PANEL: Life sciences will see radically different future

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      WALL:  I'd like to start out that life

                   science in Indiana has a lot of successes they can

                   claim.  There was a study in 2012 by Bio that ranked

                   Indiana in the top 5 in just pretty much every

                   category for life sciences and yet the state kind of

                   continues to struggle, I guess, at attracting venture

                   capital, private investments early on when you

                   compare Indiana to even just its surrounding states,

                   which aren't necessarily the nation's leaders in life

                   sciences.  We often lag.  I would just like to

                   understand why is that happening, why do you think

                   that's happening?  I'll start with the current

                   venture capitalist on the panel, Matt, can you answer

                   that one?

                           NEFF:  Well, while Indiana has a very high

                   concentration of large companies, our development of

                   small startup life cycle companies is still nascent

                   in the sense that we haven't had a lot of exits yet

                   and that's, frankly, what drives the venture capital

                   business.  Just as an alternative, if you look at the

                   tech marketplace and you check out all of the

                   companies that have been successful in Indiana in

                   technology, many of them, the entrepreneurs that run

                   them, can trace their roots back to Software Artistry

                   and that was a big success, an early success, and

                   that spawned a lot of entrepreneurs who then went out

                   and started a bunch of other technology companies.

                   We have a lot of intellectual property, we have a

                   developing group of entrepreneurs and a relatively

                   healthy flow of new companies that are being created,

                   but what we haven't seen yet are a tremendous number

                   of exits that fuel that family tree being developed.

                   Fortunately, Dr. Low and his colleagues at Endocyte

                   are making great progress in that regard and there

                   are other examples, but I think what we need to see

                   is more of that.  The venture capital business, as I

                   said earlier, it all relates back to exits, that's

                   the payoff that investors require in order to make

                   investments in venture capital funds.  The exit

                   marketplace in the last five years has been

                   significantly depressed, you know, we had a financial

                   crisis, we have a tremendous amount of policy

                   uncertainty in terms of tax policy, regulatory

                   policy, administrative policy at the FDA, those

                   things have all created a drag on exits, and if you

                   look at the venture capital industry today, there are

                   large venture capital funds that are raising more

                   amounts of money than they did in 2009 but there are

                   a smaller number of venture capital funds that are

                   doing that and the industry is consolidating and

                   what's driving that is the lack of exits.  There are

                   a lot of smaller, younger venture capital funds that

                   were created in the early 2000s and mid 2000s that

                   are still waiting for exits and they cannot get

                   themselves funded for a second fund which impacts the

                   investment going forward.

                           WALL:  Well, that's helpful.  Who else has

                   some thoughts on this?  Brian Williams.

                           WILLIAMS:  I'd probably say part of our

                   challenge in Indiana is that there is a finite amount

                   of venture capital and I think the Money Tree Report

                   that PWC issues every quarter reflects these trends

                   that Matt was articulating.  I think the challenge

                   we've had here in Indiana is we do have a finite

                   amount of capital and those bets that we can make we

                   should be making more to find successes out of them,

                   I think more dollars going into the seed and early

                   stage, which is the most difficult funding period.  I

                   know the other brilliant "Brian" on the panel runs

                   one of those seed funds but it's, relatively

                   speaking, very, very small, and so the few dollars

                   that we do have to seed entrepreneurs should go into

                   that seed and early stage, we should put more dollars

                   into seed and early stage, which means a fundamental

                   shift in how we think about risk in Indiana and what

           the game is when it comes to venture capital.  The

                   game is you're going to lose a lot of bets and you've

                   got to be comfortable with that whether you're an

                   individual investor or an institutional investor, and

                   when we're ready to make that transition and put more

                   dollars, ten times the amount of money that Brian has

                   at his disposal today, then we'll be in a position to

                   start to compete more effectively nationally for

                   successes.  Matt's right, we had one success with

                   Software Artistry that spurred multiple software

                   companies.  Dr. Low has had one success at Endocyte.

                   We need more than one success, and so for those

                   public-private partnerships that are out there and

                   those efforts that are out there, we should focus

                   more and more of our dollars on seed and early stage

                   because it's short everywhere in the country.

WALL:  Dr. Low?

                           LOW:  I'm going to answer this question from

                   the perspective of a professor or an inventor,

                   someone that discovers technology, and I think we

                   have a major problem in Indiana in our culture, or

                   actually perhaps in our vision, of how to do this.  A

                   professor at Purdue or at IU will come up with an

                   important discovery and in my interactions I see lots

                   of very, very useful discoveries being made on a

                   regular basis, but we don't have a lot of examples

                   around the university like they may have in San Diego

                   or in Boston and other places like this where our

                   colleagues have taken a new invention, gone through

                   all of the proof of principle steps that are required

                   to attract even seed funding, our venture capital

                   investors don't want to invest in just a paper idea,

                   they like to see some proof of principle before they

                   lay down large amounts of money, and so in my

                   particular area of drug discovery you have to take a

                   drug that you may have discovered in a chemistry lab

                   and test it on, first of all, cells and culture,

                   meaning you have to learn how to culture cells, then

                   you have to take it into animals, meaning you have to

                   learn how to implant tumors or induce diseases in

                   animals, you have to then demonstrate that you don't

                   kill the animal or damage the animal with your drug

                   while you're treating the disease and then after that

                   you have to begin to examine the competitive

                   landscape, are there other drugs that have similar

                   capabilities?  Can you compete?  What is the cost and

                   time to market, and can I raise this kind of money?

