BioWorld Today Columnist

There's been a lot of talk in the industry about how to get start-up companies and early stage research projects across that infamous "Valley of Death" that today gapes 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 successfully will 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.

The only catch: You need to be a billionaire to do this.

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 envisioned.

He envisioned creating institutes for biomedical development that could be funded with enough capital to hire up to 50 industry-trained employees. That 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 his model will create better financial return for the university than the classic spinout company, which has the bad tendency to die before commercialization. He said studies suggested he can provide around fivefold improvement in return to the inventor and the university.

Mann said he 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 about $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 it off.

The USC Experience

So what does this look like in real life? The first Al Mann Institute started operations at the University of Southern California 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.

The agreement 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 can bug 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 nonexclusive terms. There can be some exceptions made. The institute then makes quick initial "Go/No Go" decisions. In the USC experience, 85 percent 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.

A Change In Course

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", noted 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 in Peter Staudhammer, the former chief technical officer at TRW Inc., as the new institute director and re-scrutinizing the projects - dropping some for insufficient commercial value and bringing in others.

The executive team handles project management, patents, business affairs, regulatory affairs and core engineering management. Most of the staff 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 in Haifa, Israel, and Purdue University in Indiana. Both have biomedical engineering departments and a focus on interdisciplinary research.

Mann noted that the challenges of drug development exceed those of medical devices in terms of time and money required. The plan is to leverage the biopharmaceutical expertise at Technicon to test out the institute model on drug development.

So how do you get one of the institutes in your back yard? The site selection committee includes a dozen industry CEOs and CSOs and Wall Street folks, whose identities are not disclosed.

Added to the mix as consultants are transactional lawyers, federal agency folks, whoever else might bring in useful expertise for particular projects. Dahms chairs the committee.

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 the collaborative venture, there are site visits and sharing of more operational details.

Dahms said they are officially looking at 15 universities seriously, with another 35 in earlier stages of scrutiny. In the end, Mann makes the final decision.

"Mr. Mann is an amazing guy," Dahms said, "the 7th most generous philanthropist in the country, an extraordinary mind, very gracious and very committed to this process."

Robbins-Roth, PhD, founding partner of BioVenture Consultants, can be reached at Her opinions do not necessarily reflect those of BioWorld Today.