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UPMC Enterprises commits $1 billion to life science investments

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October 18-20, 2023 / Tucson, AZ
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The Story

A corporate arm of UPMC will invest $1 billion over the next four years to develop new drugs, medical diagnostic and other devices by 2024, cranking a nascent economic engine in the Pittsburgh region while becoming a giant in venture funding for life sciences in Pennsylvania.

The commitment announced Tuesday by UPMC Enterprises, the venture capital and commercialization arm of the Pittsburgh health giant, includes $200 million already promised to open the UPMC Immune Transplant & Therapy Center in a historic, 200,000-square-foot building on Baum Boulevard. The University of Pittsburgh is a partner in that project, which was announced in 2018.

Investment money for new companies will come from existing revenue sources, without the need to borrow, UPMC Enterprises President C. Talbot Heppenstall said. Moreover, the investments will continue indefinitely.

“It’s really going to be a continuous process,” Mr. Heppenstall said, “which will continue after 2024.”

Downtown-based UPMC, which was formed in 1990, operates 40 hospitals across the state and a health insurance arm with 3.5 million members.

UPMC Enterprises is the culmination of a decadeslong effort at the health care giant to commercialize processes and products developed internally. To date, investments of more than $800 million in entrepreneurial enterprises, mostly in digital products, have yielded a return exceeding $1.5 billion, according to UPMC.

Investing in startup life sciences companies is not without risk. Biotech startups, for example, have a failure rate of 85% to 95% and achieving success can take 10 years without measurable revenue for a long time, experts say.

Take new drug development: The cost of bringing a new drug to market has been estimated at $2.5 billion.

Pittsburgh’s struggle

In the past, studies have concluded that the Pittsburgh community has the resources — scientific research and entrepreneurial expertise — to build a startup economy, where university spinouts generate jobs and economic growth.

A number of factors, including a dearth of investment capital, have kept the region’s universities from turning those assets into new businesses and jobs.

The number of high-wage, high-tech advanced industry jobs in Pittsburgh since 2000 fell 7%, according to a 2017 study by Brookings Institution, a nonprofit Washington, D.C.-based think tank, while the region failed to produce a significant number of high-growth startups.

UPMC Enterprises has been ramping up with the formation of five companies that speed laboratory discoveries to the market, while investing in 30 internal research projects over the past two years.

The initial focus was immunotherapies for cancer, organ transplantation and diseases related to aging, but that has since expanded to include eye and respiratory diseases among others.

In a related matter Monday, UPMC announced that it had implanted the first wireless retinal device in a patient as part of a clinical trial aimed at restoring partial eyesight to people with advanced age-related macular degeneration, a leading cause of blindness. Jose-Alain Sahel, director of the UPMC Eye Center, is directing the trial.

Companies and internal programs already funded by UPMC Enterprises include the startup Generian, co-founded by Pitt physician Toren Finkel and targeting diseases related to aging, and BlueSphere Bio, co-founded by physician-scientists Mark and Warren Shlomchik and focused on rapid, personalized T-cell therapies for cancer.

‘Valley of death’

UPMC’s attention to life sciences startups in Pittsburgh is expected to draw investment money worldwide. Fledgling startup companies are especially vulnerable to the “valley of death,” a term that refers to the situation when many are forced into liquidation because they are starved for adequate funding.

The health giant’s strategy is to invest in companies throughout the life cycle, from seed funding through maturity, said Jeanne Cunicelli, UPMC executive vice president. Ms. Cunicelli previously was a managing director at Bay City Capital LLC, a life sciences investment firm in San Francisco, where she focused on investments in medical device, drug delivery and drug development.

“It’s a really important point,” she said. “A lot of companies end up in the valley of death. But we can fund companies from inception through maturity and that’s a freedom that a lot of places don’t have.”

UPMC timed Tuesday’s announcement to coincide with the 38th Annual J. P. Morgan Healthcare Conference in San Francisco, which its officials were attending. No formal announcement of the new investment strategy was planned at the symposium, a UPMC spokeswoman said.

The new companies will be formed at existing UPMC facilities in Bakery Square, Oakland and elsewhere, so new real estate acquisitions won’t be needed.

‘A game changer’

UPMC’s new investment strategy is similar to that of other academic research centers that seek to commercialize internal research, including most notably Stanford University, which has connections with every American tech company and helped spawn Silicon Valley.

For many years, Stanford’s licenses to startup companies were only a fraction of the total number signed. But in recent years, the research institution doubled the number of licenses to startups, according to that university’s Office of Technology Licensing.

UPMC’s announcement Tuesday was cheered by the city’s startup community, including Christian Manders, chief operating officer of Uptown-based biotech company Promethean LifeSciences Inc., who hosts a weekly networking event for entrepreneurs.

Even though life sciences investments are high-risk-high-reward, UPMC’s announcement was good news for the city, he said.

“Wow, this is very exciting,” Mr. Manders said. “It’s a game changer and could be a game changer for Pennsylvania.”


Source: UPMC Enterprises commits $1 billion to life science investments | Pittsburgh Post-Gazette

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