                   And moving forward with all of these very early steps

                   is daunting to someone who is actually spending most

                   of his time teaching undergraduates how to balance

                   chemistry equations, and so as a consequence and

                   without more examples of professors that can do this

                   and this vision, because what you can perceive you

                   can achieve and until you can perceive yourself

                   actually moving from this laboratory experiment into

                   the clinic you'll never move forward with it, it just

                   seems too daunting, so I think we need to bring in

                   people that know how to do it and pretty soon that

                   fear barrier will disappear and you'll see the

                   fantastic technology that is currently being

                   developed at our universities here actually being


                           NEFF:  Phil makes an interesting observation

                   about the fear barrier.  If you talk to people in

                   Silicon Valley, most of the entrepreneurs there will

                   say "Yeah, you know, I've started five companies, I

                   had two wins and three failures" and there's no shame

                   in failure.  In the midwest we have a tendency

                   because we're still relatively new at this to say "If

                   you had a failure, what does that tell me?  Maybe

                   you're not really a very good entrepreneur."  We have

                   to learn to accept the fact that, and Brian may,

                   which is that most new businesses fail and venture

                   capital people have to get comfortable with that.

                   You know, 65 to 75 percent of companies that we

                   invest in are going to fail.  There is no shame in

                   failure, it's a great learning experience.  So for

                   those of you out there that are entrepreneurs, don't

                   worry about that, at least as far as I'm concerned,

                   that is not a barrier to investment.

EILENBERG:  And I would actually like to say

                   that I agree with everything that's been said here.

                   So we are getting ready to launch Digital Health

                   Accelerator here in South Broad Ripple and the focus

                   is to help bring in talent from around the world that

                   will allow us to start to realize the value of the

                   assets that we have here in the state of Indiana,

                   whether it's digital technologies that are within our

                   academic institutions or entrepreneurs who are talent

                   that we haven't been able to put the right structure

                   and support around so that they can succeed.  Now,

                   what Matt is saying is there is a very high failure

                   rate here, we know that, but I would claim that we

                   have not done our state and our city and our region

                   justice in putting the right support mechanisms

                   around the talent and assets that we currently have

                   and we're sitting on, we're allowing them to be idle.

                   It's up to us to step up and figure out ways to

                   mobilize and bring the right ecosystem around

                   different things.  We talk about Software Artistry.

                   It's technology, and yet if I look in this room right

                   now I don't see many tech people.  There is a

                   dichotomy right now when it comes to where we sit

                   today, there's the technology sector and there's the

                   life sciences sector, we need to start to merge

                   together and realize that if we come together we are

                   going to do something great and the venture

                   capitalists will come, the entrepreneurs will come,

                   the resources will come, and we will put ourselves on

                   the map for doing something beyond what people expect

                   of us Hoosiers.

                           ZAVALETA:  J.K., I'd like to add to that.

                           WALL:  Yes.

                           ZAVALETA:  Venture capital is an expression,

                   it's a symptom rather than the cause.  I think that

                   Kristin is right, the ecosystem needs to be built up

                   a little more.  We are a very cautious midwest

                   attitude here.  When you invest in even an

                   early-stage company, the demands on valuation are

                   very high, which in many ways impedes the follow-on

                   investment, it makes it difficult for investing.  We

                   are afraid of failure, like Matt said.  I can tell

                   you that in California the rate of failure is not

                   better than ours, they fail just as often as we do,

                   but there is a stigma about failure.  I fail.  I'm

                   still an entrepreneur, but I've failed several times,

                   but you have to have that attitude of taking the risk

                   and doing it, somebody has to.  And even though we

                   are building an angel investor base, I think it's

                   still a very cautious investment focus.

                           WALL:  Brian Stemme, you haven't weighed in

                   here.  Do you have some thoughts on this question?

                           STEMME:  I think that everybody has made good

                   points.  I think one positive I would say — I would

                   agree with Raul that our angels can be cautious, but

                   compared to when we started our seed fund back in

                   2006, there actually is quite a number of people that

                   are willing to do angel funding in the life sciences

                   and that's been different than when we started, so

                   that would be one point I would make.  And the second

                   thing I would say is that a little bit of this has to

                   do with timing, you know, we had a little more

                   capital available around the 2005 timeframe when the

                   Indiana Future Fund was formed, our seed fund, as

                   well as some other funds that were invested in

                   through the IFF.  When we started to get some company

                   formation, they started to make some progress kind of

                   2005 to 2007, and then we did have a hiccup with the

                   financial crisis which has led to a slowdown, there

                   has been less money available, the money that is

                   available is harder to get, so I think that I would

                   add that it's a little bit related to timing because

                   we had more capital available, we started to get some

                   things started, and two or three years into that,

                   right when a company might be ready for an A round,

                   we had basically a freeze, or at least a very big

                   slowdown in that funding.  For example, I know that

                   when we were spending some time in San Diego on a

                   project they came to us and said venture capital

                   funding, I think this was roughly late 2008, early

                   2009, venture funding in San Diego was down 75

                   percent in that particular six-month area.  Now, you

                   know, it's gone back up, it's not something that is

                   going to be forever, but I think that just to add

                   that little bit of element that we started to get

                   some things going on the capital side and we've had a

                   little bit of a hiccup really unrelated to the

                   ability of some of the entrepreneurs that were out


                           WALL:  Okay, thanks.  Go ahead, Brian.

