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IBJ Life Sciences Power Breakfast transcript - 2016

May 5, 2016

Indianapolis Business Journal gathered leaders in the life sciences industry for a Power Breakfast panel discussion April 21.

Panel members included Colleen Hittle, managing director of Navigant; Suresh Garimella, Purdue University’s executive vice president of research and partnerships; Brian Barker, general manager of U.S. Seeds for Dow AgroSciences; Kristin Sherman, former chief financial officer of Calibrium LLC; and David Johnson, CEO of BioCrossroads.

The panel was moderated by IBJ reporter John Russell.

Here is an unedited transcript of the discussion:

RUSSELL: A question for everyone first is what are universities and private sector doing to commercialize more of the research done by faculty? And why don't we start with Dr. Garimella.

GARIMELLA: Thank you. Well, first, it's a pleasure to be here, good morning to everyone. It's a great audience and we have a team at Purdue, colleagues here that actually could speak to any of these topics much better than I could, including the Dean of Science. So I think that in terms of the commercialization aspect we view our mission as a land-grant institution as being an important part of that is to convert the basic research that we do and translate it into products that can be used for the community, and so in this space basically helping people live longer and healthier lives and impacting global health is a very important target for us. We believe just by looking at numbers we're actually quite good at this, we license about three technologies a week to companies. We're the 16th largest producer of intellectual property in the world, and last year we had more start-ups than Stanford, for instance, if Stanford's a place you compare things with. We don't.

(Laughter.)

GARIMELLA: And President Daniels' arrival at Purdue and then Hasler who leads are PRF, Purdue Research Foundation, really made fundamental changes to how we handle IP. We've changed our IP policies to make it easier for companies to work with us, and I guess we are still learning about how to work at the speed of companies and understand the root cause of any problems there are and try to fix them, but this is something we truly believe is an important fundamental part of our mission and we'll do all it takes to do better.

RUSSELL: Brian, do you work closely with the academic centers, do you engage in partnerships that try to commercialize what they're doing and other panelists and industries same question?

BARKER: Absolutely, and I was going to add for our friends at Purdue, too, a big part of what we do is not only taking some of the technology that they're bringing out, which is amazing what they're able to put out, but it's also trying to partner with them. Purdue, for example, and we're in the ag business and agricultural production and farming, somebody like Purdue brings two things, obviously they bring the capabilities, but they also bring the connection with the farmer, they know who the  customer is, so we will put efforts together with them and their Extension, we'll put efforts together with the ag school, we'll put efforts together with their science teams, building facilities at Research Park to not only make things but also develop them with the customer base so that when those technologies are ready to commercialize they really are on point, and then we get the added benefit of being able to hire a lot of Purdue grads, which is great, too, so it's a very nice circle all the way around to make things really work.

SHERMAN: Let me comment from a start-up perspective. I've seen over the years that I've been working in start-ups some real change in universities as well, there's always opportunity for more change, but looking at different models, you know, the traditional sponsored research agreement was the standard in terms of how you conduct research in the university, now we're starting to see and talk about shifts to more incubator-based models where if someone just wants to work on their own IP and rent space and market base, universities are starting to be more open to that. Let me also highlight the Purdue Research Park which has been open for several years now, but that's another excellent opportunity  for companies to get space and get up and running in terms of the start-up.

JOHNSON: John, could I just add a note on this, too, a couple thoughts on it? One is the Indiana Biosciences Research Institute is obviously designed to deal with these opportunities and issues directly by serving as a catalyst between corporate partners and university partners to attract the best and the brightest talent we can, retain what we have and bring even more here, but also to really strengthen the links between universities and industry which are each powerful engines of innovation in their own right but historically here have not spent as much time together as they really should, and we're seeing a lot of wonderful things happen around the edges of this and right in the middle of it, too. What Purdue has recently announced with President Daniels putting 250 million of research commitments into, again, looking at research that will be directly aligned and relevant to industry, what Indiana University is doing in the Translational & Clinical side, the culture of this is changing to the point where these parties are working more together and that takes a few years but I think we really are starting to get it right. The one  thing I think we're not making enough progress in and maybe we'll talk a little bit more about this going forward is one of the things that brought us all to this in the beginning and that's money. Building a company, even if you're building the kind of high quality, high octane companies that Kristin's been involved in, building a company in this sector gets only challenging and more expensive and riskier in market as the scientific stakes go up and the opportunities do, too, and we through BioCrossroads, we run the Indiana Seed Fund Program, we would like to have more partners in that. The universities are being great partners with their funds, but we are still lacking here the kind of local venture capital presence that we really need to be able to build more of these companies earlier and faster and frankly see people lead financing around it. We are not seeing enough of the promising innovation.

RUSSELL: Thanks. I've asked each one of you to think about a few questions and I'm going to get into those now and maybe we'll get back into audience questions in a moment. Kristin, if I could come back to you for a moment. Novo Nordisk acquired Calibrium, LLC and MB2, two diabetes firms co-founded by Richard DiMarchi. Both firms were just a couple  of years old. What exactly did the companies do and why were they snapped up so quickly?

