By Louis Garguilo, Chief Editor, Outsourced Pharma
The next suspense novel based on a new or imagined biotechnology breakthrough might consider borrowing its title from Bayer HealthCare’s incubator: “The CoLaborator.” More likely, pharma companies in the process of discerning ways to interact with life sciences start-ups would do well to study Bayer’s innovative model for collaboration.
The model is one of immersion and access. Bayer has thoroughly ensconced itself within the tight-knit and thriving biocluster that is Mission Bay, San Francisco. It also has opened its labs to an unprecedented degree. Bayer’s specific candidates for collaboration are early-stage start-ups with exciting technologies that need a hand in hypothesis validation and business plan development. The payoff for Bayer may or may not be an augmentation of their pipeline, but Bayer thinks the benefits will come.
"When we moved our U.S. research presence here to Mission Bay in 2011,” says Christopher Haskell, Ph.D., head of U.S. Science Hub, Global External Innovation and Alliances and the CoLaborator, “we were placed right in the middle of a rapidly evolving ecosystem where start-up companies are being created at an amazing rate.” Haskell says Bayer recognized the opportunity to be exposed to “an enormous number of interesting ideas, technologies, drug platforms, and concepts for therapeutics.”
Bayer joined a nurturing ecosystem throughout northern California that for years has hatched start-ups through support programs from the campuses of the University of California San Francisco (UCSF) and the university’s initiatives such as the UCSF Entrepreneurship Program, the original QB3 Garage, and newer QB3 incubators (QB3 is the acronym for California Institute for Quantitative Biosciences), and other academic settings and organizations. How would Bayer fit in?
ENTERING THE ECOSYSTEM: LESSONS IN LOCATION AND COHABITATION
Enter the CoLaborator, Bayer’s incubator solution, and a part of the company’s overall strategy for reaching outside for internal drug discovery and development enhancement. “What we wanted to do for our part,” explains Haskell, “was create methods by which we could stay in early contact with new companies to assist and see how things evolved. It was important to find ways to do shared risk-reward partnerships to help validate their technologies for them, and test within Bayer whether these drug platforms had legs to live up to the initial promise. We were looking for a hands-on way to help the whole community.”
Why Bayer moved to Mission Bay has a relatively easy explanation; some of it we’ve mentioned. How it established itself as a contributing neighbor who at the same time can take advantage of what the region has to offer is worthy of a study on biocluster integration strategy.
First, more on the why. With its merger in 2006, Schering bought Bayer a research group located in Richmond, CA, 20 miles north of San Francisco. It had a nice campus and facilities, but felt geographically isolated. Some at Bayer, including Haskell, sought alternative locations to combine its North American drug discovery operations. Areas considered included Fremont and Alameda, CA, as well as Mission Bay. Haskell takes it from here: “As soon as our head of global drug discovery, Dr. Andreas Busch, toured the region and met with some of its leaders, including Regis Kelly (director, QB3; managing partner, Mission Bay Capital; general partner, QB3 Incubator Partners), he was convinced it made perfect sense to locate us in the middle of this growing innovation center.”
This resulted in the consolidation and location in Mission Bay of Bayer Healthcare’s U.S. research headquarters, now known as the Bayer HealthCare U.S. Innovation Center. About 70 scientists are devoted to research for Bayer — and also to interacting with CoLaborator tenants three floors below them (more on the tenants soon).
How did the proverbial 800-pound gorilla go about establishing itself in the entrepreneurial neighborhood? According to Haskell, Dr. Busch instructed the Bayer group: “Go out and have coffee. Go meet people. Find out what other people are doing. Talk science to them. Take Bayer and immerse us in this innovation culture.”
Bayer scientists might not have actually knocked on doors and offered cookies as the new neighbors, but they did quickly set up a Master Research Agreement with UCSF. “We weren’t sure what we wanted to do yet, but we knew we wanted to work with UCSF,” says Haskell. “We started with an agreement that nailed down the key issues of IP and publication. Under that we are able to write task orders for individual projects, so entrepreneurs can quickly move ideas forward. Today we have a number of ongoing projects.” Bayer also entered an agreement directly with QB3, which operates at UC campuses in San Francisco, Santa Cruz, and Berkeley, and serves as a primary point for start-ups.