                           WILLIAMS:  In addressing that, we make public

                   policy decisions in Indiana all the time and where we

                   want to invest to try to grow the state, and we're

                   having breakfast at a very nice ballroom this morning

                   that we all as taxpayers contributed over a hundred

                   million dollars to.  We all as taxpayers contributed

                   800 million dollars to build the football stadium.

                   So we've made public policy decisions of where we're

                   going to allocate dollars into things that may

                   generate some near-term returns, but the things that

                   we are talking about are longer term investments, and

                   so I guess my encouragement would be for all of those

                   that are in the room that have an interest in life

                   sciences, when these kinds of decisions are before

                   our elected officials, that you weigh in.  We are

                   making trade-offs, we have finite resources in

                   Indiana and everywhere else, and so the BioCrossroads

                   and others that were well-intentioned efforts and

                   raised a little bit of money, right, 75 million

                   dollars sounds like a lot, but when you compare it to

                   800 million for a football stadium or a hundred

                   million dollars for a hotel or some of these other

                   trade-offs that we have made with where we're going

                   to allocate resources, I think we need to be more

                   vocal as an industry to say "Look, if you want to

                   make that investment, let's think about the

                   ramifications of it to the other sectors of the

                   economy and is that really what we want?  Do we

                   really want to have 45 football players making a

                   million dollars or would we rather have 45

                   entrepreneurs who build a successful company and exit

                   and take home a million dollars and will take half of

                   that or a quarter of that to seed their next

                   investment, those are the kinds of trade-offs that we

                   as an industry need to articulate to our elected

                   officials to say "Hey, let's think more cogently,

                   more in-depth, about what the opportunities are, the

                   opportunity costs that we are making and the

                   trade-offs that we're making."

WALL:  Thanks, Brian.  Does anyone have any

                   follow-up to what Brian just said?

                           ZAVALETA:  I think you're right, but as a

                   culture here in the Midwest we invest in things we

                   can see.  Intellectual property, you don't see it, so

                   even for angel investors it's very difficult for them

                   to invest in intellectual property because it's not a

                   building, it's not a machine, so that clouds the

                   investment judgment of our policymakers and our

                   investment community.

                           WALL:  Go ahead, Dr. Low.

                           LOW:  Well, if you want to think in the blue

                   sky, so to speak, in the public domain I would love

                   to see some sort of an organization assembled where

                   the technology developed at Notre Dame, Purdue, IU,

                   the other schools in Indiana, private entrepreneurs

                   and so forth, who are given an opportunity to present

                   in front of a panel of smart people that was

                   supported in part by the State of Indiana where the

                   very best technology was selected and supported

                   through this region that we call the "Death Valley of

                   Science" and taking something from an initial plan

                   into proof of principle, and that's where everything

                   dies, there's great observations and discoveries made

                   in the laboratories around the state and it's very

                   difficult to find the funding to take that to a proof

                   of principle, especially in the health care industry

                   where the costs associated with bringing a drug into

                   humans are formidable, but even if you have, for

                   example, a blueprint plan that you have conceived of

                   on paper for a new let's say car battery that will

                   allow you to drive for a thousand miles instead of 50

                   miles, it still is going to take an awful lot of

                   money to translate that and demonstrate to GM that

                   this is in fact worth investing millions and millions

                   of dollars and this is where everything falls apart

                   is this ability to take a great idea.  The problem is

                   if you just willy-nilly give everybody who claims to

                   have a great idea money you're going to end up losing

                   a lot.  First of all I would love to see the State of

                   Indiana put together an organized investment fund

                   that really focused money on these opportunities that

                   would be developed within the state and lead to drive

                   the economic engine of this state and use state

                   technology to do so and then you'd, obviously, have

                   to have a panel of smart people to make sure you

                   chose the right technology.

                           WALL:  Well, let's transition from there into

                   the public policy front around the life sciences and

                   one of those things is Indiana Biosciences Research

                   Institute that Governor Pence has advocated and other

                   large life sciences companies have gotten behind.

                   The Legislature gave it 25 million dollars to get it

                   started, the private partners involved are going to

                   raise a 300 to 400 million dollar endowment to help

                   sustain it over time.  What difference would having

                   an institute like that including the idea or the

                   basic concept is that you'd have collaboration

                   amongst industry and academic scientists, what sort

                   of difference would it make here in Indiana?  Do you

                   want to start on that, Dr. Low?

