UH shifts focus to commercial cash

By Beverly Creamer
Advertiser Education Writer

The University of Hawai'i basked in international limelight four years ago, thanks to professor Ryuzo Yanagimachi and his research team's monumental work of cloning a mouse.

Yanagimachi was rewarded with a new laboratory paid for by the state.

Other than that, the university hasn't seen a cent for a revolutionary success that a Massachusetts company has since used to produce the first cloned human embryo and that may offer the potential for anything from saving endangered species to turning animals into tissue factories for human transplants.

And it's still uncertain whether any financial windfall will ever occur for UH.

"That has been a disaster. The right to market that wound up with a company that has gone bankrupt," said Edward Laws, interim vice chancellor for research and graduate studies. "Unless we can reach into bankruptcy court and extract that license and get it back, we're never going to see a dime from it," said Laws.

"It was a time when the UH had not much experience in this sort of thing."

But the university has a new mantra: Don't let it happen again.

Steps are being taken to ensure it doesn't.

UH has created a new task force on economic opportunities headed by Laws and designed to get the university moving more rapidly on potential investments. The task force is foremost among a number of developments that officials hope will help UH tap into the millions of dollars available in the commercial marketplace:

• The Office of Technology Transfer and Economic Development has been reorganized under marketer Richard Cox, hired from a similar position at the University of South Carolina.
• A new "accelerator" resource in the community called HiBeam is designed to nurture young companies and put them together with researchers.
• The new Pacific Asia Center for Entrepreneurship in the Business School is intended to develop courses to encourage more students and faculty to become entrepreneurs.
• The $150 million medical school that begins construction in Kaka'ako this fall will offer space to accommodate 36 to 40 additional researchers.
• A restructuring of the way profits from licensing agreements are divided, with early income going to researchers first before the university is repaid for patenting expenses (up to $20,000 or more), as is the practice now, will create new incentive for faculty.

A sea-change in attitude means UH is moving from concern over protecting intellectual property to a focus on developing it.

"The new focus is very much trying to get the university's technologies into the hands of commercial developers," Cox said. "We had a lot of patents but we weren't doing the next thing, to get them into the marketplace."

But that process takes anywhere from three to 10 years. Pharmaceuticals such as the cancer-fighting compound cryptophycin brought UH $2 million, and could bring more, but additional profit depends on the outcome of clinical trials that could take years. The fastest turnaround occurs with computer software technology, but it's the most vulnerable to shelf-life problems.

William Richardson, a founder of University Connections, HiBeam and head of HMS Hawai'i, a group of venture capitalists looking for Hawai'i projects, is part of the web of people helping to wed UH research with outside money.

"The potential return of the technologies now being spun out of the university is enormous," said Richardson. "I am absolutely convinced the University of Hawai'i will spin out millions."

In the past year Cox's office has signed 10 licensing agreements — up from zero a year ago. Those and past agreements are bringing in $300,000 a year. It's low, said Cox, but not uncommon at a university with about $170 million a year in research and development grants.

"At this point I'd prefer to look at deal flow — the number of agreements you're doing — rather than the dollars being generated," said Cox.

The university also is interested in helping out young entrepreneurs, such as 28-year-old Dustin Shindo of Hoku Enterprises who just signed a $12,000 contract with UH to use labs and equipment to test a low-cost hydrogen fuel cell. The young company is the newest of five being mentored by HiBeam.

"We're renting equipment we couldn't find elsewhere," Shindo said. "It allowed us to start building a relationship with the university. This is step one for a company, working with the university and allows a small company to work like a larger company. If we get to step two we'd hope for an expanded relationship."

It also has enabled Hoku Enterprises to go after venture capital to the tune of $5 million in the next year.

"There's a lot of money here," said HiBeam executive director Leigh-Ann Miyasato. "It hasn't been tapped to develop technology companies as much as it could have been."

But, as Shindo, Cox and Richardson know, there are years of work and expenses between lab science and final product.

And universities still are far more dependent on the federal government than on commercial licensing.

"There are probably fewer than 20 universities out of 600 or more in the U.S. that make more than $10 million a year in licensing revenues and those are universities with sponsored programs considerably larger than Hawai'i's," said Cox. "For those with the same funding most made around $1 million to $3 million a year in licensing revenue, with some making as little as $600,000.

"But any university that has a tech transfer office solely for the purpose of making money is in it for the wrong reason," he said. "It should not be seen as a supplement to the research budget."

Keith Mattson, who heads University Connections, a program in the vice chancellor for research's office designed to link researchers with businessmen and financiers, agrees.

"Even at top universities, the ratio of federal money to industry money is lopsided," said Mattson. "The research enterprise at UH is big because we've been successful in getting federal money, and that's always going to dominate our research agenda. The local industries just don't have the capacity to replace that."

Cox and Laws say one of the changes needed is a revision of the reward system for university scientists, researchers and department deans. At the moment there's no immediate return for any of them.

Cox already is looking at revamping the university's formula for sharing profits with the hope of giving the researcher/inventor the first dollars of income — even before the university has been repaid.

"Right now the policies of the university say the faculty get to share in the net revenues and that could be eight years down the road," he said.

The ideas are controversial and a new twist on dividing the profits from university research, but he sees such changes as the wave of the future. "It's an idea that not a lot of universities have embraced," he said, "but we could certainly be in the early pack out there."

For any of this to work, there has to be what Mattson calls "a big circle of partnerships.

"That's why we've been working a lot with the investment community, which is crucial, and the entrepreneurship community, which is crucial, and the service provider groups which are so crucial," he said.

"When everything is working well, you then start to see this stuff translate from basic research to commercialization. But in most cases, it's not faculty who start companies, but people outside the university."