Russ: Hi I’m Russ Capper and this is The BusinessMakers Show, coming to you today from TMC Innovation Institute. And I’m very pleased to have as my guest, the Director of the Innovation Institute, Dr. Erik Halvorsen. Erik, welcome to the show.

Dr. Erik: Thank you very much for having me.

Russ: You bet. Tell us about the Institute.

Dr. Erik: So, the Texas Medical Center Innovation Institute was set up about two years ago under the guidance of Dr. Bobby Robbins and Bill McKeon, Chief Strategy Officer, in conjunction with a number of the executives across the Texas Medical Center Institute, which as we know is the biggest medical center in the country (Russ: We know that.) And they had really the foresight along with the Board of Directors of the Texas Medical Center to say, ‘Look, how do we better take advantage of the research, the translational, and the clinical excellence and depth of activity here in Houston?’ And how do we better mobilize that in the areas of innovation, clinical research, health policy, genomics, and regenerative medicine? And those areas became the five institutes, and the Innovation institute is the one that I direct here.

Russ: Wow, impressive. It seems to me, right now is a remarkable time in all medical sciences. I mean, you mentioned genomics, but immunotherapy is happening, portable digital devices are happening now, wellness in general. Is it just, in your opinion, just business as usual or is this an unbelievable time?

Dr. Erik: I think it’s an unbelievable time in terms of where healthcare innovation is and where it’s going. We are always blown away when we look at applications of companies from all over the world looking to join our accelerator, come to the TMC Innovation Institute, and again, the breadth of technologies in medical devices, in stem cell, in digital health, which has been one of the hottest areas for investment for the last five years. And so, there’s a ton of innovation. I think the challenge is figuring out which ones are going to be the real breakthroughs, which ones are really going to be the tipping point and really have the maximum benefit in healthcare.

Russ: You know I’m around a lot of people that focus on technology. I have them on the show all the time and there’s a category of them now that are really focused on disruption in general. It looks like disruption could be major in this space. I mean, the hospital of the future, even the general practitioner might be a completely different looking animal.

Dr. Erik: I think that’s right. I mean, disruption is a buzz word but it’s also a reality. I think healthcare, a lot of people will tell you, healthcare is ripe and ready for disruption. However, healthcare itself is such a, slow moving at times, not on the innovation side but just how medicine is practiced and how these large hospitals and healthcare providers, the speed at which they move from a change perspective. So, while people look at it and say they’re ripe for disruption, it’s not always easy to get them to actually change. So, it’s really going to be the right technology at the right time. And again, I think of some of the other features right now, healthcare is under pressure to decrease their costs, to improve the outcomes for their patients at a lower cost point, and also sort of shifting more of the responsibility to the healthcare providers, not on a procedure by procedure or visit by visit, but the overall wellness of their patient population.

And so, with those pressures being put on the healthcare system, they’re going to be more open than ever to bringing in new technologies that will disrupt their current model and practice.

Russ: Do you see technologies, like those that focus on wellness and keep people out of the hospital, do you see a lot more of those technologies showing up here at the Innovation Institute than you used to?

Dr. Erik: Absolutely. I mean, we just had, our most recent cohort for our accelerator is digital health focused, and we had 300+ applications from all over the world. Almost 20% of those applications were from Silicon Valley, which tells you something about what Houston is doing in drawing companies here. A significant portion of those digital health applications I would categorize as being in that health and wellness area; whether it was, you know, sort of getting people out and up, and exercising; whether it was nutrition, or some combination of those kinds of things; whether it was around a chronic condition that they may have, diabetes, obesity, heart conditions or whatever. But the health and wellness part of it, combined with wearable devices that we’re seeing, we certainly have seen a huge uptick in that, a ton of technology, a ton of innovation in that space. Some would say kind of noisy and kind of crowded, so which ones are going to win is part of it.

And, what’s the right incentives? What’s the incentives for patients to use it? What’s the incentives for doctors to prescribe it in having their patients? Insurers as well. Because you know that’s the part that we’re trying to solve for, and showing that these apps or these wearables are actually having the intended benefits; the changes in behaviors, the changes in their overall health and wellness, and showing that that’s happening.

Russ: Wow. Your first comment: Palo Alto to Houston, I find is very interesting. I mean, if you really look at it like a circle with a two-mile radius right from where we’re sitting, has had so much success in innovation in all of these categories, particularly in cancer treatment and cardiovascular. And maybe we keep some of that here, but historically, we’ve lost that to other cities. I mean, I’d like to see that stop. Do you think the tide is turning?

