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The University of Pittsburgh Medical Center has a huge presence in the city, including in the U.S. Steel Tower, the tallest in the city’s downtown core. (GeekWire Photo / Elan Mizrahi)

More than 125,000 people receive an organ transplant every year. The procedure could replace a failing heart, lungs or kidneys, or even help recipients see for the first time in their lives.

Those 125,000 annual miracles are largely thanks to research done by a lineage of transplant doctors at the University of Pittsburgh Medical Center (UPMC), notably Dr. Thomas Starzl. Starzl, known as the “father of transplantation,” moved to Pittsburgh in 1981 to conduct his groundbreaking research and stayed there until he passed away in 2017.

But Pittsburgh’s skill for medical innovation is already far surpassing Starzl’s legacy.

The city has put itself on the map as a center of innovation in medicine, health systems and biotechnology, and it has done so by leveraging one of the city’s most valuable assets: its research institutions. While it still faces obstacles, including a scarce venture funding scene, Pittsburgh is making progress toward building a thriving and diverse health industry out of world-class research.

“For us native Pittsburghers, it’s almost shocking how much has changed,” said Tal Heppenstall, executive vice president at UPMC and the president of its innovation group, UPMC Enterprises. He said Pittsburgh is becoming the “place where the problems that not just Western Pennsylvania, but the country and the world are facing around healthcare can actually get solved.”

Jim Jordan credited the city’s institutions. He’s the longtime CEO of the Pittsburgh Life Sciences Greenhouse, an incubator and startup resource that has worked with more than 480 startups in its 15-year history. It has invested in 84 of those companies.

“What sets the Pittsburgh region apart, and quite frankly Pennsylvania, is that we have all this funding coming in for just amazing research that we do,” Jordan said.

Pennsylvania ranks 12th in the nation in National Institutes of Health funding, a good measuring stick for medical research institutions, Jordan said. The University of Pittsburgh alone ranks fifth and earned $485 million in NIH grants in 2017. The University of Pennsylvania in Philadelphia also places in the top five, making Pennsylvania the only state in the nation to claim two of the top five institutions.

And, of course, Pittsburgh is home to UPMC, independent from the school and now one of the largest and highest-ranked hospital systems in the country.

With that amount of funding and expertise, breakthroughs in health are almost a certainty. But turning those breakthroughs into thriving companies, ones that can grow in their hometown, is more of a challenge.

The city and its institutions are doubling down on their efforts to foster innovation after a Brooking Institution report critiqued Pittsburgh’s ability to turn its intellectual capital in fields like medicine and education into economic growth.

“The connection between research and industry strengths is weak and is dampening the region’s potential,” the Brookings Institution report said. “Pittsburgh has yet to see the economic activity in advanced industries expected given its robust academic and research strengths. The difference between the level of innovation inputs (such as patents and R&D investments) and the level of economic outputs (jobs, GDP, and firms in advanced industries) is stark.”

The report sparked the creation of InnovatePGH, a public-private partnership to create an innovation district in the city.

The UPMC building at 5000 Baum Boulevard, which will be renovated into an eight-story innovation hub to house the Immune Transplant and Therapy Center. (GeekWire Photo / Taylor Soper)

The newest part of this initiative was unveiled this week: the UPMC Immune Transplant and Therapy Center (ITTC), a $200 million research and incubation center launched Tuesday by UPMC and Pitt.

Dr. Steve Shapiro, UPMC’s chief medical and scientific officer, said the goal of the center is to help UPMC and Pitt researchers turn their work into viable commercial products. He described the $200 million as a “venture fund” that will seed those ideas and quickly develop them inside the institutions, instead of going through lengthy grant funding and external commercialization processes.

“We would like [researchers] to turn their scientific breakthroughs into clinical programs and commercial products with urgency,” Shapiro said, “and we want them to be able to do that within the confines of the university and UPMC.”

ITTC’s unique funding model targets a big problem for health startups: The infamous valley of death, when a company needs gobs of cash to complete R&D and get its product off the ground.