                           LOW:  Well, yeah, I think what jumps to mind

                   to me off the bat is that those that invent are often

                   not well trained or educated in business and it's

                   very difficult to actually master both sets of

                   skills.  If we were to pursue this strategy it would

                   be great to have some capability of handing off

                   technology, not really handing it off because you

                   always want to have the inventor involved, there's

                   nothing that can replace the passion of someone who's

                   invented something for seeing that through 'til it

                   benefits mankind, there's a driving force that just

                   keeps me up late at night just because I love the

                   idea of trying to make something that I do really

                   matter.  Not very many people on earth have an

                   opportunity to do something that really makes a

                   difference and to have that has this unique

                   opportunity and so this passion is something that

                   drives me constantly and I think you don't want to in

                   any way substitute that, you want to keep that

                   associated with the development, but at the same time

                   I'm clueless of how to run a business and I don't

                   pretend to have that information, nor do I really

                   find it very interesting, to be honest with you, so I

                   think you really have to provide that other component

                   to be successful, so somehow marrying the two would

                   be useful.

                           WALL:  Who else has thoughts on the

                   Biosciences Research Institute and what impact it

                   might have here in Indiana?

STEMME:  I'll throw some thoughts out there.

                   I think, first of all, I would want to acknowledge

                   the folks from the State that have really made an

                   impact, Governor Pence, Ryan Streeter, both the

                   leadership of the House and the Senate, all

                   contributed to supporting this and really to make a

                   difference in an appropriation of that level, and so

                   there's going to be a great responsibility at using

                   those funds, combined with others to make a

                   difference.  When you say what difference will it

                   make, I think one of the keys is that it's going to

                   enable the corporations locally to interact and

                   collaborate together, which would be relatively new,

                   and while not novel, would greatly increase their

                   collaborative activities together, as well as

                   bringing in new talent, as well as having a focus on

                   the research to address a specific problem that the

                   companies collectively have identified, and so while

                   it won't be, you know, limited to that particular

                   topic, there will be a very high level of focus on

                   translational work and collaboration, so I think that

                   given the status of NIH budgets, given the status of

                   the way the pharmaceutical and device industries are

                   going with looking to academia, looking to

                   partnerships, trying to maximize limited resources,

                   we think that it's going to be a great asset that

                   adds to the research universities and the other

                   companies in the region.

                           WALL:  Who else has thoughts?  Brian


                           WILLIAMS:  I'm not familiar with all of the

                   details of the Bioscience Research effort, but I

                   certainly hope it connects to what Kristin's talking

                   about in terms of mobile health because not too many

                   months ago I was in Singapore for a similar

                   discussion along these lines and in that conversation

                   when you go around the world and you ask people in

                   the health care space who is your competition going

                   forward, it's the typical cast of characters, and I

                   always caution folks that there is this little

                   company in South Korea by the name of Samsung, you

                   may have heard of them.  They have made a commitment

                   to invest [3] billion dollars to build up their

                   health care business.  …  They have already made

                   significant strides in this regard.  So as you're an

                   entrepreneur thinking about "Where do I compete?  How

                   do I compete?" the competitive landscape and the

                   innovation cycle that occurs is changing in a

                   fundamental way.  Innovation within health care will

                   start to occur on the same cycle speed that it occurs

                   within technology.  Samsung has already purchased

                   four medical device companies.  They have already

                   constructed and received FDA approval for a

                   biosimilar production facility in South Korea.  If

                   they can make the big molecule stuff, they can make

                   the little molecules, and if you read the papers from

                   time to time you'll see that they have announced that

                   the next version of the Galaxy phone will come

                   embedded within it a smartphone health app and

                   peripherals to go into the device to help you manage

                   and track health care.  So here is a company whose

                   decided "We can have the technology and the

                   capability to manufacture high-precision tolerance

                   machines that are medical devices and diagnostics and

                   we think that capability translates into

                   manufacturing the software, the therapies that are

                   administered," and so if you think about the future

                   of health care, sitting here today we know in the US

                   we have significant problems as it relates to access

                   to care and adherence to care.  Right now today we're

                   a hundred thousand physicians short in the US to

                   provide care, we're 300,000 nurses short.  That does

                   not contemplate the 40 million plus that will come

                   into the health care system as part of health care

                   reform.  It does not contemplate the continued demand

                   and the increased demand that will go onto the health

                   care system because of the aging of the population

                   here in the US, the heaviest users of health care, so

                   we know today that the only way that we will be able

                   to provide care in a manner that meets the standards

                   of quality that we all expect from care at a price

                   that we can afford we will have to deploy and use

                   technology in new and novel ways.  So if you're an

                   entrepreneur getting into the health care space or

                   you're trying to build a business in the health care

                   space, you have to pursue the science, you have to

                   understand the human condition and the disease you're

                   targeting, but when it comes to commercialization,

                   you have to think fundamentally differently about how

                   I'm going to succeed and compete in the marketplace,

                   because Samsung is just one.  There's a little

                   company up in Chicago called Avery Dennison that if

                   you go to your supply closet it probably has a few

                   labels and envelopes and that kind of thing, fairly

                   large outfit.  They will release later this year what

                   looks like essentially a large Band-Aid that has an

                   embedded near field communication protocol to talk to

                   your smartphone, it's got an embedded galvanic skin

                   response, it's got a host of other devices embedded

                   within that Band-Aid for 99 cents.  If I'm in

                   Indianapolis and want to track Grandma in Florida, if

                   I'm a triathlete and want to see how I'm doing, here

                   is a very simple form factor that allows me to

                   communicate.  Companies like Sanofi that are drug-

                   discovery companies have built a diagnostic that

                   plugs into your smartphone, a glucometer, and

                   software that sits behind it, so if you're investing

                   in diabetes, how do I manage that?  A fundamentally

                   different health care landscape.