Dr. Erik: I think that’s right. I mean, you know part of the draw for me to come to Houston in the first place, the size of the medical center, right? The 21 hospitals, the 56 organizations, the 2 billion dollars of research that goes on here on a yearly basis, the 9 million patient visits, the, you know, 200,000 procedures that are done. The sheer size of it is absolutely miraculous, right? And the amount of innovations; research, translational and clinical, that are being made here is enormous. So, you look at it and say, ‘Well why has historically some of these innovations and discoveries, why have they left Houston?’ And I think we understand what those problems are. I think we are starting to address it as a community, I mean Houston at large; both at the city level, at the state level, and certainly at the TMC level. So, we look at it as we think that there’s a capital issue.

Other areas like Silicon Valley have a much more robust investor community (Russ: I’ll say so.) that are much more experienced. I’m sort of underplaying it, but that are much more experienced in investing in early stage healthcare innovation. Houston doesn’t have that robust of a community, but we’re trying to build it and activate it, for sure. And the other part of it is, I would say, that network of entrepreneurs, right? And so, you know we used to joke around up in Boston and in Cambridge that every Harvard graduate student and MIT graduate student, even before graduation they’re already on their third company. And so, you don’t have, necessarily yet, that culture and that history here, but I think it’s changing and I think it’s growing.

Russ: That’s interesting that you mention Boston, Cambridge, your background. That’s where you were. You were like at the epicenter of what was happening in medical innovation. You were involved in several startups, as I’ve discovered, even own a piece of several. What in the world got you to leave that and to come down here and do this?

Dr. Erik: I mean, it’s been about a year and a half that I’ve been here in Houston. I don’t regret a second of the decision to come down here. It was definitely a little bit of a learning experience. I mean, there’s the perception of what Texas is and what Houston is from the outside looking in, and then there’s the reality of when you get here; It’s absolutely true. I spent 15 years in Boston and Cambridge, thought I was in the center of the healthcare universe, as you’ve said, and I’ve said before, too, and I think that’s kind of the opinion of a lot of Bostonians, think they’re in the center of the universe in a lot of different ways. But finding out, you know I knew the Texas Medical Center, but I didn’t really appreciate all of the different organizations.

And then when you sort of look at it, you know it’s MD Anderson, the world’s leading Cancer Center; Texas Children’s Hospital, the biggest pediatric research center in the country; Baylor College of Medicine; Methodist; Memorial. You go through the list and you’re like, wow, I know all of these organizations. They’re really all kind of there and together. And, kind of put in my former Bostonian terms, if you took all of the hospitals and linked them together up in Boston, and there’s some good ones, right? Dana-Farber, Boston Children’s Hospital, Mass General, all of those; if you took them and linked them all together it would be one half of the size of the Texas Medical Center. So, again, size is great, but I also saw the coming wave of what’s going on here in Houston from an innovation perspective, from a startup perspective, and I wanted to be part of it.

Russ: Great. So, looking at what’s going on here, describe a little bit more about the TMC Innovation Institute. I mean, you see TMCx around here, you see TMCx+, you’ve got the JLABS thing. Is all of that part of the Innovation Institute?

Dr. Erik: Sure, yeah. So, the Innovation Institute has a couple of distinct, you know, groups that I’ll talk about. They’re all linked together because what we’re trying to do is we’re trying to capture early stage innovations, and companies and entrepreneurs that are working on those in healthcare, and we’re trying to put the pieces in place that will accelerate them and increase the likelihood that they will get products out there on the market that will can benefit patients, period. If we’re having a positive impact by getting better diagnostics, better devices, better drugs out there on the market that can help people, we’re doing what we set out to do. So, the way that we go about that currently is we’ve got these different programs. TMCx is the one, the brand that kind of everybody knows us by, and that’s our accelerator program. We run two programs a year where we recruit companies from all over the world.

As I mentioned, in our current digital health class, we had 24 companies with over 300 applications from all over the world. Of those 24 companies, 6 are international companies, 4 are Houston companies and the rest are from all over the country including, as I’ve mentioned, the 20% of applications from Silicon Valley. The program itself, you know, we select these amazing companies, we bring them here, we have a curriculum which is focused on product development, go to market strategies, pricing and reimbursement, financing a company, you name it we’ve gotten that built into our curriculum. We have an amazing advisor/mentor network. Whether it’s clinicians, nurses, IT people, investors, lawyers that we can draw on and plug them in with these companies based on what they need at the right time. And then, of course, we’ve got the medical center. So, these companies come here looking to collaborate with the Texas Medical Center and all of those amazing organizations. So that’s TMCx.