SHERMAN: Sure. The companies really were focused on early-stage discovery and drug development. Now, MB2 also has a later-stage clinical program as well, but let me focus on Calibrium, which is near and dear to my heart. We really had a strategy that was designed to get to a quick "yes" or a quick "no," and what do I mean by that? We would take compounds at a lab, run them through tox, run them through early clinical testing in order to quickly evaluate whether it was a "go" or "no-go." We could do that at a fraction of the cost and very, very quickly relative to a big pharma and then our intent was to partner or sell the asset. We had no intention of building late-stage infrastructure either to do late-stage clinical trials or to do commercialization, that simply wasn't our niche, it wasn't what we were good at, so that was our strategy and we were progressing along. Why were they snapped up so quickly? Obviously, the key driver is the quality of the science, the reputation of Dr. DiMarchi. When you have that to lead, it makes it very easy to follow on with a transaction. I think being in a market like diabetes certainly  helped as well, it's a very large and growing market. But I do want to comment on the fact that you do have to have the total package and what I mean by "the total package" is is your IP filed, is it free and clear. If you license your IP, do you have reasonable terms for a start-up? Do you have quality research data? Do you have quality studies that were conducted by vendors that would meet big pharma due diligence requirements? So, you know, you can't do start-ups in a garage, it does take money, as David said, and you have to operate with a mindset of "Okay, who's going to be reviewing my data and is my data quality data through quality vendors?" And, of course, you can't neglect contracting, you have to make sure that your contracts are all buttoned up so you have access to what you say you have access to. When you start with that phenomenal science and the reputation of Dr. DiMarchi, you bring the total package to it, you're able to complete the transactions and really extract maximum value.

RUSSELL: Thanks. Colleen, Kristin just talked on so many issues that touch on so many of the hurdles and the mysterious process of getting a product from lab to the marketplace through the regulatory process. I wonder if you can comment on  some of the biggest issues in the life science regulation realm these days.

HITTLE: Sure. I just wanted to echo the comments from Dr. Garimella, it's an important opportunity to have everyone here today and it's a great group and thanks to the IBJ for continuing to sponsor this and great opportunity to be here all together. I think one of the biggest challenges that we see is something that David alluded to and it is the identification and training and retention of human capital, resources, people, because as innovation accelerates and the regulatory processes become more complex, the people that know how to navigate that process are critical to the success of the organization and, candidly, my clients and my organization spends a really significant amount of time training and retaining key talent so that we are able to continue business operations without kind of interruption, so for me the human capital and the retention of talented individuals is really one of the most important issues facing life sciences companies right now.

RUSSELL: Matthew, you've run a testing lab, it's a tough business, as I'm sure you can tell us. Thanks to deeps cuts in Medicare reimbursement rates  for basic drug tests, where does AIT stand in its turnaround efforts?

NEFF: Well, it's been an interesting experience and I call it my doctoral dissertation in business, it has a little bit of everything associated with it. I've been involved in starting new businesses, I've been involved in investing in life sciences companies, but running a toxicology lab business these days is very challenging because it's being commoditized at a rapid rate. AIT, as some of you may know, had a number of organizational problems in the past. That was my challenge to try to resolve and we made a lot of progress, we've adopted a moniker of "calibrate, innovate, elevate" when I started and we calibrated everything, we measured processes, and we innovated and I'll talk about that more in a minute. Elevating has proven to be a challenge because of two significant government actions and that's one of the things that makes life sciences so difficult is the very high profile of government in all that you do. In our case reimbursement cuts have been massive. The doctor reimbursement problem was fixed largely by cutting reimbursements of labs and some legislation in 2014 authorized CMS to cut them by up to 75 percent. So  it's a little bit like being in the petroleum business these days where OPEC says that we're going to blow the top off the marketplace and government is going to dramatically reduce reimbursements. The other thing is the Department of Labor, we have an ESOP and the Department of Labor has shown a very high level of interest in that and it's very expensive to communicate with the Department of Labor. Let me turn to innovation, on a happier note. We decided that the only way we were going to set ourselves apart from a commoditizing business was to innovate with something that nobody had really thought of before, and so you've all heard about the opioid epidemic, it's really hit home here in Indiana in Scott County. I have a graphic I'd like to show you they're going to display here that shows you the progression of the opioid epidemic in the United States. This heat map, the red areas are measuring the numbers of deaths that are associated with the use of opioids and the first slide is 2002, but as you see it progress through 2014 you can see it spreading like a cancer and it's spreading like a cancer particularly in the central United States, the midwest and Appalachia, and drug testing is really what AIT specializes in and so we took this trend, we  took our expertise and we created a program, what we call GuideMed, which is the nation's only opioid prescription management platform, it's the only thing like it in the marketplace, and so we're playing into this trend that you see displayed on the heat map, and then if you look at Scott County, just to kind of quantify the magnitude of the damage of something like this, Scott County, Indiana has a population of 20,000 people. The cost of cleaning up the hepatitis C and HIV epidemic in Scott County has been estimated conservatively at 250 million dollars. Think about how many people are on that heat map and that kind of cost factor and it's a scary problem. So kind of a long-winded answer to your question, John, I'm sorry for going on a little bit, but we have tried to take an old-line business that was going through a commoditization process and turn it into an innovator on a problem that is really hitting close to home these days.

RUSSELL: Thanks. Brian, one of the biggest stories in life sciences this year is the huge merger between your company and DuPont and it's not the only merger in the ag industry. I'm just wondering if you can talk about why these things are happening, why scale is so important in your field.

 BARKER: Yeah, I just found out about that yesterday.

(Laughter.)

BARKER: Just kidding. Well, really the crux of it goes back to something that affects everybody in this room, the business that we're in and eventually I think all of us are in which is the problem of you have billions of people on the Earth and it's growing and the amount of land, air, resource that it takes to feed all of those people there's a mathematical dilemma that just doesn't add up, so there's a dilemma of how we're going to feed all these people and so that's a big and immense problem, and so when you look at what we do, so much of what we put in as an industry over the years, and we're in agricultural production, is about trying to figure out how you can make more from "X" amount of resource, and so there is no one company and there is no one person or one institute that can possibly boil that ocean and figure that out, and so the ultimate challenge we've had over the years as an industry and where it's very active is collaboration, so collaboration takes on a lot of different forms, it can be two people that are sharing ideas or it can be two companies that decide to get married, but at the  end of the day trying to leverage whether it's with us and DuPont, whether it's with us and Purdue University, whether it's even us with our competitors licensing and working together to bring pieces and parts together to solve that problem, that is really the ultimate challenge that we have is trying to figure out how you're going to feed all of these people and no one company can do it, so we have to collaborate. Obviously, a merger like this allows us hopefully to do one plus one equals more than two and we think it's pretty exciting.

