Currently the chief science officer of a small start-up company called Nephros Therapeutics, Humes is guiding the development of a bio-artificial kidney that is undergoing human trials. As the technology has blossomed, so has the payroll: An original staff of six has now turned into 30 and will likely grow to 60 employees by the end of the year.
While the future looks promising, Humes' career path belies any notion that profit is his principal motivation. He was--and still is-- on the faculty at the University of Michigan Medical School in Ann Arbor. And it was in the university's laboratories that he conducted his investigations and with the university's help that he launched his business enterprise. "This research would have been too risky for Big Pharma," Humes says. "The only way to move it forward was to spin off a company" that could attract venture capital.
In the coming years, Michigan officials expect laboratories connected with public institutions to give birth to many more companies like Nephros Therapeutics. That's because the state is pumping a whopping $1 billion of its tobacco-settlement money into life sciences research at state universities and research centers. The aim is to build a biotechnology hub along the corridor from Detroit to Ann Arbor to Grand Rapids. Whether that actually happens will depend a lot on the ability of people such as David Humes to turn university-sponsored research into successful companies that create good-paying jobs.
Michigan is hardly the only state tossing its hat into the start-up ring, and the interest isn't limited to biotech. Nationwide, states are increasingly pushing public universities to turn their laboratories into engines of economic development. The long-term goal is to create vibrant technology-based economies, in much the same way that private universities such as Stanford and MIT fueled growth in Silicon Valley and the Boston area. "The states are saying, 'Hey, we need to be in this game because this is where the high-end jobs are,'" says John Fraser, the technology transfer chief at Florida State University and a member of Governor Jeb Bush's panel looking at how to encourage more spin-offs.
As the focus of higher education turns to higher profits, however, there is grumbling on college campuses. The race to publish, some complain, is being replaced by the race to patent, cutting out the old ideal of science for the sake of science. What's more, as professors increasingly wear two hats--that of the public educator and the private entrepreneur--they create conflicts of interest for themselves and the university. On the commercialized campus, such conflicts, once avoided, are now "managed."
Indeed, public universities increasingly find themselves in unfamiliar territory. They're negotiating licensing royalties, taking equity positions in privately held start-up companies, and making decisions on how to divide the spoils with faculty members should their ventures hit pay dirt. "We have to be very careful as scientists not to lose the public's trust," says Susan Dorr Goold, director of the bioethics program at the University of Michigan Medical School. "We can't let the public think that scientists are just in it for the money."
Technology transfer is nothing new for many state universities. As long ago as the 1920s, the University of Wisconsin commercialized the discovery by one of its professors that vitamin D could be produced in milk. That led to the eradication of rickets. But it wasn't until 1980 that a federal law known as the Bayh-Dole Act pushed all universities in the United States to get their faculty members' inventions into the marketplace. Since then, tech transfer has become a big business. According to the Association of University Technology Managers, universities in 1999 received more than 3,600 patents, earned at least $850 million on license fees and formed 300-plus start-up companies.
Economic development officials are determined to capitalize on that. Michgan's financial commitment is turning heads because of its size, but California, New York and Illinois also are pouring significant sums into information technology, biotechnology and nanotechnology research. Texas and Oklahoma recently gave public universities the flexibility to take equity in start-ups, and a ballot initiative to do the same in Oregon will go before voters this May. In addition, states are trying to build up their venture capital industries to give start- ups a chance at finding local investors to help them grow locally.
In Michigan, the big infusion of research dollars is only part of the equation. The state also set up a $2 million commercialization fund. It is a "gap" fund, intended to give a start-up its legs when the company is little more than an idea. The fund pays for market research, proof-of-concept studies and product prototypes--the sorts of things that venture capitalists want to see before investing a dime. State money is also paying to beef up the tech-transfer offices at the University of Michigan, Michigan State and Wayne State.
The hardest part seems to be nurturing a campus culture of entrepreneurship. Many researchers flocked to academia precisely because they didn't want to go into business. The Michigan Economic Development Corp. has been holding a series of technology-transfer conferences, hoping to get not just professors but also the business community into the start-up mood. "The university provides some of the ingredients," says Marvin Parnes, associate vice president for research at the University of Michigan. "But we also need bankers, attorneys and accountants who understand start-ups. It takes time to build that kind of culture."
Even as they encourage start-ups, universities are increasingly aware that there are lines they can't cross. When private ventures create conflicts of interest with public research, universities are taking special steps to make sure the situation doesn't get out of hand. Ignoring conflicts can be embarrassing and costly.
Consider a recent case at Florida Atlantic University. Stanley Dunn, chairman of the ocean engineering department there, developed an unmanned submarine that could prove useful in minesweeping. The discovery led to a university contract to build subs for NATO and also led Dunn to found his own company, SeaRobotics, to market the technology. But the lines between Dunn's personal business and the university's business blurred. He hired SeaRobotics engineers to work in his university lab and used university resources to do company work. With his actions under investigation, Dunn resigned his chairman's post last March.
For FAU, the case was a wake-up call. The university had no staff dedicated to technology transfer to guide researchers through the start-up process and its intellectual-property policy wasn't much help either. Last summer, FAU put a more thorough intellectual-property policy into writing and hired a tech-transfer veteran to launch an office to oversee licensing and start-ups. "There's a chance that what went sour here may have been a gem, but we'll never know," says Jeanie McGuire, FAU's new technology transfer chief. "Faculty members have got to wear the right hat at the right time and in the right place."
An even greater concern in the age of biotechnology is scientific experiments involving human subjects. The death two years ago of a gene-therapy patient at the University of Pennsylvania triggered universities across the country to review their conflict-of-interest policies. The faculty member leading the experiment was the founder and part owner of a company that had a financial stake in the outcome. It was impossible to say whether that conflict in any way contributed to the patient's death, but the case sparked enough bad press that universities don't want to take any chances.
For David Humes, all these concerns mean that the closer his invention comes to being a success, the more he must distance himself from it. Now that the bio-artificial kidney is undergoing human testing, he must keep at arm's length from the work. A separate faculty member runs the trials and consults Humes only for answers to technical questions. Every six months, Humes must report to a conflict-of-interest committee that keeps close tabs on how he balances his dueling roles as educator and entrepreneur. "The university is most concerned that I don't interact with patient enrollment and treatment," Humes says. "They don't want me to make decisions or recruit patients for my own advantage and not for the advantage of the patient."
Nephros Therapeutics is still a long way from turning a profit, but state officials already consider it an economic development and scientific success. If the kidney works, it will be a financial bonanza as well. Humes, of course, stands to make good money on his invention. And so does the university, which has pledged to pump its share of future earnings back into research.
