Bioastra Technologies uses open innovation to help firms outsource R&D

Sumitra Rajagopalan was a materials scientist who wanted to solve real-world problems. Now she solves them for clients using an emergent business model

PROFIT 500: Canada’s Fastest-Growing Companies
Sumitra Rajagopalan

Bioastra founder and CEO Sumitra Rajagopalan has built a booming company on collaborative R&D . (Guillaume Simoneau)

Sumitra Rajagopalan’s life as a scientist started out like a dream. She was a bright-eyed 18-year-old who left her home in India to study chemistry in St. Petersburg mere months after the collapse of the Soviet Union. Being there, an outsider at the epicentre of modern chemistry—where Dmitri Mendeleev created the periodic table, no less—was exciting and scary, foreign and beautiful, and Rajagopalan was inspired.

In an ornate lecture hall, Professor Alexander Bilibin delivered a lecture that sparked her interest in the science that would define her livelihood. He spoke of the promise of smart materials—life-like objects that change form in reaction to external triggers. “I went to him right after and said, in my broken Russian, ‘I really, really want to work for you,’” says Rajagopalan. “I knew this was what I wanted to do for the rest of my life.”

So far, she hasn’t wavered. As the founder and CEO of Montreal-based biomedical devices company Bioastra Technologies, she’s at the bleeding edge of developing and commercializing practical uses for smart materials—turning Professor Bilibin’s vision into reality. Since launching Bioastra in 2008, she’s grown her business from a one-woman operation to a team of 17 whiz-bang inventor-types; together, they’ve increased sales by 906% in the last five years, landing the business at No. 82 on the 2017 PROFIT 500 ranking of Canada’s Fastest-Growing Companies. In a sector known for long timelines and fervent secrecy, Bioastra has embraced a research and development orthodoxy that allows it to quickly market its inventions.

Rajagopalan speaks with both pride and humility about her accidental path to entrepreneurship. Like many scientists, she initially saw herself working in academia. But after moving to Canada, completing a master’s degree in polymer chemistry at the University of Montreal and starting a PhD program—which allowed her to work on a “dream project” creating a biological muscle from smart materials—Rajagopalan grew restless. She wanted to see her work make an impact with real-world applications, not enshrined in niche publications, so she quit. “I was in pure survival mode after that,” she says. “I had to find work.”

That’s when she decided to sell a prototype she’d developed after a trip home to India, a sponge-like smart fabric—inspired by materials used in the Russian space program—that helps alleviate heat stress in super-hot climates. Rajagopalan figured someone would buy it and, after cold-calling countless garment companies, someone did. She took the $10,000 cheque as a sign to keep going, and spent the the next two years toiling by herself in a shared work space—getting by, but making no major gains.

That changed after she discovered the life-altering magic of open innovation (OI). A consumer health company emailed her cold, asking if she’d like to collaborate on a new product. The partnership never took off, but it tipped her off that OI might be a strategy worth pursuing. In an OI environment, different parties work together to develop a product none could do on their own. A company seeking a new product will create a profile on a specialized online marketplace explaining what it needs; researchers, manufacturers and marketers will bid to work on the solution. (Rajagopalan describes it as for innovators.) The tenderer pays winning bidders in installments as different stages of R&D are completed, giving the tinkerers working capital to build what needs building.

For a smaller company like Bioastra, OI is a direct and relatively risk-free path to monetizing technology in the very early stages of product development. Partners typically buy a license to use the technology going forward. Depending on the terms of the agreement, the innovators-for-hire are then free to apply their intellectual property to non-competing applications. “The phrase ‘game changer’ has been bandied around,” says Rajagopalan, “If there’s a game changer in the industry, if there’s a reason for unbridled optimism, it’s this.”

Ying Tam, head of Health Venture Services at Toronto-based incubator MaRS Discovery District, agrees that OI is reshaping R&D. As big firms in sectors like pharma increasingly fret over the overhead of internal skunkworks, says Tam, they are drawn to the “unbelievable” potential cost-savings of the open approach. (A 2014 survey of large corporations revealed that 79% used innovations from outside firms, and that 71% planned to grow their OI budgets.)

Since positioning itself as an OI partner, Bioastra has forged partnerships with some of the world’s top pharmaceutical and biomedical companies. The company has developed an injectable liquid that turns solid when it enters the body to aid in (among other things) drug delivery; it’s also invented a polymer-based artificial muscle—similar to Rajagopalan’s abandoned PhD project—used in compression wear to counter pain. These two technologies alone hold myriad application possibilities, says Rajagopalan, and while they were developed for others, Bioastra owns the intellectual property.

While open innovation helps little-known outfits get in with the Googles or Pfizers of the world, the nature of the process makes for intense competition. Keeping pace has been one of Bioastra’s greatest tests. Most employees come from academia, where they have months or years to prove an idea. “Here we have days to show a prototype and make our sales pitch,” says Rajagopalan. “That’s a big challenge: convincing this amazing talent—all smarter than me, no exceptions—to think like me, to stop talking about the idea and build.” She’s found a sort of reverse psychology to be an effective motivator: when an employee says it’s impossible to build something in five days, she asks them to show her they can’t do it. More often than not, they’ll produce a functioning—if not always pretty—product on time. Not every employee takes to this style, but those that do tend to grow to love the unique problem-solving process and quick, tangible results of non-academic work.

Tam from MaRS predicts the smart materials market will grow at about 10% per year for the forseeable future. “There’s huge potential,” he notes, which is creating more competition for Bioastra, which has until now faced relatively few rivals. “I say bring it on,” says Rajagopalan. “It will create supply chains, the cost of raw materials will go down and we’ll have more client traction.” It might seem an unconventional approach, but it’s consistent with the ethos that has thus far fuelled the company’s success. “I’m very happily sharing my vision with the world knowing it will spark other ideas,” Rajagopalan adds. “It’s lose-lose if you don’t.”