RUSSELL: Thank you. Suresh, we were talking earlier about the Zika virus, I mentioned that in my opening remarks. Your university made national news a few weeks ago for mapping the structure of this Zika virus. I wonder if you can talk about the backstory of that story and what will the university be doing with that research going forward.

GARIMELLA: Thank you. We only wish we could have news like that every other week or so and maybe we will, but actually the announcement does build on a long-standing set of inventions and discoveries by our Structural Biology Group, they have been a long- standing leader in this area and, in fact, well before Zika became a household name the Dengue virus,  which actually infects 390 million people annually, I understand, much, much larger scale, that virus structure was discovered by this group of Professors Rossmann and Kuhn, then they went on to map out the structure of the West Nile virus and then Zika, they're all sort of related structures in some ways, so, really, I think there's been long-standing strength in the School of Science and Biological Sciences and other departments, but what this life sciences investment did that David Johnson referred to is to sort of identify specific areas of sort of pillars of excellence as we call them in this space and invest deeply in them to, in fact, make a difference, and, therefore, I think the mapping of the structure of the virus is great, of course what comes next is the question, right, and so I think that it's a beginning for Purdue researchers but also for researchers around the world, once you map out the structure many folks can contribute to finding treatments and such, and, in fact, we have a very strong drug discovery team, as you know, and they are currently collaborating with the infectious disease folks to try and come up with therapeutic solutions and vaccines and such and this group, again, has had a long-standing partnership with vaccine  manufacturers and so on. Someone talked about human capital, actually Colleen did and I think Kristin did as well, it is very important when we talk about this big investment we're making, it is obviously in advanced equipment and faculty and labs and things, but really what we bring to the table is the human capital. Imagine the number of PhD students and post-docs and things that are being trained in this space that truly enrich Indiana as a bioscience hub, and so I think this is something we shouldn't under- recognize and it also helps us to attract the best and the brightest around the world when we have new discoveries.

RUSSELL: Thanks. David, he just mentioned the term "biosciences hub." Kind of a big complicated issue now that you're grappling with and the whole industry is 16 Tech, that district on the westside. I'm not sure it's very well understood community-wide. It seems like a positive thing to redevelop a beaten-down corridor of this city. How exactly do you believe 16 Tech will bolster life sciences in the state?

JOHNSON: Thanks, John. Well, it is an emerging opportunity and I think that people who are beginning to see it, and they are numerous, including  many of the people who live in that area, are excited about it, that's one of the reasons that the city- county council for Indianapolis appropriated 75 million dollars to develop the infrastructure to make the Innovation District their work. 16 Tech is being deliberately designed as an Innovation District, it is designed to first and foremost attract the talent, human capital that we're all talking about here and, frankly, we can do it by having a really cool place for people to be. If you look at where it is on a map, it sits really in a pocket surrounded by IUPUI, the medical school, by four hospitals, and so the health care and life sciences convergence is going to be very apparent there because the Biosciences Research Institute will be the anchor tenant for 16 Tech, that's where it begins but that's not where it ends. The opportunity for 16 Tech really seems to be across all technologies for some of the reasons that we're talking about here. Let me just make three points about 16 Tech that was a life sciences destination for purposes of why we're here. First of all, the corporate sponsors of the Biosciences Research Institute wanted a big place for the IBRI, they did not want to build a palace or a campus, but they did want a place that's readily accessible,  where parking is readily accessible, where the building could be scaled where there would be accelerators nearby and incubators to take innovation coming out of promising scientific discoveries, where companies like Dow and Roche and Lilly, if they wanted to, and there's interest in this, could co- locate facilities and scientists and development opportunities of their own, so it had to be in a place where you could spread out and really brand, and so 16 Tech is the 60 acres of land, it's a big place and it's a place that can take an opportunity like this and really do something with it. Secondly, though, 16 Tech is designed to be, again, a technology convergence area and the IBRI is all about that. Brian and I were talking about this before breakfast this morning, it's very interesting that when you have Roche and Dow and Lilly and Zimmer- Biomet and Cook and IU Health and you take their leading scientists and clinicians and you put them all in a room, which is exactly what the IBRI has done, and said "Okay, so we've got this really cool innovative institute, it sits here between academia and industry, where do we begin?" and everybody around the table, and, again, the focus of the IBRI is cardiovascular, metabolic disease, diabetes,  obesity, things that we need to deal with from a public health standpoint here as well, but all the scientists around the table said "Where we begin is with big data," and so the first core of the IBRI will be all about people being able to get their arms around the data that's increasingly necessary to do innovative, groundbreaking research in a collaborative setting and that's emblematic, frankly, of where health care, life sciences and technology are going because you're seeing an increasing convergence of it, so the goal with 16 Tech is to have a place with IBRI in it that is about more of the life sciences and frankly has a lot of other technology companies and technology opportunities immediately adjacent to it. The final thing I'd say about the life sciences opportunity is that IBRI is all about attracting talent and it's all about bringing people here who don't live here today to set up shop and make their careers. Most communities our size and scale with an industry like the life sciences industry we have already have a cool place, frankly, a place you can point to and say "Beyond the campus, beyond the corporate setting, this is a place where talent comes, lives, works and aggregates." We do not have that at the start of the year. 16 Tech  will be that and IBRI will be the anchor tenant to help drive it.

