Medical Device Daily Columnist

There's been a lot of talk in the industry about how to get startup companies and early-stage research projects across that infamous "Valley of Death," the gap that yawns between the research-stage projects and the Phase II clinical stage where most private funds want to invest these days.

An unusual Southern California businessman is pretty sure he has come up with a model that will successfully take university-based technology and drive it into the marketplace – without diluting ownership, without the need for meeting with recalcitrant VCs, and without the challenges of trying to build an industry-experienced team when you actually need their experience.

But there's a somewhat of a catch here: To do this you need to be a billionaire.

It all started in 1985, when the entrepreneurial Al Mann created the Al Mann Foundation for Scientific Research as an incubator to develop neuromodulation devices. The work done there became the springboard to enter clinical trials with cochlear implants, insulin pumps, pacemakers, and implantable devices to restore function in paralyzed limbs and other organs.

In the 1990s, Mann considered the fact that lots of great academic research takes way too long to produce a commercially useful product or never reaches patients at all. After working with several incubators, Mann was convinced that model would not generate the efficient development he had sought.

Rather, he envisioned creating institutes for biomedical development that could be funded with enough capital to hire up to 50 industry-trained employees. This staff could optimize the technology transfer from the university in a way that would benefit patients.

A key point: The university would continue to own the intellectual property and co-manage the institute, which would develop the products all the way into the marketplace for devices, and to Phase IIa for drugs. An industry-savvy board would help with business development to optimize partnering.

Mann believes this model would create better financial return for the university than the classic spinout company, which has the unfortunate tendency of dying before commercialization. He says studies suggest he can provide around five-fold improvement in return to the inventor and the university.

Mann hopes to create up to 15 institutes that can act in an "evergreen" mode, eventually generating product-based out-licensing revenue to feed back into new projects. After selling three companies for around $12 billion just in the past four years, and with a personal worth set by Forbes at $2.4 billion, Mann has the clout to pull this off.

The first Al Mann Institute started operations at the University of Southern California (Los Angeles) in 2001 with an initial $100 million endowment to generate operating capital, another $70 million to date for operating expenses, and a complicated affiliation agreement with USC. The institute, with 30 staff, fills 4,000 square feet in the Denney Research Building, where the USC College of Engineering resides.

The affiliation agreement between the university and the Al Mann Foundation for Biomedical Research covers every aspect of the interaction. While the document continues to evolve as the Mann folks learn from the existing institutes, the plan is to have the same basic elements in each deal.

The agreement details are confidential, but return generated by projects goes to the university, the inventor, the institute endowment, and the Mann Foundation.

It creates a 50/50 management board that decides which inventions should be brought in-house. The USC Institute board includes the president, the provost, the dean of the medical school, and the school's legal counsel.

One of the sticking points that bugs some academics is the part that says the university must bring to the institute all inventions in the covered field within 30 days of disclosure, under non-exclusive terms (though there can be some exceptions). The institute then makes quick initial "go/no go" decisions.

In the USC experience, 85% of the projects are declined within two to four weeks, with another chunk declined soon after.

The remainder go through an extensive business analysis, with the institute having exclusive access at that point. The joint management board makes the final decision whether to in-license the program. If it's a "no go," the university can use the institute's business analysis and market the project elsewhere.

The goal is to have a final decision and licensing agreement completed within 180 days from initial introduction.

Inventors can follow their invention into the institute to help with product development if they have sufficient development expertise, or stay in the university and serve as advisors to the institute.

The original USC institute culture was "probably too academic", says Steve Dahms, CEO of the Mann Foundation for Biomedical Engineering, which funds the institutes. USC faculty tended to see the money as another source of grant dollars, rather than funding for applied development work.

Mann and the institute board shook things up in 2004, bringing on Dr. Peter Staudhammer, the former chief technical officer at TRW as the new institute director, and re-scrutinizing the projects – dropping some for insufficient commercial value and bringing others in.

The executive team handles project management, patents, business affairs, regulatory affairs and core engineering management. Most of these staffers have industry experience, and the institute focuses primarily on medical devices.

Mann brought in Dahms in 2004, after meeting him in 1995. As former executive director of the California State University Biotechnology Research Program, Dahms had lots of experience managing grants, setting up audit processes, and working at the academic/industrial interface.

Mann's team has spread the institute model to the Technicon Institute of Technology (Haifa, Israel) and Purdue University (West Lafayette, Indiana). Both have biomedical engineering departments and a focus on interdisciplinary research.

Starting out in 2005 with a list from Mann, the committee picked the top 16 academic institutions and interviewed folks from the school during the year. If the universities are interested in being considered for this collaborative venture, there are site visits and sharing of more operational details.

"Mr. Mann is an amazing guy, the seventh most generous philanthropist in the country, an extraordinary mind, very gracious, and very committed to this process."