Unlike other health hubs in Boston and San Francisco, Pittsburgh isn’t home to a wealth of venture funds and anchor institutions that could fund new companies. So while the startups of today are seeking much of their funds from the coasts, incubators and accelerators are working to create home-rown venture capital in the Steel City.

UPMC and Pitt are the two biggest players in this field, and both organizations are pumping resources into creating and supporting spinout companies. UPMC Enterprises oversees the organization’s spinout companies and its investment in other health startups, like Seattle-based Xealth.

“It’s all about solving UPMCs problems, whether its problems on the payer side, problems on the provider side or problems on the consumer side. We are about inventing new solutions to them,” said Heppenstall, the UPMC Enterprises president. The organization’s spinouts are either health technology startups, providing solutions for health systems; or medical and bitoech startups, taking medical research from the lab into a clinic.

Across town, Pitt launched a new biotech accelerator just a few months ago, although it has been in the works for several years. The project is called LifeX and aims to give biotech startups rooted in Pitt research a leg up through a combination of expert mentoring and funding, starting with a $25 million seed fund.

LifeX was created in part by Dr. Don Burke, yet another Pittsburgh-based innovator — he’s one of the world’s leading experts on infectious diseases and helped create the Hepatitis A vaccine — and is led by Dietrich Stephan, head of Pitt’s Department of Human Genetics.

Inside Pitt’s Cathedral of Learning. (GeekWire Photo / Todd Bishop)

Stephan said Burke “recognized that the University of Pittsburgh is a powerhouse in research. We’re currently fifth in NIH funding, for example. That puts us in the realm of UCSF and Harvard, all the household names. Yet our impact, in terms of products derived from our research that are helping people every day — as measured by total industry revenue into the institution — was low in comparison to those pure institutions. Dramatically lower, quite frankly.”

LifeX is working to reverse that by helping Pitt research become fully fledged startups and guiding them through their early stages. One of its most recent stars is Peptilogics, a company developing a drug that can treat antibiotic-resistant infections. The company’s $5.5 million Series A was led by Silicon Valley entrepreneur and venture capitalist Peter Thiel.

Another LifeX startup, DiaVacs, is developing an immunotherapy treatment that could reverse early Type 1 diabetes, an incurable disease that leaves patients dependent on insulin injections. The startup was founded by Pitt researchers Nick Giannoukakis, David Finegold and Massimo Trucco and its tech is based on their research.

Related: Pittsburgh research giants unveil landmark $200M immunotherapy center to combat cancer and aging

Stephan said LifeX is in the midst of raising its $25 million fund that will go towards seed funding for startups. It then plans to raise a second fund to support later-stage companies, aiming for a figure in the hundreds of millions of dollars.

Pitt also has several other life-science focused commercialization vehicles, including technology transfer group sciVelo. Founded in 2016, the group helps researchers with the very early stages of commercializing their research.

“sciVelo fits in the very earliest stages of commercialization – where the basic scientific and clinical research is being conducted,” sciVelo Founder and Executive Director Don Taylor said in an email. “We partner with these research investigators from this very early stage until they reach the core of the Innovation Institute where there is a strategic handoff for intellectual property filing, licensing, or new company formation preparations.”

Even Carnegie Mellon University, better known for software than biology, is in on the action. CMU partners with Pitt and UPMC in the Pittsburgh Health Data Alliance, aiming to turn medical data into innovations in the clinic. Its researchers are also beginning to spin out health-focused technology startups.

Several of those startups have gone through the Life Sciences Greenhouse, Jordan said. The greenhouse was founded by the state of Pennsylvania in 2002 as a way to support and fund homegrown startups, like robotics company Blue Belt Technologies.

Blue Belt develops the Navio Surgical System, a smart robotics system that helps surgeons with complicated procedures. It was founded in 2003 by Carnegie Mellon robotics researcher Branislav Jaramaz, orthopedic surgeon Dr. Anthony DiGioia and entrepreneur Craig Markovitz and was acquired by Smith and Nephew in 2016 for $275 million.

From robotic surgery to diabetes to electronic medical records, Pittsburgh researchers are finding new ways to innovate in health — and the city is determined to make those innovations thriving, home-grown companies.

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