                           WALL:  Who else has thoughts on the

                   Institute, or, if not, we can start talking more

                   about digital health, considering Brian sort of

                   kicked it that way anyway.  Okay, Kristin Eilenberg,

                   tell us about digital health, what sort of impact in

                   either mobile apps, like Brian was emphasizing, or

                   even digital health that's more in the hospital

                   system, provider space with medical records, how is

                   that going to change health care going forward?

EILENBERG:  I think that one of the biggest

                   challenges is what's the definition of digital

                   health, I'll throw a question back at you.  A lot of

                   people ask me that, they're like "Well, what is

                   digital health?"  Brian has already identified a few

                   examples of where technology is meeting health

                   monitoring, and all of us right now are being

                   monitored.  If we've got a cell phone on us, a

                   smartphone on us, Verizon, AT&T, Sprint, they know

                   where we're at.  If we were at St. Vincent or if we

                   were at Community, they would also know we were

                   there.  If that data was geo-tagged to say "This is a

                   health situation going on," you know, if we're

                   showing up and it's our employer every single day

                   it's not going to get flagged, but Verizon can see if

                   you're going places on a regular basis.  The question

                   is how do we transfer that information into a usable

                   form so that we can use it to better improve our

                   patient outcomes?  The way that I live my life, I

                   don't walk around saying "I'm a patient," I don't, I

                   don't think any of you do either, but yet when we

                   show up in a health care setting we're all of a

                   sudden tagged with "You are a patient."  Digital

                   health will get us to a point where we are just

                   living our lives and we are producing health

                   information that can be used to help diagnose us,

                   help treat us, help monitor, help provide information

                   back to us in a relay system so that we can do things

                   differently and we can live differently but in a good

                   way so that it reduces the cost out of our own

                   consumer pockets because even though historically we

                   haven't had to pay a huge price, now there are some

                   individuals that are self-insured and they'll debate

                   me on that, but typically we have to do copays or,

                   you know, minimum payments for types of things, what

                   we're going into is a world where we're going to be

                   paying more out of pocket.  Price transparency of

                   health systems and what it really costs to get

                   access, so Brian talked about access, is a huge

                   thing, we're going to have consumer reports of health

                   care, we're going to be able to say when you go to

                   Dr. Bob and you are going to have an x-ray, it's

                   going to cost you $12, but if you go to Dr. Sue, it

                   can cost you 5 and when you look at the quality, it's

                   the same quality, so as a consumer of health care

                   that's going to benefit you.  Those are all digital

                   health types of things because that's moving

                   information in many different ways, it's helping the

                   consumers do something different than what we've been

                   able to do historically because technology exists now

                   that didn't exist 10 years ago.  The other thing

                   that's going to happen is, and this is my passion, is

                   how can we figure out how to tap Facebook, Twitter,

                   all of these other social settings that we engage in

                   on a regular basis, our families engage in.  We use

                   Skype, we use all of these other types of

                   technologies and we are producing lots of

                   information.  I texted last week on Facebook "My

                   daughter had the stomach flu," I know that we're

                   clear, by the way, but everybody that was connected

                   to me on Facebook knew that we had an illness in our

                   family.  How can that information be tagged and

                   pushed to our GP so that they're monitoring?  It's

                   not like we're going to go into the doctor's office

                   because we know that it's a 24-hour bug, but that

                   information can be put as part of our record and be

                   used and referenced in the future.  When people only

                   have 60 seconds, two minutes with a doctor once a

                   quarter, once a year, once every two years, and the

                   doctor says "How are you feeling today?"  "Great!"

                   the reality is if you looked at the Facebook posts

                   for the last six months you'd know that they've been

                   on a rollercoaster and they're struggling with their

                   depression but at that very moment they're great, so

                   digital health is something that will bring

                   information to lots of different stakeholders that

                   are seeking that information and then it's also going

                   to help us do things differently as an end consumer

                   of that information.

WALL:  Matt Neff, you're investing in

                   companies.  What do the advances in digital health

                   mean for the decisions you make, the companies you're

                   working with?