RUSSELL: Thanks. A follow-up question for Matt on your point about opioid testing, a question from the audience says "Sadly the marketplace has been growing and it's smart of you to recognize that. Can you share how you can monetize this? Who will pay for the expanding testing needs given the users themselves may be uninsured and in tough financial situations?"

NEFF: That's a good question. The states as they've seen that map develop over time have become alarmed about the way opioid prescribing is managed by doctors and so they have to varying degrees imposed regulations and laws on the doctors about what they have to do before they can provide opioids for a long period of time, and the doctors, this is not a reimbursed thing for them, it's just the cost of doing business or for the hospital system in which the doctor operates, so they haven't been happy about it, they've been very frustrated by the cost, the time, and they're worried about being viewed by the patient as becoming a police officer rather than a trusted confidante about somebody's health, so our approach has been "Let us take all of that off of you  and we will do all of the processes so you can outsource that to us. We'll take all the risk. If something goes wrong, it's our problem, not yours, and we'll manage all the data" because to David's point, you know, the convergence of life sciences and technology is profound and over time as we get more experience with this we will be able to predict somebody who is susceptible to becoming addicted or dependent on opioids, I hope, so that's our ultimate goal is to be able to identify those problems in advance.

RUSSELL: Thanks. Kristin, you were also CFO at Marcadia Biotech, another Richard DiMarchi company, but that one was acquired by Roche in 2010 for at least 287 million dollars. None of the firms had more than a handful of employees that you were involved with and much of the work was contracted out. Is that the new business model for life sciences and if so why is that the case?

SHERMAN: It is a virtual model for start-ups and especially in the life science space. I think it makes a lot of sense for very obvious reasons. First and foremost, it's a very low cost model, you know, we start up in our homes, staff is at Starbucks, and we tend to license our intellectual property very  efficiently from all of the amazing work that's done at the universities, so you're able to keep your costs very low and can have very little overhead initially. As you grow up you might bring in an office to start to have a little bit more formal environment for your company, but, again, you're looking at low cost and a lot of variable costs because you're only hiring vendors you need when you need them and you don't have a lot of capacity sitting around. Similarly, I think the model attracts and it allows you to access a lot of talent because it doesn't matter where your people work. With all of the advances in technology we're all connected, so it doesn't matter if someone's on the east coast, the west coast, the midwest, you can access the best and the brightest and fill them into your limited number of slots because you're not constrained to a geography or an expensive relocation package. I also think it is an attractive model for your target employees or the folks that are going to run your organization. In this model you need folks who are very experienced because they're often going to wear a lot of different hats, you know, your CM&C (check word) person might also be your quality person, your regulatory might be covered by medical,  CFO might cover everything from HR to systems to legal to that financial stuff, so everybody has to wear a lot of different hats, they're very experienced. These folks are often attracted to the flexibility of this model, they're not necessarily looking for full-time, they're not necessarily looking for 8 to 5 and sitting in an office, so they value the flexibility and the variability to work wherever they want to work and just to make their contribution, and if you're really lucky they're also interested in low cash, high equity comp, which is the music to a start-up's ears, so I think for all of those reasons, the virtual model for an early-stage start-up life science makes complete sense.

RUSSELL: You mentioned several phrases that several people in the audience have kind of circled to as well and it's come up in almost every comment so far and that's talking about talent. What specifically can we do to improve identification and retention of talented workers in life sciences? This is not a brand-new question, but we've had several questions from the audience like this and it's a question that's maybe an evergreen that everyone up here is grappling with year after year, so for anyone or everyone who has thoughts about that.

 HITTLE: That's an area that I spent a fair amount of time thinking about because you can imagine in consulting the most important commodity you have is people. I think one challenge especially for life sciences companies in Indiana is to work against the trap of it always looks better on the coasts and we have to model that I think as an organization, if we are always going for lawyers that are in New York or innovation that's only in southern California, I think we send the messages to our employees that the best and the brightest are somewhere else, so I think part of it is modeling, you know, selection in that regard and making sure that we're looking close to home, at least midwestern, before moving to the coasts. Same for acquisitions of small businesses and doing business more locally, but I think the other kind of growing trend that I'm seeing is there are different ways to learn and work that the kids today learn in college and being adaptable to different work environments I think is another way to work to retain key talent, to be willing to think differently about the work day, the work environment, and being collaborative and innovative around flexibility in that respect both for diversity and women in leadership roles, but just also generally in  terms of the work day and what we characterize as professional commitment to people from an 8 to 5 perspective, so being as flexible and creative as possible I think is a key area for talent retention.

RUSSELL: David.

