Innovation Challenges Hit the Big Time

Teams selected to enter the NIH's Neuro Startup Challenge are required to "look like successful startups" and are "rigorously evaluated" on criteria that VCs, foundations, and others would use to provide funding, says the model's designer.

How do you unlock innovation?

I've written previously about various healthcare technology challenges—some inspired by the XPRIZE, some outgrowths of the various hackathons and camps spawned over the past decade in Silicon Valley and elsewhere.

Now there is some evidence that the challenge model can unlock science discovered by the National Institutes of Health.

Traditionally, government research somehow inevitably finds its way to the most deep-pocketed corporations. Big pharma and device makers come to mind in the healthcare context, which, being large public entities beleaguered by shareholders looking for quick returns, proceed timidly. Further burdened by organizational sclerosis, decision can take years to be made, and some potential innovations are killed off before they even have a chance to germinate.

As described in the Lifetime film Living Proof, even herceptin, one of the most revolutionary breast cancer treatments ever developed, was stymied at one point when corporate backer Genentech stopped funding for drug development. Only a determined physician, aligning with philanthropists, was able to keep the drug on track to FDA approval.

Perhaps with this in mind, the National Cancer Institute last year conducted the Breast Cancer Startup Challenge, an international, university student-based competition. Eleven startups launched to commercialize NCI inventions and received technology licenses from NCI in 2014.

NCI's partners in that challenge were the Avon Foundation and the Center for Advancing Innovation (CAI), a Bethesda, Maryland-based 501(c)(3) specializing in technology transfer and commercialization.

"There's a disconnect between certain disease areas and some of these inventions," says Rosemarie Truman, Founder and CEO of CAI. "The best commercialization path for them would be through a startup, not to license to a large pharma. The problem is there's no way for [government agencies] to do a spinout, to launch a startup around an invention."

"So," she says, "I came up with this idea to crowdsource teams from around the world for the strongest, most commercially viable inventions in the breast cancer space, and it just so happened I was working with the Avon Foundation at the same time."

For its next challenge, CAI partnered with five different institutes across NIH. Last year, more than 70 teams composed of 568 students and entrepreneurs entered the Neuro Startup Challenge, an open innovation competition designed to bring promising brain-related inventions to market and launched in August 2014.

The challenge has teams competing to commercialize 16 NIH-conceived and -developed inventions involving therapeutics, diagnostics, prognostics, and medical devices for a range of brain diseases.

Bankrolling the new challenge is a name familiar to HealthLeaders readers – Richard Merkin, MD, founder, president and CEO of Marina del Rey, CA-based Heritage Provider Network. Merkin's spokesperson declined to state the exact amount of Heritage's investment, but from the enthusiastic response to this challenge, it would appear that this is a bigger deal than the usual cash prizes, and it is, as I will describe.

Teams selected to enter the Neuro Startup Challenge are from universities, research institutes, and hospitals from the United States and abroad. More than 20% of the teams are from outside the U.S. In addition to deliverables due at the end of each of the three phases of the challenge, the teams will participate in 40 rigorous entrepreneurship and start-up training sessions.

In addition to post-docs, PhDs, law, and business students, team leaders have added venture capitalists, clinical research outsourcing organizations, law firms and entrepreneurs on their teams to increase their probability of success. Each team required a seasoned entrepreneur as well as two graduate students.

"We are thrilled about the high quality teams from 96 universities that have entered the challenge," Merkin said in a statement.

3 Phases
The first phase requires the teams to develop elevator speeches, 350-word executive summaries outlining potential commercial products and a company vision. Products were be posted online from January 12–16, 2015, and were to be voted upon by the public. The results were due to be posted Monday.

Winners of the elevator speech phase will move on to compete in the second phase of the competition in which teams develop a 10-page business plan and 20-minute live pitch presented to a panel of judges. Winners of the business plan phase receive $2,500 per team provided by the Heritage Provider Network, and move on to phase three of the competition: the startup phase.

The startup phase requires the remaining teams to launch their start-ups by incorporating their business, applying for licenses, and raising seed funding.

"This is an excellent model for commercializing NIH technologies, while also providing real-world, hands-on experience in creating start-up businesses to all of the Challenge participants and creating the next generation of entrepreneurs," says Joseph M. Conrad III, MD, NCI technology transfer specialist and NIH coordinator for the Neuro Startup Challenge.

The Center for Advancing Innovation (CAI) evaluated the teams that wanted to enter the challenge on more than 40 criteria. "We wanted the teams that were accepted into the challenge to look like successful startups. Therefore, we rigorously evaluated the teams based on criteria that VCs, foundations and others would use to provide funding," Truman says.

A Replicable Model
The model used to develop both challenges could be institutionalized across other government agencies. "We're planning a challenge for [2015] within the NIH, and possibly even one with CDC, and we're also planning one with NASA," she said.

One thing I really like about this challenge is the way the government agencies take care to place licenses for the inventions in the care of the startups. By dint of their hard work, they are later, after further development, able to turn around and negotiate with interested bidders—big pharma and the like—without concern that those big firms could swoop in and outbid such teams in a government auction at that point where the inventions become viable.

It's a real tonic to the lowest-bidder, inside-the-Beltway government mentality that gave us healthcare.gov 1.0. And it's a cleverly thought-out way to turn our tax dollars into healthcare innovation we should all be able to enjoy in a few short years.