                           NEFF:  Well, we're still in the early stage

                   of gathering digital data, we're in the meaningful

                   use phase of health care reform where electronic

                   medical records are now becoming more and more

                   common, but we're still, as I say, working our way

                   through the early part of that cycle.  Then the

                   question becomes "Okay, you've got all of this

                   massive data, what do you do with it, how do you make

                   it meaningful, how do you organize it and what kind

                   of predictive value does it have for you going

                   forward?"  So one of our investment theses is that

                   health information technology is obviously going to

                   be very important.  We recently invested in a company

                   called Health Catalyst that is an electronic data

                   warehouse, big data for health care, and it cuts

                   across all types of software to accumulate data for

                   health management purposes.  IU Health bought this

                   product, has implemented it and it was the first

                   health care system on the Cerner EMR to accumulate,

                   aggregate, organize 20 years of health care record

                   data from the Cerner system, so health care reform is

                   driving a near-panic search for solutions in terms of

                   efficiency.  2014 is going to be the big bang of

                   health care reform, the reimbursements are going to

                   drop, all the large health care providers are looking

                   for ways to significantly reduce the cost of

                   operations.  Digital health in all of its forms is

                   offering a major, major opportunity.  The question is

                   going to be can you demonstrate some kind of

                   compelling impact on the problem, but if you can I

                   think you've got a heck of an opportunity given

                   health care reform.

                           WALL:  Raul, do you have thoughts on this?

                           ZAVALETA:  Yes.  Let me take you to a not so

                   distant future.  Right now we go to the doctor, as

                   Kristin says, wait an hour to see the doctor for

                   about 10 minutes and he asks you some very lame

                   questions in trying to determine what's wrong with

                   you but those questions are in a whole stack of paper

                   which he doesn't read to try to figure out what's

                   wrong with you and those are instances of something

                   that has happened to you.  What digital health will

                   do is it will change that.  I envision that we will

                   no longer have to visit the doctor as often, that

                   there will be a continuous collection of your vital

                   signs and other information about you that will be

                   fed to a big database where algorithms will

                   determine, certainly assist the doctor in the

                   diagnosis, making that much more efficient.  What

                   Samsung is doing is along those lines.  Then you

                   listen to Andrew McCarty, who's an MIT professor,

                   that says that the future of work is a mix of people,

                   purpose, knowledge, (Raul difficult to understand,

                   please confirm), and you think about it and you say

                   "Okay, yes, there's a lot more data but people are

                   not going to be the ones interpreting that data, you

                   need algorithms to do that."  At BioSystems, if you

                   go to our website and look at what our mission

                   statement and our business model is, it's to assist

                   scientists on the visual interpretation of data.

                   Well, what does that mean?  Look at what Google has

                   done, for instance, with the driverless car.  What is

                   the driver doing?  He's really interpreting the

                   surroundings and guiding this car through the world.

                   An algorithm can do that and, actually, they did

                   that, they drove the car from San Francisco to LA,

                   I've done that many times and I tell you, it's a

                   treacherous road, so you can do that.  So

                   interpreting data, especially big data, detecting

                   trends that a very small slice of what the doctor is

                   trying to ask you is not enough, you have to be

                   looking at a bigger slice of data, so that's the

                   future for work, that's the future of health care as

                   well, so mobile technology will enable to collect the

                   data but mostly you need the algorithms on the back

                   end to interpret all of these huge amounts of data

                   that will be generated.

WILLIAMS:  I don't know that it's that far in

                   the future, Raul.  Part of the competitive landscape

                   that's changing is that our competitors are outside

                   the US.  For example, in South Africa they have a big

                   problem with HIV/AIDS, they also have a big problem,

                   because it's a complex treatment regimen, people

                   adhering to the treatment protocol, so we ran a pilot

                   down there using the phone, they're feature phones,

                   they're not smartphones, we can locate you, and those

                   individuals who are on the treatment regimen not only

                   do we locate you and send a text reminder of "You

                   need to take your pill today at 2 o'clock.  By the

                   way, the nearest dispensary from where you're

                   standing is two blocks away.  Please go there at 2

                   o'clock, they'll be ready for you with your

                   medicine."  We did a very similar thing with

                   Telefonica, which is the Spanish telecommunications

                   carrier in the Basque region of Spain, for the

                   elderly of access to care, compliance with your

                   treatment, ways to outreach the social workers for

                   management.  We did a similar thing in Brazil with

                   Telefonica for diabetes.  Brazil is one of those

                   countries with an increasing incidence and prevalence

                   of diabetes.  So how do you engage people in that

                   way?  The result of that pilot, Telefonica, here's a

                   telecommunications company, how do I use my

                   infrastructure in a different way, purchased a

                   Brazilian diagnostics manufacturer as a way to link

                   diagnostics to their network to the data that they

                   have about you today.  It will fundamentally shift

                   how we access care.  And so as those companies

                   develop business models that work in Brazil, that

                   work in South Africa, that work in Indonesia, which

                   is a 240 million population country that has made a

                   public policy decision to have a single health care

                   system, things that survive and succeed in those

                   environments will come from there to here, they will

                   be lower cost, they will be more efficient, and they

                   will radically upset how we address health care in

                   the US, and our challenge in the US is that we don't

                   have a single model of health care, we've got a

                   government program in Medicare and Medicaid which

                   treat large numbers of population but they're the

                   most vulnerable, the poor and the elderly, and then

                   we've got this mix of private payers, so it creates a

                   challenge for us to implement some of these

                   technologies where it's easier outside the US.

                           ZAVALETA:  And we also have the FDA that

                   continuously delays technology.

