Merck, J&J Back Stanford Student Incubator as Innovation Farm Team

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are dreaming up ideas for new companies between their classes.

“It’s really innovation in its most raw expression,” Miralles says. “Young students have irreverent ideas; they have not been shaped by life yet, so they can perhaps think more freely.”

Nag herself co-founded a company, Stem Cell Theranostics, with three lab colleagues when she was a 20-year-old Stanford sophomore studying human biology. She was a student researcher with a lab group at the Stanford Institute for Stem Cell Biology and Regenerative Medicine that created cultures of beating heart cells derived from the skin cell samples of 150 patients. The co-founders saw the cell cultures as a resource that could be used to test experimental drugs for cardiovascular disorders, rather than trying the drugs out too early in humans.

Stem Cell Theranostics was one of the first startups admitted to the original StartX accelerator program, which was founded in 2009.  Nag says her young biomedical company gained immensely from the accelerator session in 2010, even though the other startups were consumer IT developers and other high-tech innovators. To help spread the benefits, she and her business partner, Stanford MD-PhD student Andrew Lee, decided to found StartX Med the following year to meet the particular needs of other companies in the fields of digital health, medical devices, and biotechnology.

Divya Nag

StartX Med Co-founder Divya Nag

Under the StartX umbrella, Nag and Lee created a six-month StartX Med accelerator program and recruited volunteer industry advisors in areas such as FDA regulation and grant funding. Startups admitted to the sessions get free office space, instruction on business formation and financing, and industry mentors. Like StartX itself, StartX Med doesn’t ask for any ownership stake in the companies it nurtures.

Experts from both Merck and J&J had already been contributing their time informally when StartX Med started talks with the two companies about a corporate partnership early last year, Nag says. The companies’ financial support will allow StartX Med to hire more staff, expand its office space, and admit more fledgling companies into the program, she says. For the accelerator’s second session starting in January, there were 80 applicants for fewer than five slots.

“There was such a huge demand,” says Nag, who dropped out of college when she started her career as a co-founder of new enterprises. She is now chief product officer for the StartX organization.

Another StartX Med startup is Analytics MD, which analyzes data on the workflow in hospitals to improve their efficiency. For example, it can track the amount of time spent by hospital frontline staffers at each stage of patient care, to detect bottlenecks that might increase costs or lower the quality of treatment. Another of the accelerator’s startups, Medwhat, is developing a service that allows patients to ask health questions in their own words, such as, “Why does my stomach hurt?’’  The platform searches medical databases to come back with answers.

For StartX Med participants and alumni, the new link to two major pharmaceutical companies could open up a host of opportunities. Miralles says Johnson & Johnson’s California Innovation Center will be looking for talent in drug development, medical devices, and health IT. It’s possible that some graduates of the StartX Med program might be invited to join the Janssen Labs incubator program at San Francisco’s Mission Bay complex that is being set up by J&J unit Janssen, Miralles says.

Both Merck and J&J also have venture capital arms that might consider making investments in the StartX Med companies, the executives say. These startups already are candidates for investments from the new Stanford-StartX Fund announced this month, through which Stanford University and Stanford Hospital & Clinics will join venture firms and angel investors in early financing rounds for startups that emerge from the StartX and StartX Med programs.

Meanwhile, Stem Cell Theranostics, the company co-founded by Divya Nag, Andrew Lee, and Stanford professors Robert Robbins and Joseph Wu in 2010, is pulling in revenues by supplying its beating heart cultures to the big drug developer Gilead of Foster City, CA, and two other large companies that also use them for testing, but don’t want their names disclosed. Because the startup was already reaping some revenues, it was able to bypass the step of seeking initial financing from angel investors and retain a greater ownership stake for its co-founders, Nag says. Stem Cell Theranostics is just now raising its seed round of funding from investors.

Nag says experienced industry folks tell her things don’t usually move so fast. But, she asks, isn’t that the point of an accelerator?

“We’re all about speed,” Nag says.

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