JOHNSON: John, BioCrossroads is going to publish a pretty major report on the topic of talent in the life science and health care workforce, actually, probably within the next couple of weeks. We're going to do some programming on it. It's a major benchmark study, first of all, looking at the life science and health care and we put health care in with it because of the convergence, looking at that workforce, looking at what it is and where it is and it's enormous, we're talking about one out of every 10 jobs in the state of Indiana, they are all in various ways, whether they're low-skilled, mid-skilled and high-skilled and most of them are in the mid and high-skilled areas, increasingly dependent upon technology-enabled skills and highly talented people to keep them. One of the things that we are now able to show in this report is that the issue we're talking about here indeed is whatever you're hearing from everybody here, it is not that we do not have enough jobs for talented people, we do  not have enough talented people for jobs. Even with the companies that we currently have, which is probably driving Colleen crazy on a daily basis, we are not seeing the string of people that we need to keep this enormous industry going, which is a nice problem to have but it's a problem we have to deal with and there are multiple strategies for dealing with that, I just want to touch on two briefly here. One is our education system simply needs to be better, we need to be doing a better job preparing students starting from pre-K all the way to K through 12 and in, whether it's associate's and baccalaureate programs as well, in STEM training and STEM education and tech-enabled skills. There are a number of ways to talk about that, but that is to some extent the elephant in the room that has got to be dealt with. More and more it's an educational and policy issue. For a state like ours whose future is so dependent upon science, this is an industry based on science, and so if we're not training our young people in science and engineering and math, we've got a challenge coming around the corner. The second thing is that one of the things the report will show is that we are a superb, absolutely superb, importer of talent here in Indiana not only for our major  companies for people who are mid-career, but also our universities. You take a university like Purdue which has -- I think, Suresh, you have maybe the second highest concentration of Chinese students in the nation coming to Purdue for an undergraduate degree. This is true, we have 39 higher education institutions in the state and we are 14th in the United States in terms of the number of baccalaureate degrees we turn out from those because these are superb schools and people come here from all over the world to work, but if you take an area, I'm just going to give you a real quick example, if you take an area like engineering in the medical technology area, let's say that we need a thousand new engineers just to feed the industry we have every year, the report will show you we turn out roughly about 1500 in the category that I mentioned every year. The challenge is that about 40 percent of the people who are coming out with those degrees are from Indiana and we've got a very high shot at getting them to stay here, but the other 60 percent are not and they did not come here to stay and they did not come here for a career and only about 6 percent of them stay, which is actually not a bad starting place if you don't have a deliberate attraction strategy for them.  Given the fact that we're recruiting nationally now, we've ought to start recruiting nationally while these people are here and we ought to start having internship programs and other programs that hit people in their freshman and sophomore and junior years at places like Purdue and Notre Dame and Rose- Hulman to really try to begin to link them directly to the production possibilities we have to put them to work right here in Indiana.

NEFF: Can I make an observation? Kind of ground level on the topic of human capital, first of all, having been a venture capital person, I think we need to adopt the approach that there is no shame in failure. Anybody who doesn't fail is not pushing the risk envelope hard enough, so you've just got to accept that it's a fact and it's not an adverse reflection on the entrepreneur, you have to try it, change it, if it's not going to work, try it again, change it, and keep doing that and you have to be persistent and that has to do with staying power and that's a personal attribute and that's a function of money, and so to David's point about the availability of capital and to the point about dealing with universities, hospitals, large institutions, the time-money balance is frequently lost because they  have bureaucratic processes that the entrepreneur just can't live long enough to get through. Secondly, I would make an observation that it's the responsibility of people like myself and Richard DiMarchi and Kristin and Fritz French and people have been very good about stepping up to the plate about this and that is mentorship of entrepreneurs by people that have been there and done that and our tech community in particular has a track record of very good exit and then taking those proceeds and reinvesting them in our community in new start-up businesses and that I think is one of the secrets to Silicon Valley was that there was a recycling of intellectual capability and capital that went on continuously and if we can get that going here, and I think the IBRI is a great way to prime the pump, then I think we'll do a lot better in the long-run.

RUSSELL: We have another question from the audience speaking of talent. They wonder another way to get more talent possibly is to get another research medical school in Indiana. IU's medical school is the largest one in the nation, but it's the only one in the state. Is there any merit to the idea of exploring another medical school in Indiana?

NEFF: Actually, there are two medical  schools in Indiana.

RUSSELL: I'm sorry, I'm sorry, Marian University has an osteopathic school.

NEFF: Right.

RUSSELL: But maybe a third or a fourth?

(Laughter.)

NEFF: Well, they're very expensive to start, extremely expensive to start and accredit. The question will be how does Marian do I would say in the next couple of years and can they develop more of a research function because, you know, capital is a commodity, people are hard to find, but you can build that talent pool over time. Intellectual property in my experience has been the most difficult thing to locate, and we have great universities, Purdue's a master at this, but medical schools, IU and Marian, need to get a lot better in terms of generating that and making it available for entrepreneurs.

RUSSELL: Suresh, any thoughts?

GARIMELLA: Briefly on the capital question which kind of relates, too, that I do think that Indiana is a very friendly place and I think all of us get together and work together well, but I don't think we're as good at ability from companies to universities and back, the internships thing, but  much more, I think just employees taking sabbaticals at the university and our faculty spending time deeply at companies learning about them, so I think we just need to build that further, and I will say that when we made the life science investment announcement a reporter called me up and said "Why are you doing life sciences, isn't that all in, you know, Boston and the Bay Area?" and I think just getting the word out that we are No. 2, the statistics you quoted, 62 billion or so, and that's what I think people need to hear about when they think of Indiana. Our dean of veterinary medicine will disagree with you when you count the number of medical schools, he tells us that we do have a medical school at Purdue and it's an animal medical school, and I only say that partly in jest because there's a lot of this work that needs to be done with animal models and I think we should not underestimate the importance of that connection and build on that further and support our vet school. I would only say that I'm not sure about whether we should be opening another medical school, perhaps at Purdue, but in the absence of one, this 250 million dollar investment that brings six colleges together at Purdue, that is looking at much deeper partnerships with corporate  and foundations and such, can actually contribute to the basic research side of things and I think we just need to all get better at collaborating between the IU School of Medicine and Purdue. We've got some great examples, there can certainly be a lot more, and I do think that the Foundry at Purdue, for instance, again speaking to the capital thing, we attract a lot of students to Purdue but they don't all stay, if we gave them exciting opportunities to incubate things here as we're trying to do, I think that could help. So I don't know the answer to that question. If you all want to put money up, we'll take it and make a medical school out of it, but I think in the absence of it we can do a lot more.

JOHNSON: Just real quick. Building on Suresh's point of collaboration, one thing that is happening here and is happening well is collaboration among Indiana University, Purdue, University of Notre Dame through the Clinical & Translational Science Institute which is technically an NIH award that came to IU, but, unlike any other state, Purdue is a joint recipient of that award and so is Notre Dame, so from a talent standpoint you have a really interesting working collaboration and portal opportunity that already exists as a bridge among those three that  doesn't present some of the economic issues that Matt was referring to.

