Business Minds Help With Drug Research
By JASON GERTZEN
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Posted: April 11, 2004

Stephen Rao was brainy about brains, but not about business basics.

So much so that he almost talked himself out of a business opportunity.

"To be honest with you, I said that is a good idea for other people, but it is not right for me," said Rao, a neurology
professor at the Medical College of Wisconsin. "I didn't think I had the expertise. I really don't have a business
background."

Not long ago, this could have been a story about one more interesting idea languishing in a Wisconsin laboratory. No
new company. No new jobs. Rao would have been left to run his experiments, publish research in scientific journals and
teach medical students.

Not this time.

After a little cajoling, persistent persuasion from colleagues and a lot of outside input, Rao formed a company called
Neurognostics. The 1-year-old firm just received $750,000 in outside investment, hired a chief executive and is gearing
up to go commercial with its service: running tests for pharmaceutical companies to gauge the effectiveness of new
drugs for Parkinson's and other diseases.

Researchers now use a patchwork of technologies and techniques to figure out exactly how new drugs affect patients.
Rao's challenge is to create a testing procedure that will easily mesh with technology already in use, and, of course,
at a price that hospitals and researchers will pay.

The essentials of the Neurognostics technique were developed at the Medical College in 1992 when Rao and his research
team discovered a way to use magnetic resonance imaging scanners to measure brain function. Since then, the team has
applied the technique to numerous medical conditions.

Changes in blood flow within the brain indicate which gray matter is engaged for whatever the patient is doing at the
moment. When a person moves a finger or puzzles through a memory task, more blood flows to specific areas of the brain
that control the motion or thinking. The technique that detects this activity is called functional magnetic resonance
imaging.

Last week, a man with Parkinson's disease reclined with his head inside a massive scanning machine used by Medical
College researchers. Rapid-fire pulses from the machine helped capture electronic images of the man's brain as he
rested and then tapped his fingers on a keypad to the beat of rhythmic tones piped through headphones.

Before arriving, he had temporarily withdrawn from the medication that controls his Parkinson's symptoms. That allowed
the Neurognostics system to precisely track the misfiring sections of his brain.

The same process can be applied to clinical drug trials. Neurognostics hopes that pharmaceutical companies will be big
buyers of the services it provides.

Pharmaceutical companies typically run clinical trials that involve hundreds of subjects when they are gathering
evidence to show federal regulators that their new drugs are safe and effective.

Neurognostics is touting its ability to save drug manufacturers money and time by getting the needed data by conducting
portions of their clinical tests with far fewer patients.

"Instead of 800, we might be able to use 80," Rao said.

Currently, it takes about 10 years and nearly $900 million to develop a new drug, according to the Boston-based Tufts
Center for the Study of Drug Development.

That level of expense should pave the way for high demand for a cost-trimming service such as the one Neurognostics is
offering, said Douglas Tucker, the company's new chief executive officer.

"Clearly, there is great business potential there," he said.

Neurognostics is off to a promising start, with one contract with a pharmaceutical company and negotiations with at
least three more.

Still, it is trying to introduce a brand-new technique into a high-stakes market.

That's why Rao's panel of advisers will be critical to its success out of the chute.

TechStar, a Milwaukee-area agency that nurtures new firms, was created for opportunities like this. It is working with
three other Medical College spinoffs in addition to Neurognostics. The new technology transfer initiative at the
Medical College is pitching in, too.

Like Rao, few academics have any idea how to convert their success in the lab to success in the market.

"It's not something the typical academic knows anything about," said William Hendee, a top Medical College official and
board member of the Wisconsin Technology Council.

A strong tie between the academic and business worlds is increasingly important to many of the top researchers being
recruited by schools such as the Medical College, said Lane Brostrom, TechStar's executive director.

"They don't want to see anything but how many start-ups you have in your research park," Brostrom said.

Brostrom considered Rao's innovation a good candidate to become one of those start-ups as soon as he heard about the
technology. Brostrom was the one who persuaded Rao to shift into entrepreneur mode.

Rao didn't jump at the chance. He talked with colleagues who had brought research to market and saw that doing so
wouldn't necessarily derail his academic track.

His lack of business experience was not a serious liability as long as he agreed to let the PhDs take charge of the
science and the MBAs run the business. Rao will serve as his new company's chief science officer.

"He is an extraordinarily bright guy who recognized early on that he brought his academic expertise and that he wasn't
a business guy," said Jeff Rusinow, who organized the angel investor group that is putting time and money into the
company. Rusinow is now on the Neurognostics board.

The investors are intrigued with Neurognostics because it has "disruptive technology" that appears poised to shake up
the way the pharmaceutical industry tests its new drugs, Rusinow said. The Neurognostics approach produces more
detailed results, more quickly and possibly more cheaply, he said.

"The science, in and of itself, if we are right, it will be very exciting," Rusinow said.

SOURCE: The Milwaukee Journal Sentinel
http://www.jsonline.com/bym/news/apr04/221600.asp

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