"Obviously, you don’t want to give away IP at this stage, but Bayer has garnered a lot of trust at the CoLaborator."
CEO of Xcell Biosciences
Brian Feth, CEO of Xcell Biosciences, a biotech that got its start in QB3 and became one of the first tenants at the CoLaborator, agrees Bayer has worked well with the other players in the area. “We initially spun out of the Berkeley ecosystem at the QB3 incubator in the East Bay [the other side of San Francisco from Mission Bay]. We met Chris [Haskell], who came to the QB3 network lunches to talk about how startups could engage with Bayer. We spoke over the next two months with Chris [Haskell] and Rick Harkins [principal scientist of global external innovation and alliances at Bayer] on ways we might work together scientifically, and about the CoLaborator.” Xcell then established a pilot research study with Bayer on pancreatic cancer cells, focused primarily on proving that Xcell’s technology can capture and grow pancreatic tumor cells from various patient blood samples. “As we flushed out the ideas for the pilot study with a separate research group within Bayer, we also naturally shifted into the CoLaborator space. This then allowed others to enter the QB3 incubator and is a win for all parties.”
THE NUTS AND BOLTS — AND STRATEGY — OF AN INCUBATOR
The CoLaborator opened in September 2012 and occupies most of the first floor of Bayer’s U.S. drug discovery headquarters. It comprises 6,000 square feet of lab space, in an open layout, divided among six tenants appropriate to the needs of each company. The facility is full, and Bayer doesn’t plan to expand at this time. “We provide a great lab space equipped with expensive equipment it would not make sense to buy for a startup,” says Haskell. He mentions modern hoods, minus-80-degree freezers, liquid nitrogen services, core items such as basic CO2 incubators, centrifuges, water baths, microscopes, and the requisite various facilities support and licenses, including for biohazardous waste pickup and chemical disposal. Feth of Xcell particularly mentioned utilizing tissue culture hoods and a qPCR (thermocycler for precise temperature control and changes to conduct polymerase chain reactions) as important to his company.
Bayer makes no bones that it brings in companies with technologies within its areas of interest. “We want companies doing things we are extremely excited about,” says Haskell, “and where there is at least the potential for working with Bayer. For example, there was an exciting company working in neuroscience that didn’t make sense to put in here because we are just not in that area.”
Haskell then offers a key insight into Bayer’s drug discovery strategy and worldview. “Bayer is always seeking to engage with innovators to stay on the forefront of drug discovery research. Our company is in a good position so we are taking our core skillsets and finding others who can complement them as we move into new therapeutic areas. You may see other pharma companies really flashing internal programs, and then essentially trying to backfill that with external assets. I would say Bayer is not doing that. We also look externally for inspiration and are motivated by the entrepreneurial spirit from the Mission Bay ecosystem to achieve this type of combining of technologies for breakthrough drug innovation with greater patient impacts. There are so many great ideas out there."
Regarding the structure of relationships, Haskell says, “The CoLaborator lease is separate from any other type of partnering agreement. There is no equity or licensing as a part of being a tenant. Although we are interested in the programs at these companies,” he continues, “we know it is important to give start-ups independence from Bayer so they can grow without reach-through from our side. Potential partnerships might be farther down the road because they have a certain critical path to solve in their business plan that does not necessarily involve us, and that is fine.”
Despite this degree of autonomy Bayer provides tenants, Feth and others we talked to for this article all confirm it is the close interactions and mentoring received from the scientists at Bayer that adds the greatest benefit to the start-ups — and the best chance for commercial success.
“We would have moved forward with the pilot study with Bayer even if we hadn’t gone into the CoLaborator,” explains Feth. “At the same time, it is hard to quantify the value of seeing Chris and Rick [Harkins] on a regular basis. We were always amazed to find that Rick is completely up to speed on our project on a daily basis.”