RUSSELL: Brian, we've heard some good discussion about the Biosciences Institute and I'm wondering how much interest Dow has and why, especially in working closely with researchers from Roche, Cook Medical and other life sciences firms. Do you have any issues or unease in sharing your intellectual property outside of your company?

BARKER: No, and I've got to speak on behalf of my colleague, Steve Webb, who's out here, too, but no, absolutely not. Like I said before, our industry may be a little bit different in terms of how we approach agriculture and ag productivity, but the fundamental problem and the fundamental capability is the same whether it's hard science, whether it's big data and number-crunching or ideas around how you treat tissue culture or how you do transformations, you know, the science and the capabilities that we're trying to use are the same and so we could use a lot of the same tools and leverage a lot of the same tools and solve the problems that we have, so whether it's doing collaborations with the university, whether it's doing a partner situation, working with 16 Tech and feeding people in and out of that, Dave  and I were talking about opportunities of sabbatical and feeding people in and out which benefits our people and benefits the region. Licensing, there really aren't any limits to that and, frankly, we can't survive without it, we have a huge number of those types of collaborations, intellectual capital and property going back and forth and we can manage that very effectively, so it's critical to what we do.

RUSSELL: One of the biggest challenges in addition to or possibly in addition to talent that we've talked a little bit about is money. A question from the audience and also one we've been tracking, PricewaterhouseCoopers and the National Venture Capital Association puts out the MoneyTree Report which tracks capital investments across the country. In the latest quarter 15 million dollars of the 24 million dollars flowing to Indiana companies went to NiCo Corp which is commercializing brain surgery technologies. Generally, though, that list is dominated by software companies, not life science companies. What are the obstacles and opportunities to get more of that money flowing into life sciences? David.

JOHNSON: Well, again, I tried to allude to  this earlier. Life sciences companies are hard, risky and expensive to build. We have some people here, and Kristin is one of them, who are extremely good at doing it and we have some wonderful success stories that show how they can be done and how they work and how they can return significant capital to the initial investors, and, John, I would say you can't look at it quarter by quarter, but I do believe that we are underweight when it comes to having sufficient both seed and venture capital assets. Some of the stuff that Pricewaterhouse and MoneyTree track, actually, is the level of investment even above where I think we need to be focusing which is back in the seed, just right beyond family and friends, at the seed and angel and early stage to get things through the valley of death and that's a long valley increasingly so. We are just lacking enough concentration of people in the venture capital business here, we don't need to be a money center for it, we don't need to be a financial center like Boston or San Francisco, but we need to have a more deliberate strategy and the state needs to be part of it and the universities are already part of it, and organizations like ours I think are going to be a helpful part of it as well to really think about how  we bring more capital to more promising innovation coming out of our universities earlier because, among other things, if we had even more stories like Marcadia and MB2 and Calibrium, that success tends to attract even more success and more people to build companies here, so I think we would be able to attract more money if we simply had more smart capital available now and we have some of it but we just don't have enough.

SHERMAN: I don't want you to forget even the basics like the Venture Capital Investment Tax Credit, I've used that on three different companies to get angel investors who are very excited about that. Simple program but it works. It's effective and it helps in terms of attracting capital at a seed level.

RUSSELL: Speaking of money and ideas, Suresh, Purdue recently dipped its toes into crowd funding for research. Do you see significant potential in that area and how have those early efforts gone?

GARIMELLA: Yeah, it's a fun question. So for research funding we had our best year yet in terms of research awards last year and we're growing our corporate and foundation partnerships. A third  of our money for our research fund last year came from corporate and foundation sources, which is a very large number of professional peers, and of course our alumni and friends very loyal to Purdue, so those are the primary sources with which our research is supported, of course federal funding being the central. So why crowd sourcing, why crowdfunding? I think you could look at it multiple ways. Certainly, if a researcher has an idea it takes awhile for the peer review process and so on to go through for federal funding, so it could take some time, and if there are urgent cases, like Zika, for instance, where you want to start making a difference right away, you can get a quick shot in the arm, so bridge funding from this kind of crowd supported resources, but I really see it more as a way to help those who want to work with us, those who want to be a part of the excitement on these remarkable journeys to sort of engage them, to inspire them, to excite them, so I think people even without big means can feel like they're contributing to something like this and I think the excitement is critical. So why are we doing this? As you all know, Mitch Daniels is all about nimble operations and trying new things and here's one more, but I see it probably not quite as a  source of displacing our federal funding or our corporate funding but really engage the larger community in areas of greatest interest to them even if they don't have a lot to give in that space, and so we've had some good successes with it and we're just trying it out, but it's a novelty I think to some extent and if it works, that will be great.

RUSSELL: Matt, general question for you. You're a veteran of the life sciences community here in several different capacities. What do you see as the obstacles that we need to overcome to elevate us to the level of science hotbeds like San Diego and Research Triangle Park?

NEFF: Well, I think a number of the things that have already been touched on are great progress forward, IBRI would be a notable example of that, 16 Tech, developing a sense of community, attracting the right people. I think we have a lot of wonderful, as I say, human capital here, people that have been there and done that and more and more we just have to keep encouraging them to keep doing it, you know, it may not have worked the first time, so go on to the second and third venture and keep trying. Dave and I were talking, you know, IU Health I think may have been a little bit ahead of its time in terms of  creating a venture capital fund, I think it's 35 million dollars that they allocated. Just in the last couple of weeks there have been several large health care systems around the United States that have announced the creation of their own venture capital fund, I've gotten calls from some of them, and they're allocating significantly more than 35 million dollars, even though they may be smaller organizations, so it may be that that's going through a cycle. With health care reform everyone in the hospital business became very inwardly focused, "How am I going to be more efficient, how am I going to maximize reimbursement, improve my margin because I don't know what the ACA is going to do to my business?" Well, hopefully we're through the worst part of that now and perhaps we can start getting health care systems to reconsider creating venture capital funds.