                           EILENBERG:  The other aspect of this is just

                   the data itself, so we're talking about the ability

                   to move the data.  Right now, and this is a global

                   issue, there's conversations happening actually in

                   the next few weeks over in Europe with the WHO, the

                   European Commission, several different pharmaceutical

                   companies, technology companies, it's about the

                   movement of the data, and right now on a global

                   level, even though you can do things within

                   individual country borders, who owns that data, who

                   governs that data, who has the rights to move the

                   data, who has the rights to access the data and use

                   the data, who has rights to archive the data, who has

                   rights to make money off of the data, is it the

                   health system, is it the patient, is it the

                   government, is it an individual entrepreneur that

                   creates the interface that allows the data to be

                   moved?  There are things that need to be addressed so

                   that we can get to utopia because the technologies do

                   exist, the entrepreneurs exist.  We've got to sort

                   through some of these cultural and social aspects of

                   privacy, ownership, use, those kinds of things, so

                   that we can move forward and get the efficiencies,

                   reduce the costs and ultimately benefit from the

                   implementation of these technologies to get to the


                           STEMME:  J.K., I would just add that, in

                   addition to Raul's point about the FDA having to

                   approve specific software that goes into a clinical

                   decision being made, it's going to be CMS making

                   decisions about how to reimburse and fund these, the

                   use of this technology that's going to have a big

                   impact at least on certain portions of the digital

                   health area and hopefully there will be a better job

                   of that done proactively than something, you know,

                   we've see recently with CMS was going to change the

                   way that they were reimbursing molecular diagnostic

                   tests, which has really been a disaster from a

                   perspective of companies that are providing those

                   tests, so hopefully, again not all of digital health

                   start-ups and technologies are going to be in —

                   they're going to be consumer oriented and useful in a

                   different way, but to the extent they're impacting a

                   clinical decision they're going to have to be touched

                   by the FDA and in many cases by the CMS and hopefully

                   our government can be open-minded and progressive

                   about how they utilize and approve of those


WALL:  Dr. Low?

                           LOW:  I think someone should mention

                   something about the sequencing of the human genome.

                   It is now probably possible to sequence your genome

                   within a day for under 3000 and it's anticipated

                   within a few years it will be under a thousand, which

                   is less than the cost of a CT scan, and whereas in

                   the past we've recognized that a few genes can

                   significantly impact our behavior and our health, for

                   example, sickle cell anemia is caused by a single

                   nucleotide base pair change, or phenylketonuria,

                   we've known about these diseases for years, but more

                   recently the knowledge has advanced so that from

                   sequencing you can tell that you have a

                   predisposition, for example, to depression, to

                   Alzheimer's, to a number of different forms of heart

                   disease, to a kidney disease of all different sorts,

                   and my anticipation is that within a few years your

                   children are going to have their entire genome

                   sequenced at birth and you're going to be told ahead

                   of time that the probability is that by the time

                   you're 30 you're going to begin to develop restless

                   leg syndrome or you're going to have problems with

                   schizophrenia, or whatever, and you'd better start by

                   the age of 20 taking these preventative measures, and

                   so all of this is going to impact your health and

                   your management of your life, and I think this is all

                   going to have to be digitally communicated,

                   correlated and stored in a private manner that you

                   have control over and that you can access for

                   information that will benefit you.  In this room

                   right here there are probably a million mutations in

                   your genome, that's the numbers that are passed

                   around right now, and these determine a lot of your

                   behavior, a lot of your health, a lot of your future

                   and so forth, and as that information is understood

                   in greater detail it's going to have an enormous

                   impact on your life.

                           WALL:  I've got a couple questions from the

                   audience that pick up on something you said which is

                   the issue of privacy in relation to digital health.

                   We're talking about all of this data, moving it

                   around, analyzing it.  Is that a concern, privacy?

                   How is that managed?  How is privacy maintained in

                   this new world we've been describing?

                           EILENBERG:  I'll go first.

                           WALL:  Go ahead, Kristin.

                           EILENBERG:  So I've spent a lot of time

                   looking at the amount of data that we create just

                   living our lives and people think HIPAA protects you

                   and the reality is that when you walk into your

                   clinic and you sign, you actually sign, it's

                   acknowledgment that you've been told, you're not

                   consenting, so there's a difference between

                   consenting and being notified.  In the state of

                   Indiana we actually, because of policies that have

                   been put into place, when we show up and we get

                   medical treatment, our data goes to INPC, to

                   Regenstrief, to a lot of different places and it is

                   moved, it's portable, which a lot of other states —

                   So within the United States, every single state has

                   different policies in place on whether or not there

                   needs to be a consent process or whether or not

                   people are just notified that their data is moving.

                   I think that there needs to be more robust education

                   around when we create information what happens to it.

                   When we go in and we use Google, these are examples,

                   you go in to use Google, Google is text-mining all of

                   our e-mails, they're text-mining all of our searches.

