Courtesy of The Gazette
By Matthew Patane
University spin-outs can provide economic boost for Iowa
Most days, Ben Krog works in the University of Iowa’s Translational Research Incubator — TRI, for short — alone.
Four start-ups attempting to commercialize university research are signed up to use the incubator. The university set up the small, on-campus incubator exclusively for spin-out companies that need access to a lab environment but aren’t big enough to need their own space.
The sole full-time employee of one of those start-ups, SynderBio, Krog typically has the space to himself as he works on the company’s device to separate benign cells from malignant cancer cells. The incubator resembles what students may find in their classroom lab setups with room for four lab tables and basic equipment. If they need it, though, the start-ups can rent larger equipment from the university.
The TRI is also just a few minutes’ walk through twisting hallways from the office of Krog’s boss, Michael Henry, a SynderBio co-founder and professor of molecular physiology and biophysics at the university. The company, a spinoff of Henry’s research into the biology of cancer cells, hopes it can improve the separation of benign and malignant cells to help researchers extract more viable samples and aid in their testing.
“For right now, with the size that we are, this is perfect,” Henry said of the TRI.
The TRI is a part of the University of Iowa’s efforts to bolster the commercialization of the work of their professors, such as Henry. Bringing that research out of the lab and to the market, the University of Iowa and Iowa State University say, can mean real-world applications for their technology and a boost to Iowa’s economy.
More spin-outs, they say, means more innovative Iowa companies and more people employed in the state.
“Our mission is to take what we learn, knowledge we generate, inventions we create — how do you get those out to have a positive impact on society,” said Mike Crum, vice president for economic development and industry relations at Iowa State.
In recent years, however, the universities have faced budget cuts at the state level and a competitive environment for federal and outside funds that can make it more difficult for discoveries to reach the market.
The University of Iowa and Iowa State reported $224.4 million and about $219 million in sponsored federal funding — money used for research — in the 2017 budget year, respectively. Both were down from the 2016 budget year by about $16 million for the University of Iowa and $10.6 million for Iowa State.
And while Iowa State has seen a 26.7 percent increase in sponsored federal funding since fiscal 2013, the UI has reported a 9 percent drop.
“Traditionally, universities try and give everything a chance, invest a little bit, make a lot of phone calls and get as many shots on goal as you can,” said Marie Kerbeshian, executive director of the University of Iowa Research Foundation. “With the environment we’re facing now with budget constraints, we’re beginning to recognize we can’t afford to do that anymore because if we try and be all things to all people, we’re going to end up being nothing to everyone.”
Both universities have managed to increase their total sponsored research dollars in the past five years, with ISU reporting $503.6 million in funding, up 54.4 percent since fiscal 2013, and the UI reporting funding of $557.7 million, a 10.1 percent rise.
“It’s really been a treacherous time, and the federal investment has been flat due to sequestration and other factors. It’s another reason we’re really excited about the success of our researchers in landing funding, because they’ve been in a dog-eat-dog environment and done very well,” said Sarah Nusser, vice president of research at Iowa State.
WITHOUT FUNDING, START-UPS ‘GO NOWHERE’
While additional state and federal funding would benefit commercialization and technology transfer efforts, university officials and spin-out company leaders universally pointed to the need for more venture capital in Iowa. As with all start-ups, university spin-outs typically need outside money to survive, they said.
“We can have great technologies and get them into the hands of a start-up, but if that start-up doesn’t have funding, it’s going to go nowhere,” UI’s Kerbeshian said.
A greater density of start-ups and connections to other regions of innovation in the United States, such as “medical alley,” an area around Minneapolis with a confluence of health care companies such as the Mayo Clinic and Abbott Laboratories, also would help spin-out start-ups survive, they said.
“Partnerships with other places that have done this and done this well would be a great way to boost the entrepreneurial culture,” said Susan Wood, president and chief executive officer of Coralville-based Vida Diagnostics, a UI spin-out that has commercialized imaging software to help detect lung diseases.
For Henry and his co-founders, the need for funding and validation of their research helped push the formation of SynderBio.
“The company was really put together to help prove the value of the technology. If we can be successful, then other companies will be interested,” Henry said.
Working as a business also opened SynderBio to different funding opportunities, such as federal and state grants, and hopefully eventual investment from venture capitalists.
If SynderBio makes it in the long-run, Henry said support from the university, state and federal funding programs “would have been key” for the company’s success.
Iowa also will need to find a way to attract individuals with experience running technology-centric companies. Many researchers, university officials said, don’t want to lead a company beyond its starting phases or don’t have the business experience to do so.
Henry, for example, said he wants SynderBio to grow to a point where it needs to hire a chief executive from the outside.
“I definitely have an interest in seeing it be successful, but I know that success will most likely mean that somebody else is really running it,” he said.
‘NOT A READY MONEY STREAM’
Universities can make money from their research discoveries due to the Bayh-Dole Act, a federal law passed in 1980. Rather than having the rights of discoveries from federally funded research go to the government, the legislation let universities maintain ownership.
Iowa’s three regent universities report millions of dollars a year in revenue they received through licenses of their discoveries.
The annual amounts are variable, though, and royalty revenues for all three universities have only surpassed $50 million once in the past 10 fiscal years.
Even so, if state universities are facing a budget crunch, could they turn up the rate of commercialization, rake in more money from royalties and fill in those gaps?
Largely, university research officials said no.
“There is not a ready money stream that is going back into the university that is going to be big enough to support the kinds of budget issues the university faces,” Iowa State’s Nusser said.
While a “home run” invention may come along every once in a while, a vast majority of spin-outs can fail, Kerbeshian said.
“It enables the university to build a new building or create a new program that it might not have been able to before, but you really can’t count on a steady stream of revenue” from commercialization, she said.
One of ISU’s most prominent inventions, lead-free solder, banked more than $58 million in royalties for the university before its patent expired in 2013.
But that technology would be one of the few in the university’s history to have such an effect, Iowa State’s Crum said.
Only four technologies in the history of ISU’s research foundation have earned more than $10 million in revenue, he said.
“I wish I could say, ‘Yeah, if we were hugely successful, this would really help’ because every university is looking for new sources of funds to help students, to help sustain our academic programs,” Crum said. “This area is unlikely to be the one.”
The commercialization process, such as patent filings and compliance, is long and costly, he and Kerbeshian noted.
So, much of the revenue earned from royalties goes back to support the universities’ research offices and foundations.
“The blockbusters for funding research are nice, but when it comes down to it, having a robust technology commercialization program is really a requirement for getting the initial grant funding in the door in the first place,” Kerbeshian said.
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