RUSSELL: Colleen, we've talked a lot about drugs and some about crops. One issue we haven't talked much about is devices. Medical device makers cheered a two-year suspension of the medical device tax. Do you think the tax depressed innovation in the sector and do you think it's gone for good?

HITTLE: So do I think the tax suppressed  innovation, yes, absolutely, it would be difficult to argue against that, and innovation has a lot of different tentacles. Certainly the tax put new structure, new buildings, new facility expansions on hold, it caused businesses to draw back and rethink some other kinds of expansions through people and hiring and new business extensions, and, of course, if you have less talent and less facility you're going to have less true innovation, so I think it would be difficult to argue that it had an impact. And when you say is it gone for good, meaning the tax, likely not, it will probably pop up in some other way. I think we were very, as a group, very effective in our lobbying efforts and in talking very openly about the impact that the tax will have on our businesses and on innovation, but the reality is that this is an industry sector that makes money, that's exciting, and so it will be a source of dollars that we will have to get creative about finding the right balance there in terms of that tax, if you will. So is it gone? Certainly in its current state, yes, but I do believe it will pop up in the future, be prepared for that.

RUSSELL: Question for the whole panel or anyone who is interested. This is an audience  question. There's been quite a bit of talk about university relationships with the private sector, several audience members are asking for specifics. What would be a textbook example of a big success in that area? What are the impediments that prevent more successes?

BARKER: I'll take a shot at it because we do a lot of work with, again, Purdue and several others, but one of the big successes we've had in a very broad market is our Research Park investments we've made in our quality labs and our soybean research. Soybeans is a very significant crop, meal and oil seeds, in the industry, and several years our R&D organization was able to partner with Purdue and put a very nice footprint up in West Lafayette and the results of that have produced pieces of our biggest new technology launches that we have that are a big part of the merger with them that's going to happen, and so some of the trade development and crop development that we're getting out of that has been very, very significant and that is a big success for us. We also bring a lot of students in, hire a lot of people out of that, so that's a win for both sides, too, so I think that's a great example of a university and a publicly-traded company that can  work together and produce some very nice results.

RUSSELL: What do you see from the other side of that relationship, Suresh?

GARIMELLA: Yeah, John, I think it's a good question because it's all well and good to talk about partnerships but what does it actually mean and I don't have a life sciences one to give beyond the great one we have at Dow Agro and that will be growing, of course Lilly, but you all know that GE had looked the country over when they were looking for a place to locate their LEAP jet engine plant and they chose Lafayette and they made no secret of it that Purdue being next door was a big contributor there, besides the state being a business-friendly state. Along with that came a 10 million dollar sort of advanced manufacturing center and GE hires more of our students than any other company and more Purdue students go to GE than go to any other company, so clearly that is a deep, comprehensive, strategic partnership. I don't think there are too many examples like that that come along. Just last week at an IBJ event Rolls-Royce announced their 33 million dollar partnership with Purdue in the area of compressors and thermal management. I think these kinds of examples help some with attracting Nanshan,  the aluminum company, to Lafayette sometime back. Whenever IEDC is talking to folks, we're at the table, rightly so, we're happy to be, so I think the ingredients involved here -- Of course we work with 500 companies, some are testing, little contracts and such, they all keep going, but we envision having maybe dozens of strategic partners, residential partners, if you will, where the relationship is on many, many fronts. Of course there's the research, but a big part of why companies come to us is the human capital and so undergrad internships, graduate internships, sabbaticals going back and forth, et cetera. And then, in fact, David mentioned briefly that we have a very large international student population at Purdue, I think they're an under- recognized source of recruitment for companies that are now worldwide and so we have been increasingly helping with looking for ex-pats, if you will, not quite ex-pats, but folks that go back to their countries to work with a GE or an Intel, whatever. So I think there are multiple ways of doing this. One more thing I'll say is Purdue has made an enormous change in how we do intellectual property agreements and such. Today a company can come to Purdue and pre-own intellectual property on contracts  with us and not very many universities do that, so it's all done in a way that the barriers, you know, worries about IP and such kind of go away upfront, so we've been working hard at that, and if the audience has other suggestions or worries about things that they face, by all means they're welcome to e-mail me and we'll try our best to address that, too.

SHERMAN: I'll give you a life science example. All of the technology from Dr. DiMarchi was licensed into these companies, into Marcadia and into Calibrium through licensing agreements between the company and IU and IURTC, their technology transfer arm, so it's very common in a biotech start-up model to create those partnerships. You're leveraging the lab, the human capital, the talent and the expertise of the university, the university benefits by getting the intellectual property out and having it advance through clinical testing and in the case of both of these companies partnered and then ultimately transacted, so it's a win-win for both. The company doesn't have to set up initially its lab and incur all the cost and the hiring and build the infrastructure because, again, remember, start-ups want to be low cost, you want to be nimble, no fixed overhead, so it fits, it's a nice model and it works  very well, it's a benefit for the university and it's a benefit for these private start-ups, and, of course, the scientists are pretty excited to see their inventions, their discoveries move forward and ultimately get into patients.

RUSSELL: David, do you have a thought about concrete examples?

