Scientists-turned-entrepreneurs share lessons learned launching startups

From venture capital to office space to acquisitions, academics starting companies face a steep learning curve — but there’s help to be found
Map of Seattle's South Lake Union Neighborhood showing Fred Hutch and Hutch-launched startup companies
Startup companies launched by Fred Hutch scientists are adding to the "biotech cluster" in Seattle's South Lake Union neighborhood. Map by Jim Woolace / Fred Hutch News Service

Editor's note: Life Science Innovation Northwest kicks off this week, bringing together life sciences professionals from industry, nonprofit organizations and academia to discuss the biotech and life sciences research scene in the Pacific Northwest. To celebrate, we're sharing a story, first published Nov. 13, 2017, on Fred Hutch-based startup companies — and the unique experience academic scientists face when they become entrepreneurs.

When Dr. Mark Roth launched his first startup company in 2005, the biologist had a relatively straightforward goal: Translate the preliminary but promising results he’d seen in his Fred Hutchinson Cancer Research Center lab to a medical treatment that could actually help people.

Measured simply in dollars and cents, the company, Ikaria, was a success. Buoyed by Roth’s own scientific achievements — he was awarded a MacArthur Foundation Fellowship in 2007 and had notched several high-profile scientific publications — Ikaria acquired another biotech company before being bought itself by the U.K. pharmaceutical company Mallinckrodt Pharmaceuticals for more than $2 billion.

But by Roth’s measure, he had failed.

Ikaria didn’t move his ideas — to use certain simple salts to stem injuries caused by loss of blood flow — to a clinical trial, let alone to market. Ikaria — and later Mallinckrodt — ended up focusing on different types of therapies.

Roth knew he needed outside investors to get his company off the ground. But once he’d found financial partners, his work shifted from the traditional academic path.

“You have a fiduciary responsibility for shareholder value that precludes you from operating as a person who cares only about the science and experiment,” he said. “I was in a position where my obligation to shareholders meant that I had to make decisions that I don’t think were in the best interest of the science. There’s a trade-off.”

Like others at Fred Hutch who have made the leap from academic scientist to founder of their own company, Roth didn’t quite know what he was getting into when he started. As a lifelong academic scientist who’d relied mainly on funding from the government, he had a lot to learn about how the investment world works, what it’s like to strike compromises with your financial partners and how to work toward a product or company that’s not only financially successful but successful in improving human lives as well.

It was a lot to take in.

That’s not unusual for scientists trying to start a company after decades of working in the academic model, said Dr. Patrick Shelby, director of technology management at Fred Hutch. These scientists might feel at a disadvantage throwing their hat into the ring with serial entrepreneurs. But where they have an advantage is that their ideas are often much further developed because they are built on years of work in an academic lab, Shelby said.

“You can de-risk in [an academic] environment before you spin out, so you stand a much better chance in the open ocean … of floating,” Shelby said.

Photo of Mark Roth
Dr. Mark Roth in his Fred Hutch lab. Fred Hutch file photo

Doing things differently the second time around

After the Ikaria experience, Roth wasn’t giving up on his ideas or the idea of a startup. He just wanted to do things a bit differently. So in 2014, he started another company, Faraday Pharmaceuticals, and he decided to just be present, physically.

Typically, Fred Hutch scientists who start their own spinoff company still spend most of their time in their academic lab. Roth decided to take a sabbatical from the Hutch “to jump in with both feet,” he said.

Now, three years later, the work is progressing in the direction he’d hoped for over a decade ago. The company has completed a Phase 1 trial using iodide, a common type of salt, in healthy volunteers, and a larger, Phase 2 trial in heart attack patients is now underway. The researchers also plan to open a second Phase 2 trial next year, designed to improve muscle function for patients having knee replacement surgery.

The idea Roth and his colleagues are trying to prove is that the salts can temporarily shift a person’s metabolism to protect against damage that can occur when blood rushes back to a damaged area after the circulation has been stopped — as in a heart attack or following the use of a tourniquet, for example.

Once the trial results roll in over the next few years, “then we’ll find out whether the work that my lab and I did can influence the physiology of human beings,” he said. “That was always the point. That was the point even in 2005 when I started Ikaria. It just never got to fruition.”

Why does an academic cancer center need private industry?

In an era of stagnating levels of funding from the National Institutes of Health, which is the largest source of government funding for research at the Hutch and many other centers, it’s not much of a stretch to understand why an academic organization would turn to industry partners to keep its science moving forward.

Academic and nonprofit organizations such as the Hutch benefit financially when their discoveries are licensed to startups or existing companies, and revenue is also shared with the faculty inventors. The percentages that are distributed depend on several factors, but money going to the center does support further research, Shelby said.

But academia and the biotech industry need each other for reasons beyond just research funding. There are certain things that each just can’t do on its own. In many cases non-profit labs aren’t set up to get an idea all the way from preclinical testing to the scale-up required to run a large clinical trial and then to actually deliver the new drug or other medical product to the marketplace. And startups launched on the back of academic findings can have a head start in the business world by being closer to product development.

There’s a lot of work to be done between a blockbuster academic finding and a blockbuster new drug, Shelby said. And that work requires money and person-power.

“Just publishing scientific results — which is totally wonderful and should absolutely be done freely — does not necessarily guarantee that they will be developed into anything that impact people’s lives,” Shelby said.

It’s rare that an academic center like the Hutch would have the funding, lab space and personnel to conduct a Phase 3 clinical trial, the type of clinical trial that is required to show that a new therapy or other intervention can truly benefit patients. And some trials just don’t make sense to conduct in-house — like Roth’s. His studies most directly apply to critical care medicine rather than cancer or infectious diseases such as HIV. So in addition to funding, Roth needed access to a very different group of patients than those who typically enroll in Hutch clinical trials.

