In the Business, by Christopher Hammond -- Endeavors, Fall 1999

Faculty entrepreneurs have become an economic force. But how do they keep business out of the driver's seat?

In the Business
by Christopher Hammond

Lola Reid is an internationally recognized cell biologist at Carolina who works on determined stem cells.

Reid has also helped launch a new biotechnology company in Research Triangle Park called Renaissance Cell Technologies, Inc.

Both Reid and the university will receive royalties for their work—developing a way to use stem cells to help people with liver failure. Reid also holds stock in the company. The deal is an extension of Reid's industry-sponsored work at Carolina.

But questions arise because academic scientists often play another role. They perform the independent tests that evaluate new drugs and therapies. Meanwhile, they provide the basic research for private companies trying to sell these drugs. Isn't that a potential conflict of interest?

Yes, Reid says, but it's manageable and is often the only way to boost an idea with promise to the level of a successful treatment. Reid says collaboration between industry and academia is essential.

"Some of the research that's done is so expensive that it's exceedingly difficult to get enough money through the federal government to fund it," she says. "You have to go to industry. When the projects have some interest or relevance to industry or clinical programs, industry is a valuable partner."

Reid says she sees an emerging gray area. On one hand, professors and university staff learn when an idea is ready to develop, and they search for willing investors. Then there are bigger projects that require industry support from the get go.

"What's emerging now is the middle ground," Reid says. "That's for ideas that look very promising but haven't come to complete solutions. Industry likes the idea of spending less risk-money, and they can do that by investing in projects on campus where there is an existing infrastructure."

The numbers bear her out. Although industry sponsorship at Carolina brings in a scant 6 percent of total sponsored funding, the overall amount continues to grow. During fiscal year 1998, researchers brought in $18 million from industries, up 32 percent from the year before.

Here's the rub. Some critics say the money doesn't come without strings attached. This year's meeting of the American Association of University Professors gave corporate-academic collaboration serious attention. About 130 professors and researchers gathered to air concerns. They drafted a statement to fend off what they see as a threat to academic freedom. Too often, they said, industries dictate the studies, how they're conducted and when, if ever, the findings will be published. They cited some notable examples:

• Early this year, Nancy Oliveri was reinstated to her medical research position at the University of Toronto. She had been removed after a drug company, Apotex, sued her for publishing negative findings about their drug.

• David G. Kern was hailed as a hero by colleagues after he refused to be silenced by Microfibres, a textile manufacturer in Rhode Island. The associate professor of medicine at Brown University published findings of work-related lung disease at the factory. The company claimed he violated a confidentiality agreement. Kern lost his job at one of the university's affiliated hospitals.

• UC-San Francisco brought suit nine years ago against Genentech, claiming the biotech giant secretly used DNA from a university lab to create its first drug, a human growth hormone. Genentech says the researcher legally brought the DNA over from his lab, but it wasn't used anyway. A jury in the civil trial deadlocked in June.

Such legal battles are rare. At Carolina, university contracts usually allow industries to delay publication of sponsored research no more than 45 to 60 days.

"But the university never agrees in a research contract that an industrial sponsor can approve publication," says David Parker, associate university counsel. "In most of our industry-sponsored research, the contract contains boilerplate language guaranteeing university ownership of inventions and faculty control of publications," Parker says. "But sometimes companies prefer that we work off of their contracts." The university then tries to iron out the details in a way that follows university policy while preserving academic integrity.

"We're a research university, and our priority is publication," Parker says. "We're in the business of dissemination of knowledge."

Robert Johnston, professor of microbiology and immunology, says his work on an AIDS vaccine would not be possible without a private partner. In this case, one private partner is Johnston. With researchers Nancy Davis, Ron Swanstrom, and Jeff Frelinger, Johnston is creating a vaccine from a promising virus. They use a modified version of Venezuelan equine encephalitis. First, they're testing its ability to prevent SIV, a monkey virus related to the virus that causes AIDS.

To go from monkey to man, university researchers sought corporate sponsors. Last year, Johnston helped start the Durham-based company AlphaVax, Inc. Until recently, Johnston was both CEO and chief scientist. AlphaVax won a $4.5 million grant from the International AIDS Vaccine Initiative (IAVI) to come up with an AIDS vaccine. IAVI plans to target the disease in South Africa, where AIDS is epidemic.

Johnston says development costs of an FDA-licensed vaccine can peak as high as $200 million. "We felt that this technology would not have been effectively commercialized, either by a large pharmaceutical company or by our own research lab," he says.

Johnston admits that technically he's created a conflict of interest—some of his research is sponsored by his own company. But he says his commitment to the university is paramount. Finding time to work for AlphaVax and complete his university obligations fills his work week and then some. "However, I was encouraged to do this by the university," he says. "The university owns a significant amount of stock in the company. So it's my opinion, not necessarily shared by others, that my work with the company and my work with the university are in parallel."

One reason universities are taking a stronger lead in turning biological
discoveries into patents is because of Congress. When biotechnology was as newborn as Internet start-up companies are today, Congress passed the 1980 Bayh-Dole Act. Not only were scientists encouraged to seek out industry partners, the act pushed universities to patent, market, and license inventions made with federal funds. If not, a university must waive title to the federal sponsor.

Fran Meyer is director of the university's Office of Technology Development (OTD). Part of his job is to put willing faculty and administrators in touch with industry.

"When a faculty member meets a scientist from a company, we talk with them about how to put together a collaboration," he says. "It's kind of like after they meet, fall in love, and want to get married, we perform the ceremony."

Last year, OTD's efforts resulted in 78 filed patent applications, 66 licensed inventions, and $2.6 million in sponsored research funding—money coming to the inventor's lab from companies who have licensed a university discovery.

"The more inventions we license, the more companies are likely to want to sponsor our research," Meyer says. He admits that all this corporate attention results in more conflicts of interest. Ten years ago, Meyer says, the rule was "avoid conflicts of interest."

"Today, it's only rarely avoiding conflicts," he says. "It's figuring out how to manage them."

For example, both Johnston and Reid are monitored by three committees—the university conflict of interest committee, the School of Medicine's conflict of interest committee, and a subcommittee of the school that is solely devoted to each project.

According to university policy, faculty members must comply with an 11-page conflict of interest policy each year, submitting any conflicts in writing to their department heads. Conflicts of interest fall into three categories. At one end are conflicts that are left up to the individual faculty member to sort out. Higher-level conflicts receive heavy scrutiny.

"There's always going to be a concern about whether the research that somebody's doing in his or her lab, that's sponsored by a company in which the investigator has a financial interest, is indeed carried out independent of those interests," says Parker. He says the answer to managing such concerns is accomplished by the university conflict of interest policy and by those charged with managing the conflict.

Department chairs and deans decide whether any conflicts merit extra attention. If so, the department head offers the conflict up to a university faculty committee. Compared to other universities, Carolina's policy is more decentralized, laying responsibility at the feet of individual faculty members as well as supervisors.

Soon after Chancellor Michael Hooker arrived in 1995, he attempted to put this relationship in perspective. He told staff it was the job of the faculty to create conflicts of interest, and it was the job of the administration to manage them. In other words, a faculty member who receives attention from companies must be doing important work.

If the number of start-up companies is any indication, three in the last two years, Carolina must be turning corporate heads.

"The same phenomenon occurred in chemistry a few years back," Reid says. "Every scientific field goes through this phase where they're interfacing with industry. Now industry is learning with biology. What's happening is that the
university is getting smarter and smarter about how to define issues like academic freedom and conflicts of interest."