Fall 2000 The Greening of Montana The World of E-Commerce Business to Business From Bench to Business Rocky Mountain Global Virtual Corporations Forecasting Montana's
Economic Future |
From
Bench to Business Three case studies by
Caroline Lupfer Kurtz
Pharmaceutical promise In 1997, Gustafson, who recently had left his position as director of biochemical research at RIBI Immunochem, and DeBorde, who was about to leave his University job, formed a company called Montana Headwaters. Their idea was to make vaccines and vaccine components to prevent infectious diseases and even, someday, cancer. They believed they had developed a novel method that would render their products simpler, safer and less expensive than those developed through other processes. UM gave the researchers laboratory space and resources for the first nine months of their start-up venture as well as help with working up a business plan and identifying prospective investors. Gustafson and DeBorde continue to make good use of University facilities such as the Mansfield Library and the nuclear magnetic resonance spectrometer, which can help determine the precise chemical composition of their various vaccines. They also make occasional purchases from UM’s chemical stores.
As their business concept took shape, the pair applied for and received a Small Business Innovation Research Grant from the National Institutes of Health. Eventually Gustafson and DeBorde interested a Seattle venture capital group in their plan. The Seattle company formed EndoBiologics International to raise capital globally, and Montana Headwaters changed its name to EndoBiologics Inc. The Montana corporation already has had one private offering for investment and plans to hold more before eventually going public. Stuffed into a double-wide trailer behind some empty buildings on the west side of Missoula, seven EndoBiologics employees, including CEO Gustafson and President DeBorde, are completing the process for making their first vaccine product, designed to prevent sepsis and septic shock in severely ill people. The researchers have performed tests in mice, using UM’s Laboratory Animal Resources facility, and plan to start clinical trials to demonstrate safety soon. They see their close ties to UM as an advantage in many ways, including having access to a pipeline of talented UM graduates and the possibility of future profitable collaborations with other UM researchers. Gustafson says that a new product for treatment of late-stage sepsis recently was announced by the pharmaceutical firm Eli Lily, but he does not see the news as negative for EndoBiologics. “We’re trying to develop a vaccine to prevent sepsis in the first place,” he says, “one that is directed against the toxins produced by bacteria in your gut, neutralizing them to prevent the disease.” Sepsis is a major concern in hospital critical-care units, where initial flu-like symptoms can lead to a raging infection and even death within 48 hours. The potential market for such a therapeutic vaccine is huge. EndoBiologics’ approach to a vaccine against sepsis makes use of an unusual class of microorganisms. “Our approach is completely new technology,” Gustafson says. “We’re trying to make the vaccine as simple as possible to reduce the cost to manufacture, make it more stable for shipping and handling, and safer with fewer ingredients. A big part of our technology is to simplify the process. The vaccines closest to ours are expensive because they produce lots of toxic byproducts in their manufacture. Ours don’t.” In September EndoBiologics will move into expanded laboratories built on land they bought near the Missoula airport. Gustafson and DeBorde plan to hire maybe a dozen more people in the next year. Ultimately they hope EndoBiologics will become a full-scale production facility in Montana, with packaging and marketing aspects contracted or licensed out to other companies. Turning waste into wanted Thirteen years ago, Missoula businessmen George Torp and Philip Barney had a technology they wanted evaluated to determine its potential marketability. Their product was an advanced filter material for removing heavy-metal contaminants from water — a material with tremendous commercial potential but some problems. Through contacts in California, Torp and Barney approached chemist Ed Rosenberg at the University of California, Northridge for help. “They funded our analysis,” Rosenberg says, “and when we determined that what they had was not a particularly good technology for what they wanted to do, they funded us to find a better way.” Thus began a decade-long collaboration that flourishes still. When a faculty position opened at UM in 1993, Torp and Barney were instrumental in getting Rosenberg to apply for the job. It was one of the best decisions he’s ever made, says Torp of Rosenberg, who now chairs UM’s chemistry department. Over the years Rosenberg’s laboratory has received steady funding from government and Purity Systems Inc., Torp and Barney’s company, to improve their method of turning raw materials and waste streams from industrial processes into wanted commodities and clean water. The technology involves modifying silica particles with organic surface polymers that selectively bind charged metal atoms, such as those of copper or nickel, which can then be rinsed off for concentration and collection. The filter material can be reused thousands of times, and its applications are so numerous and varied that the market for it is estimated to be worth hundreds of millions of dollars. In 1995 UM filed the first of three patent applications on the process for Rosenberg and Purity Systems. The patent was assigned to the University in 1997 with exclusive license for commercial development held by Purity Systems. A second process patent was granted in 1999, and a third application is pending. Ultimately a portion of the company’s profits will return to the University to help support more such technology-transfer endeavors.