JOHNSON: Yeah, I'll give you just another related one. When Lilly ended up doing a major transaction with Covance and decided to exit the toxicology business and Phase 1 clinical trial business, it gave its Phase 1 clinic, which was located at the IU School of Medicine, it gave that to IU in hopes that that clinic could be used both for the Clinical and Translational Science Institute to do more Phase 1 studies for university researchers but also for industry and that's exactly what's happened, it was a very interesting, complex transaction, another one of Dr. Shekhar's major accomplishments at the IU School of Medicine. Interestingly, Covance has come into help manage the clinic so it can manage it to work to industry standards, standards and endpoints as well as academic research ones and you, therefore, now have a shared clinical research asset housed within a  university working with industry as well and that really helps to speed the process of innovation.

RUSSELL: If I can stay with you for a moment, David, you mentioned before a report you're going to be coming out with in a few weeks and a month or so ago you came out with a report about economic impact for your industry.

JOHNSON: Right.

RUSSELL: Been trying to gauge exactly what the economic impact of this whole sector is on the state in terms of how many of the 50,000 plus some jobs in this industry are the high-wage scientist and business executive and entrepreneur -- Okay, so maybe entrepreneurs aren't always high-wage, but --

JOHNSON: They get there eventually.

RUSSELL: -- versus support staff and the hourly workers, and do you have a sense of what the breakdown is and what that means for economic data?

JOHNSON: The data's getting better on that, John, and this report will show some of that for various reasons I won't bore you with here, but it is sometimes difficult to get into the numbers in the way exactly we're talking about. Here's what we know, the average wages in this sector, life science, 56,000 some jobs are $96,000 a year, so that is a  pretty hefty per capita average wage and it tells you that there are a lot of high-skilled jobs in the sector. It looks like in looking at an initial cut of the data in the report that roughly a third of the jobs in the life sciences sector would be truly baccalaureate, graduate degree, very high level of educational preparation and that can be in science, it can also be in the business people that run it. It's obviously a complex industry that employs lots of different people, engineers, CPAs, lots of people. In addition to that you have about 40 to 45 percent of the life sciences industry in Indiana that's in production, but again we're talking about biotech production, right, so there's a lot of science in that and you need a lot of scientists in those production facilities to make them work, so it's why it's harder to break it down occupationally in some cases. It is increasingly true in that production workforce about half of them need advanced degrees, that much we know right now, and it's also increasingly true that even for those that don't need a baccalaureate they're going to increasingly need some kind of associate's degree or credential to be able to meet employment in the production sector. And then you have about 25 percent of the sector that  is sort of undesignated and it would be more in supporting roles and have a variety of educational and skill levels required. We now know, again a point I made a moment about the report, we now know we have a major demand problem, we do not have enough people overall to fill the opportunities we have, and so in addition to having the data where people are right now, we are probably going to have to spend a lot more time going into our existing employers and really finding out where they're short, where they think they're going to need more folks coming forward, and then work with people like our colleague Suresh here to see if we can produce more of those people as well as attract more to come.

RUSSELL: Thank you. Brian, we've talked not as much about agriculture as I was hoping, but maybe you can bring us back in that direction for a moment. What are some of the hottest research areas these days in terms of crop protection and seed genetics that you're doing up at Dow Agro?

BARKER: Well, like I said before, the big problem we're trying to solve is how do you get more out of less from a food production standpoint. Most of what we've really concentrated on the last 20 years in the industry has really been trying to  create plants and products to increase productivity, so what a farmer does, and as you guys drive over the next couple of weeks you'll see a lot of planters and a lot of dust on the roads because people are out planting crops right now. A lot has been going into getting the most we can out of an acre of land, and what you're going to see going forward I think is more and more of a sustainability aspect of how a farmer produces, closing the loop on a farm, reusing, making sure that you sustain topsoil and trying to make sure that the natural resources we have limited on the planet are used wisely. Again, we focus more on the inputs and the production part, but the second area for the future is going to be output. Inputs would be the things you put into the crop. The output is really what's in the crop when it comes out or the byproducts. A big area right now is improved nutrition of some of the crops that are being produced, oils, canolas, sunflower, soybeans, that have zero trans fats and have lower less saturated fats and taking millions of pounds of fat out of the diet, making rice, which everybody's probably heard of Golden Rice, rice that has high vitamin levels to deal with the malnutrition, different oil profiles and cellulosic profiles to make biofuels to enhance  what we're doing in fuel, so a lot of the research right now is going into trying to figure out how do we produce not only better crop, more efficient crop that's gentler on the environment but also what is the value of that output for medical, for alternative fuel sources, and those are big areas. The last area that I think is very relevant to what's going on, and again Dave and I were talking about this earlier, is agriculture really is no different than any industry and it's very similar to medical where you have the relationship between people that provide the technology and a farmer and just like a doctor and a patient behind that there are very, very significant diagnostic tools, and so this whole area of big data and precision agriculture and prescription agriculture are very similar to a doctor-patient that get together that have a relationship and then leverage that knowledge with very sophisticated diagnostic tools. The amount of information from weather, production history, Earth, water, heat units, how food is actually produced in every way, shape or form, the amount of data is actually considered to be the largest area, big data, it's one of the primary focuses, data computation and how do you take all of nature and figure out what's going on  and try to predict it, no different than looking at the weather in the morning. If somebody that can predict the weather nine months out, you could probably order yourself a yacht because it will be very valuable. It's very hard to do and the value of that is immense in the world in terms of crop production. So those are really the three big areas, sustainability, the second is better and more nutritional output traits, and the third would be using data computation, statistics, the whole area of prescription and big data, to be more productive and to help producers, and I think a lot of those capabilities and the science behind that, a lot of those are androgenous, they're not just unique to our industry, you can get those from universities, we can get those from collaborations, and that's why it's so important that everything we're doing here continues to thrive because we can't do all of that ourselves, we need that here and we need to tap into that.

RUSSELL: Thanks, Brian.

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