Haskell says each company at the CoLaborator has unique circumstances. “With three of the companies, we have ongoing projects that cover a variety of different models. With some, we simply lead them in understanding how best to think about applying their technology. Just giving them feedback on what we would find valuable at Bayer often proves beneficial, to both sides. With many companies we help design benchmarks on how their approach is performing compared to everywhere else in the world, and provide feedback on research proposals and business ideas and models. We put them in touch with toxicology or regulatory experts as well as our bench scientists and others.”
Feth says, “The partnership aspect is really important. Partnerships suggest early revenues, providing the ability to validate and also bring credibility to a young organization such as ours. The external validation we receive from being in this space is significant.”
Regarding this last comment, while some early-stage companies would rather fly under the radar, Feth enjoys basking in the aura of a big-company endorsement such as Bayer’s. “Certainly it is part of marketing for us. For example, a VC sees we can form important industry relationships. We are gaining from valuable feedback on our business model and product development before investing a lot of time and money. And you can’t be shy about talking to customers and potential competitors, which Bayer can help us with,” he says. Then echoing a sentiment also clearly espoused by Haskell when I asked him about reservations entrepreneurs might have opening up to Bayer, Feth comments: “Obviously, you don’t want to give away IP at this stage, but Bayer has garnered a lot of trust at the CoLaborator. Mutual trust is a most important factor, if not the most important.”
GOOD FOR THE BAY, GOOD FOR BERLIN
Imitation is the best form of flattery. Dr. Stefan Jaroch, head of external innovation technologies, among others at Bayer HealthCare AG’s global headquarters in Berlin, Germany, liked the concept so much they established their own CoLaborator.
Thousands of miles away from Mission Bay, Berlin also has gained notice as a burgeoning biotech cluster with excellent research and medical centers, and according to Jaroch, “with a lively startup company scene.” He says, “There is the same entrepreneurial spirit here. A similar, exciting collaborative environment is now being created in Europe with the aim of fostering early innovation. Berlin is not only Bayer’s global pharmaceutical headquarters, but is also our largest site for research and development. This allows for expanded opportunities for close interaction between entrepreneurs and an array of Bayer scientists. We believe the CoLaborator fits perfectly into this landscape and community.”
I asked Jaroch what has been exciting or even surprising about the CoLaborator and made the efforts at an already busy headquarters campus worthwhile. “The first three tenants have already moved into the CoLaborator premises in Berlin. Calico GmbH is involved in the development of monoclonal antibodies and biomarkers. DexLeChem GmbH engages in research and development in the field of homogeneous chiral catalysis. Provitro AG operates in the fields of tissue microarrays, immuno-histochemical analyses, and cell-culture technology. We were aiming to create something beyond the traditional incubator, and I have been very pleased to see how well the CoLaborator is received in the life sciences start-up scene in Berlin.”
"Although we are interested in the programs at these companies, we know it is important to give start-ups independence from Bayer."
CHRISTOPHER HASKELL, Ph.D.
Head of U.S. Science Hub, Global External Innovation and Alliances and the CoLaborator
(As a quick aside, and by way of serendipitous corroboration, while recently talking with a former colleague who resides in Berlin and invests in biotechs, he enthusiastically explained to me that he and his scientists had utilized advice and space at the Berlin CoLaborator.)
What is different between the two locations is that Bayer moved into its San Francisco neighborhood, while the company has been a long-term presence and community leader in Berlin. This may bring different challenges, but the concept of immersion into the local start-up community and culture, willingness to open labs to provide assistance from its own scientists and facilities, partnering with other stakeholders, and relationships built on both legal agreements but more importantly mutual trust, are all common attributes of the two CoLaborators.
“Our interactions and relationships are really proximity driven,” says Haskell. “We don’t foresee the CoLaborator strategy as a nationwide model. We feel the unique location and opportunities offered in Mission Bay make this work well for us here. If I want to work with someone in Utah or Colorado or Texas, the CoLaborator model obviously is not the right tool.” But innovation does not stop at the water’s edge, so to speak. “We are, though, looking at other ways to do that, too,” says Haskell.