commercial partnerships. Part of our job is to work with the faculty and find the right opportunities. Not to the point of worrying about patenting every single discovery here, but finding those opportunities where working with a commercial partner makes sense.

On the outside, a lot of people don’t understand what’s being done here at the Hutch. One of the things we’re doing in this office is developing relationships with local biotech companies and the investing community, and also some of the larger groups on the West Coast and East Coast, and really providing communication on the type of things we’re doing. Maybe they’ll be interested in investing or a strategic partnership.

X: What’s surprised you here, since you’ve had a year to look under the hood? … Next Page »

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Tom Ranken is the first to admit he can get a bit ornery on the subject of venture capital in the Northwest. “It used to make me foam at the mouth when VCs would say there’s plenty of money out there and all the good ideas get funded,” he says.

But now Ranken, the former CEO of the bioinformatics company VizX Labs, thinks the VCs may be at least partly right. He has had the change of heart after doing a research project this spring that dug into why the Northwest doesn’t create more biotech startups. He and Jim Severson, the former vice provost of technology transfer at the University of Washington, identified all 21 life sciences startups formed in the state from 2006 through 2007, and interviewed CEOs at 11 of them about what the region needs to provide more fertile grounds for new companies. (Click here for the full WBBA report)

It’s hard to find good comparisons on startup creation by region, Ranken says, but one study has suggested that a startup is formed for every $65 million in sponsored research. By that rule of thumb, the region should have produced three times as many startups, he says.

The study, paid for by the Washington Biotechnology and Biomedical Association and the City of Seattle, debunked several popular perceptions about the drought, Ranken says. It found there isn’t a shortage of management talent, and the region is actually exporting some of its talent. Venture capital is nearly impossible to get for small companies that aren’t likely to go public, yet it can be scored for companies with big ideas that could someday generate more than $100 million to $200 million a year in revenue. Technology transfer isn’t as big of a road block as it once was to commercializing ideas from the University of Washington. But one real issue at the region’s anchor university is an academic culture that frowns on entrepreneurial efforts, Ranken and Severson found.

“The academic culture here seems to be that once the knowledge is published, it’s done,” Ranken says.

Here’s a sampling of recommendations from the report:

—Perform more research to understand what Ranken and Severson dubbed “Good Life Science Businesses.” These are the firms that do the industry’s grunt work—managing clinical trials, contract manufacturing, and running toxicology tests. These companies collect steady fees and fulfill key functions in the local biotech machine, but get little recognition because they will never become the next biotech to change medical practice, like Amgen (NASDAQ: AMGN) or Genentech (NYSE: DNA). “The Good Life Sciences Businesses are seen as the Ma and Pa grocery stores, when Ma and Pa come in to the store, do a little work and go home,” says Ranken, who calls that perception “garbage.” Examples of low-profile, yet important, companies are Quintiles, a contract research organization based in Research Triangle Park, NC, and Axio Research, a small contract research organization in Seattle, he says.

—Round up some of those former Immunoids and Icosians who scattered after corporate takeovers and re-connect them in a life sciences angel network for companies that don’t qualify for venture funding. “Local angel networks have little life sciences expertise and angel capital is nearly impossible to identify and access in Washington,” according to the report.

—Copy the model of Accelerator, the startup incubator affiliated with top venture firms and Leroy Hood’s Institute for Systems Biology, and apply it to medical devices, diagnostics, and (here we go again) the so-called Good Life Sciences Businesses.

—The WBBA needs to redesign its networking events that connect entrepreneurs to other entrepreneurs, or hook up inventors with entrepreneurs. “These activities probably will require many different foci, venues, times, etc. to remain fresh and vital,” according to the report.

The report has made an impression on the WBBA, says Jack Faris, the trade group’s president, who sat in on some of the interviews and heard some feedback first-hand. “We want to pursue most if not all of the recommendations,” he says.

One recommendation that’s dead on arrival? Amending the state’s Constitution to allow direct state aid to startup businesses. Some executives would like to see that happen in order allow the state to do something aggressive on a global scale, like Massachusetts Gov. Deval Patrick’s initiative to put $1 billion into supporting life sciences over the next 10 years.

“Here it would take a two-thirds vote of the legislature and a vote of the people,” Ranken says. “It’s politically impossible.”

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