Seeing an idea through

Fred Hutch cord blood transplantation researcher Dr. Colleen Delaney is almost two years into her first startup experience. Nohla Therapeutics launched in 2015 to bring a universal donor cell therapy product derived from umbilical cord blood to market for patients with blood cancers. The first product Nohla is developing is intended to be used along with existing cancer therapies for these patients. The aim is to reduce the harmful side effects from high-dose chemotherapy or the radiation that accompanies blood stem cell transplants, Delaney said.

Photo of Colleen Delaney
Fred Hutch cord blood transplant researcher Dr. Colleen Delaney wanted to take her ideas all the way to patient benefit. Photo by Robert Hood / Fred Hutch News Service

Delaney had been developing the cord blood product at the Hutch for nearly 10 years before she launched the spinoff company, taking it from promising preclinical studies in Dr. Irv Bernstein’s lab to a series of clinical trials testing the cells in patients with blood cancer who were undergoing transplantation.

Because these stem cells are less developed than marrow cells from an adult donor, they don’t have to be as perfectly matched to the patient’s genetics — and thus can be used as an alternative to traditional transplantation for those who can’t find an adult match. But the number of cells present in a single umbilical cord is much smaller than that collected from adult donors. Delaney and her colleagues created an “expanded cell product” by developing a special technique to increase the number of cord blood cells in the lab. That product can then be paired with another cord blood unit to boost the blood cells’ infection-fighting powers.

Delaney’s goal was always to see the work through to the point where it was helping as many people as possible. After she launched a Phase 2b trial — not quite as large and lengthy as a Phase 3 trial, but larger than a standard Phase 2 — she realized she had taken the work as far as she could in an academic setting. She could have looked for existing companies that would license her work, but that didn’t feel like the right fit.

“This was my baby. I wanted to see it grow,” Delaney said. “There was no way I was giving it to someone else.”

Companies to help other scientists

Some startups grow not from an idea that would directly help patients but from a product to help other scientists.

Photo of Raphael Gottardo
Computational biologist Dr. Raphael Gottardo is working on a service-based startup company to help other teams of scientists analyze their data. Fred Hutch file photo

Drs. Raphael Gottardo and Greg Finak are computational biologists at the Hutch, working on tools that help other scientists design and interpret experiments dealing with large amounts of data, beyond the level that humans can parse and understand intuitively.

In one project, they developed computational tools to help scientists understand large datasets from a widely used lab method called flow cytometry. This method is used to sift through a mixed collection of cells — say, a sample of a patient’s blood — to understand precisely what cell types make up that mixed collection.

The method is rapidly improving and expanding, Gottardo said, allowing scientists to study up to 50 different types of cells in one experiment. But the methods to analyze those exponentially growing sets of data weren’t catching up.

So Gottardo, Finak and their colleagues started creating software to automate that analysis. In the course of testing whether their programs worked, they realized there was a need for both these computational tools as well as the expertise to customize the tools for individual research projects, across both academic and industry labs. And they started wondering whether a startup company could provide those services — Gottardo and Finak didn’t have the time or funding to do it all through their Hutch lab.

The complex software engineering was the easy part. That’s where they have training and expertise. Now comes the difficult step of learning how to write a business plan, work with lawyers and find investment partners, Gottardo said. They’re just at the beginning of the startup process; the company isn’t officially launched yet (nor does it have a name).

“Now we need to make that jump,” Gottardo said. “We know it will take a lot of time … This is where we know nothing — but we’ve already received guidance from the business development team at the Hutch.”

The lonely entrepreneur

Starting a startup can feel like a lonely road, some of the scientist entrepreneurs said. But it doesn’t have to be — Shelby and his colleagues in Fred Hutch’s Business Development & Strategy department are ready to help, he said. And many other academic scientists have walked that road before — in the past decade, Fred Hutch researchers have started 12 new companies.

Delaney said she didn’t talk at length to any business veterans before she started working on Nohla. Maybe she should have, she said. It took her six months to get her bearings in the process, and a lot of the steps were much harder than she anticipated.

“Two years in, I’m still learning and there are still surprises,” Delaney said.

Roth said he did seek out help from others, and that’s the first piece of advice he would give other entrepreneurs-to-be.

“The best thing that I did when I started was I found other people like me who had done this before,” he said. “You’re trying to learn a new language, so speak to people who have learned that language.”

He’s always offering to talk to anyone interested in startups or the business world, he said. But he thinks scientists new to the world of intellectual protection and industry secrets can get confused about what is OK to share, even among friends, and they might clam up entirely.

“It’s as if you wanted to do science but you don’t know how to write a grant and you’re afraid to talk to people,” Roth said. “That stifles the science … you’d get over it because you realize that we all have to write grants. That’s what you kind of have to do in business too.”

Map of Seattle's South Lake Union Neighborhood showing Fred Hutch and clusters of Hutch-launched startup companies
Of startup companies launched by Fred Hutch scientists, most are clustered in Seattle. Sixteen of those startups remain currently active, while 12 have been acquired by other companies. Graphic by Jim Woolace / Fred Hutch News Service

Note: Scientists at Fred Hutch played a role in developing these discoveries, and Fred Hutch and certain of its scientists may benefit financially from this work in the future.

Rachel Tompa is a former staff writer at Fred Hutchinson Cancer Center. She has a Ph.D. in molecular biology from the University of California, San Francisco and a certificate in science writing from the University of California, Santa Cruz. Follow her on Twitter @Rachel_Tompa.

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