According to Torp, Purity Systems’ research has produced a metal-ion removal material that is easy to synthesize, uses limited — and recyclable — organic solvents to create, exhibits higher metal-binding capacity and is considerably less expensive to produce than earlier materials. The company already has conducted successful pilot tests for the Montana Department of Environmental Quality and the Environmental Protection Agency’s Mine Waste Reclamation program, using water from Belt Creek and the Berkeley Pit in Butte. Purity Systems also has an agreement with Calgon Carbon Corp. of Pittsburgh, and Torp is negotiating with MSE, an engineering applications firm in Butte, to carry out larger-scale demonstrations. Calgon Carbon also is interested in using Purity Systems’ material in some of its other industrial applications, such as the recovery of copper from mining waste streams. Commercial quantities of the silica particles and surface ligand that make up the filter material are being manufactured in China, primarily because of lower production costs. Although they would prefer to have manufacturing done in the United States, Torp and Barney have been unable to find affordable sources for this stage of Purity Systems’ development. Rosenberg, Torp and Barney have been working hard to take their show on the road, in the United States and overseas, to demonstrate the technical aspects of their product and seek new agreements. This October they will travel to Australia to present their technology at the world’s largest meeting of the copper mining industry, hoping to get their material chosen for use in a large start-up copper mine there. “But our major goal is to build a research facility in Missoula and staff it with good scientists to produce good products,” Torp says. Other companies would be needed to take care of large-scale manufacturing, marketing and distribution. As a research and development firm, Purity Systems is a top candidate for space in MonTEC, the new UM/community technology incubator facility under development (see “The Greening of Montana"). Both UM graduates, Torp and Barney have had successful careers in other areas: Torp in pharmacy and real estate and Barney as head of pathology at Community Medical Center. Both men are looking forward to a more leisurely retirement once Purity Systems gets fully under way. “Neither of us has a lot of ambition to put money in our pockets by doing this,” Torp says. “But the world is so full of pollution, and people are still looking for an economically sensible way to recover certain metals. We think we could meet a great need with this product.” Advancing physical therapy While there, Leonard saw a prototype of a device that was being developed to quantify muscle tone in astronauts after prolonged periods of weightlessness in space. It dovetailed perfectly with his own interest in finding a more precise way to measure muscle characteristics following disease or injury. Upon returning to Montana, Leonard began a formal collaboration with his Russian counterpart, scientist Eugene Mikhailenok, a physician and physiologist formerly with the Pavlov Institute. Once various legal issues were worked out, the researchers formed Neurogenic Technologies Inc., to develop a computerized apparatus that can quantify levels of muscle tone, compliance and paresis, or weakness, that may have changed following a stroke or as the result of a disorder such as cerebral palsy. They call their device the Myotonometer. Mikhailenok is Neurogenic Technologies’ vice president for research and development, and Leonard is president and CEO. The pair received the first patent for their invention in May 2000. Protection for another device is pending. Like all nascent business ventures, Neurogenic Technologies needed capital to develop and bring its product to market. With the help of UM’s Technology Transfer Program, Leonard found an angel in John Menson, a venture capitalist in Ann Arbor, Mich., with a proven track record of business development. Menson brought in enough investors to enable Leonard and Mikhailenok to build some test devices. He and the researchers are hoping to raise at least another $500,000 for the company within the next year. Leonard would prefer to find businesses and investors in Montana that could provide the necessary manufacturing and financial backing, but he has met with limited success so far. “When we conceptualized the company, we envisioned it being a total Montana enterprise,” he says. For now a company near Sheridan, Mont., has been doing the precision machining of the device’s stainless steel components, but the electronic and computer work may have to go farther afield. Leonard says the Myotonometer has moved beyond the prototype phase. Ten units have been made and sold through his own contacts at research labs and clinics in the United States, Canada, England, Australia and Sweden. Ten more have been built, all made in the United States under Food and Drug Administration regulations although not yet FDA approved. “This means sales will be somewhat restricted until approval is final,” Leonard says. The Myotonometer is a computer connected to handheld stainless steel probes that can be pressed down onto skin to measure underlying muscle length and tension. Thanks to feedback from his own children during testing, Leonard realized that different settings for how hard to press the probe were needed for adults and children, so he developed software to compensate. The computer translates information received into a quantitative measurement of muscle condition. Currently there is no other technology on the market capable of doing this. “When we use different drugs to treat a condition, we can’t tell how effective they are unless we have a way to quantify changes in muscle characteristics,” Leonard explains. He expects the device to be very useful for quantifying treatment effectiveness and in monitoring the progression of muscular and neurological diseases. “Insurance companies are clamoring for something like this,” he adds, “because of the movement toward ‘evidence-based’ practice, meaning that doctors need to be able to show [quantitatively] that what they are doing is efficacious.” Like Purity Systems, Neurogenic Technologies is ripe for space in MonTEC as soon as it is available. “It’s an exciting melding of community and University resources,” Leonard says. With sufficient investment to propel Neurogenic Technologies into the next phase of development, Leonard believes the company could become a solid employer of high-tech labor, such as engineers, designers, programmers and assemblers. Leonard recently requested that his faculty position be reduced to halftime so he can continue to move Neurogenic Technologies forward. Although somewhat naive when he began the process, he says he has grown to appreciate being made to “think outside the box of pure research.” “I thought the product would sell itself and that I could go back to R&D,” he says. “I may have to force the University to give me an M.B.A. when this is over.” For more information on EndoBiologics Inc. and its products, call Gary Gustafson or Dan DeBorde at (406) 543-7909. For more information about Purity Systems Inc., contact George Torp via fax at (406) 327-0879. For technical information about their filter products, contact Ed Rosenberg at (406) 243-2592. For more information about the Myotonometer and Neurogenic Technologies Inc., contact Charles Leonard at leonard@selway.umt.edu. |