Dr. Erik: For the companies that we bring here, we hope they stay here in Houston, and we feel if they are able to raise money here in Houston, they’re able to get traction at the medical center, they will stay here because of the other things; the food, and the rodeo, and all the other great things Houston has to offer will also entice them to stay. And so, we have co-working space which we call x+. And that’s where these companies can really set up shop here in Houston. We have a Biodesign fellowship program, which is a one-year fellowship program where we recruit people from all over the world with clinical backgrounds, engineering backgrounds, programming backgrounds. We imbed them in the hospitals, identifying unmet needs where a better digital device or a medical device could be built to solve a problem, and they spend a year doing that. We then put intellectual property around those discoveries, we start the company, and we push the company into our accelerator.

Dr. Erik: And then, of course, we’ve got our corporate partnerships. We’ve got a lot of corporate partnerships, but resident corporate partners we have in J&J, and AT&T. And they’re such a really important and vital part of an ecosystem. Having these, I mean we just call it what it is, these are gigantic multinational companies and their talent pool, from a technical perspective, from a product development perspective, from sales and marketing and distribution and all of that, and they’re innovative as well. And so, having them working side by side with these early stage companies, you know, you just can’t explain how important that is to these entrepreneurs and this overall ecosystem that we’re building here.

Russ: Very impressive. Two of the first people I met out here: A guy named Ramone, with a virtual reality company from Barcelona; and then Harris Auer from Australia, with an approach of addressing depression through doing some DNA testing. I said, ‘Harris, what got you here?’ And he said, ‘Well, Bill McKeon came over to Australia and told me this story and I came back with him.’ I was just blown away by that. What a record, and what a collection of entrepreneurs and innovators you have here.

Dr. Erik: Adding the international folks to the mix has been phenomenal. It’s really, as the Innovation Institute, and as TMCx and the brand, and just the TMC brand has really gotten out there, it’s been amazing to see the international attention. We have weeks where we’re doing two international delegations a week that are coming through here from all over. And for us, it’s great, you know because they may have an innovation hub back in Norway, or Denmark, or China, or Australia, and we want to collaborate with them to help make that as strong as possible. And then, if we create mechanisms for companies from there to come here and ours to go there, or collaborate, again, it fits into our mission of what we’re trying to do which is get products out there that can help patients.

And again, if some of those companies come here and they stay here, that’s great for Houston, great for the Texas Medical Center as well. But at the end of the day, getting products out there that can help people is our main goal.

Russ: Wow, ok, so before I let you go, here we are in 2017. Look out five years, we’re at 2022. What does success look like, in your opinion, in 2022 for the TMC Innovation Institute?

Dr. Erik: We’ve got, between x, x+, and JLABS right now, we’ve got 100 companies right here in the 100,000-square foot space. That’s the biggest density in Texas, for sure, and I think probably the country from a healthcare startup perspective. And we just see that continuing to grow, with what we’re doing. And so that will be success for us, for sure, and we see that happening. I think the other two things that we’ve talked about, which are the capital issue, and being able to activate existing capital in Houston, and certainly being able to sort of create new sources of capital that can invest in these startup companies is going to be important. So, we’re spending a lot of time thinking of how we’re doing that. And then, building out our entrepreneurial network in a couple of different ways.

Some of it just takes time, so it’s educating, cultivating the local talent that’s here, but it’s also drawing entrepreneurs to Houston, right? When they see what those opportunities are to join existing companies or to start companies, we see that this will continue to draw those folks in here, much like we’re already seeing companies flocking to Houston from Silicon Valley, from Boston, from internationally. We think the entrepreneurs themselves will come here to start companies.

Dr. Erik: And then lastly, right now we’re very focused on supporting existing companies and existing products. What we haven’t done yet and where we’re going is we’re building out resources and a team to be able to start more companies, right? So, you’ve got 2 billion dollars of research going on over at the Medical Center and the affiliate institutions; finding those nuggets of innovation that really have a lot of potential, and then we put the entrepreneurs around there, we put the capital in place, we put the team in place, actively forming companies. That’s what we’re going to be doing a lot more of and that’s going to be great for Houston as well.

Russ: Erik, I really appreciate you sharing your story here; it’s exciting.

Dr. Erik: My pleasure.Thank you.

Russ: You bet. And that wraps up my discussion with Dr. Erik Halvorsen, the Director of TMC Innovation Institute. And this is The BusinessMakers Show.