                   They probably know more about you than you know about

                   yourself and they can start to do the predictive

                   analytics of things.  Now, Google's interesting

                   because they don't share that data, they don't try to

                   monetize that data and give it to others, they tell

                   people "We've got the data, we know how to do

                   targeted ads, we know how to drive for traffic, we

                   know how to do things when it comes to searches and

                   let us take that ownership, we'll do this for you and

                   you'll pay us a price to do that to the commercial

                   entities."  A lot of people don't realize that when

                   you go to Google you've already engaged in a

                   relationship and you're giving up that information,

                   you're giving up your IP address, you're giving up

                   any demographics that might be tied to your account,

                   all of that kind of stuff, they know where you go.

                   Facebook is the same.  So I think overall we need to

                   have more robust understanding of the data that we

                   create today, where does it go, how is it used, who

                   has ownership of it, who's making money off of it.

                   It's not a bad thing.  I like the fact that Google

                   can customize and tell me things that provide value

                   to my life.  If I can do a search for something and

                   find information faster, it's "Yeehaw, this is

                   phenomenal!" right?  I remember the old days of

                   AltaVista.  It wasn't nice, it wasn't pretty.  So I

                   prefer the more customized experience, but I'm a

                   knowledgeable participant in that interaction.  I

                   don't think a lot of people are.  When it comes to

                   the transfer of information for health, it is going

                   to be a challenging conversation and it is something

                   that does need to be addressed.  I don't think it can

                   be a unilateral decision of "This is what we will

                   do," we will end up in a 1984 Orwellian type of

                   situation and I don't think any of us want to do

                   that, but I think that we need to become more

                   cognizant of how much data we produce just sitting

                   here just breathing, if you have any kind of devices

                   on you that's all producing information, it's going

                   somewhere, and so I just think that we need to do


NEFF:  So everybody's concerned about privacy

                   and, of course, we should be about health care data,

                   but, you know, the one immutable law of government is

                   the law of unintended consequences.  HIPAA was

                   enacted 10-plus years ago and to this very day if you

                   say to a doctor "Can you text a message about your

                   patient to a colleague and ask him a question?" and

                   they will tell you "No, I can't do that because HIPAA

                   prohibits that."  "Can I send an e-mail?"  "No,

                   you're not supposed to use e-mail."  "Well, how can I

                   communicate patient data?"  "Fax."  I don't know

                   about you, I don't ever use a fax machine anymore,

                   and so that's a deficiency by enacting legislation

                   that has criminal consequences and it makes people

                   terrified to share data.  That's unintended.  I mean

                   it ought to be maybe a civil penalty if you violate

                   somebody's privacy, unless you really intended

                   something bad with it, but it needs to be respected,

                   but we're generating so much digital data and it is

                   so vital to making our health care system more

                   efficient that if we don't find a way to flex on

                   things like HIPAA we're not going to be able to do

                   what Brian outlined.  You know, if you wanted to do

                   what they did in South Africa with an AIDS

                   population, you talk about a couple million dollars

                   and a couple years of clinical trials to prove to the

                   FDA that you could do this and you wouldn't have any

                   unintended consequences, the by-product of that, I'm

                   sorry to say, and this is true with Endocyte and it's

                   true with most of our portfolio companies, is we're

                   going outside the United States to try a lot of

                   different things to innovate in order to prove to the

                   FDA when we come back that "We've got data and you

                   can be more comfortable with this and, therefore, you

                   should accelerate the approval," and that's a shame I

                   think from a policy perspective.

                           WALL:  We're almost out of time.  I'll ask

                   one last question, if someone can jump in here, to

                   wrap up.  What factors that make life sciences hubs

                   successful around the country are missing in Indiana?

                   Can we do a lightning round with a couple people?

                   Can you just name one or two things?  Brian Williams.

                           WILLIAMS:  Seed and early stage capital, more

                   of it, a lot more of it.

                           WALL:  Okay.  Brian Stemme, do you have an


                           STEMME:  I would say additional academic and

                   company collaboration.

                           WALL:  Raul, do you have a thought?

                           ZAVALETA:  I would say a better tech transfer

                   from our universities and commitment to work with

                   businesses to capitalize on the technology being

                   researched and developed.

                           WALL:  Dr. Low, do you have any thoughts?

                           LOW:  Yeah, more people to carry the flags to

                   set the example so that it is real to anyone that has

                   the aspiration to participate.

                           WALL:  Okay, Matt Neff, do you have a


                           NEFF:  Surfing.

                           WALL:  Surfing, okay, in the oceans.

                           NEFF:  What I would say is a government that

                   is more attuned to making long-term investments in

                   the growth of this industry.  You know, you compare

                   Indiana to Ohio, the Third Frontier Fund is in the

                   billions of dollars.

                           WALL:  Okay, Kristin, you get the last word.

                           EILENBERG:  So everybody says "capital,"

                   right, I hear a lot of "capital"?  I'm going to say

                   we need people, we need people that are willing to

                   take the risks because, and we brought this up

                   earlier, it seems that failure is a bad thing and yet

                   I see failure as an enormous opportunity, and so we

                   need people who are willing to take the risks to go

                   out there.  We need to create the ecosystem system

                   with the capital, with the resources, training,

                   education, and just additional manpower to support

                   the ideas to move them forward.

                           WALL:  All right.

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