1 February 2010Patents

Commercialising university IP

The Association of University Technology Managers (AUTM) defines technology transfer as “the process of transferring scientific findings from one organisation to another for the purpose of further development and commercialisation”.

Under the guidance of professionals employed by universities and research facilities, an innovation is usually protected under patents, and then licensed. The university or institution grants its rights to a third party through a licence agreement for a set period in exchange for payment.

Agreements range from patent applications and material transfer agreements to sponsored research and start-up companies, all sought in the hope of financial reward, recognition and/or to link students to future job opportunities.

At Yale University, technology transfer is handled by its Office of Cooperative Research (OCR), managed by IP specialist Jon Soderstrom. Recruited from Oak Ridge National Laboratory in 1996, Soderstrom was impressed by plans to transform the university’s technology transfer process—plans that were more than “let’s make money” and instead centred on raising the stature of the institution and the recruitment and retention of staff and students.

“If you’re doing it purely for money then you’re going to make a lot of bad decisions, but if you’re trying to enhance the profile of the institution then your investment profile and your thought process are going to be much more long term,” he says.

Yale has also set itself the much wider challenge of helping to generate an economic renaissance in its home city of New Haven, Connecticut. The relatively small town is booming, largely thanks to the biotechnology companies that have used the research facilities at Yale (80 percent of all its research is in life sciences) over the last decade and have since complemented that by working with ambitious students seeking to start new ventures.

Pfizer, Bristol-Myers Squibb and Bayer all have major research facilities in Connecticut. Proximity to Yale encouraged Pfizer to develop a $35 million clinical research facility next to Yale’s medical school campus. Of New Haven’s 124,000 residents, Soderstrom believes that 400 to 500 are currently employed by studentgenerated ventures.

Even so, it is no easy task to develop and commercialise a university’s IP portfolio. “The issue of any university portfolio right now is that it tends to be extraordinarily early stage, and so from a technological risk standpoint, that’s the worst possible time because you’re not sure if it’s going to actually work,” says Soderstrom. “What you really need is money to push forward and fund different types of experimentation, and those funds just don’t exist.”

The situation is complicated by the current financial crisis— investors are naturally drawn towards more mature technologies and have very little appetite for risk. Yale’s attempt to combat this problem is to try and come up with new ideas, to increase value by combining its IP with other university and corporate partners, and to focus on the things it believes will translate from an idea into a product more quickly, such as medical devices that require less capital and clinical testing before being approved for the market.

The team also tries to find other sources of money to invest in developing some of the technologies—for instance, working with a pharmaceutical contract research organisation that can take some of the team’s targets and work with them to put together a pre-investigational new drug (IND) package to raise an investment fund that could be used to finance that work.

The key to Yale’s technology transfer process is communication. One of the main advantages the OCR has is its tremendously loyal alumni, who are in influential positions in investment banking and venture capital, and who are willing to share their knowledge and provide support. The approach also reflects the changing industry: the idea of a biotech company reading a journal article by a faculty member and getting in contact to license it is now unrealistic.

Soderstrom says that stopped happening a few years ago. “The concept to consider now is how to make the phone ring—you have to be out there talking to people all the time, at investment banking conferences, at scientific meetings, wherever potential investors are,” he says. “You can’t expect it to happen passively.”

Some may question whether the technology transfer process is a mutually viable one. Soderstrom is of the opinion that it cannot work unless it is a win-win situation: investors participate because they think that the technology being developed is worthwhile and has value, while faculty members benefit because they get to see their technology further developed—perhaps even taken all the way into the market, resulting in royalties.

Soderstrom recalls a piece of advice given by an experienced biotech investment banker: “If you want to make money in biotech, you’re better off investing in the stock market!” With publicly traded biotech companies trading at less than their cash value, there is a naturally lower tolerance for risk—investors still need to make money, and in order to come up with attractive deals, there needs to be great technology and management teams to develop it.

And it seems that working with an experienced team in the industry is usually something people are excited about. The terms and conditions of an agreement fall into two parts: finance and diligence. The former is apparently straightforward—so many deals are done by universities that the financial aspects tend to follow market norms.

The latter is more complex: how to determine what it is going to take to get to a point where the technology warrants a clinical trial. The diligence plan includes what the licensing client is going to commit to and invest in over an initial five-year period, which will then be renewed and updated over a period of time. As with most technology transfer offices, Yale’s OCR deals with anything IP-related.

With its specialism in life sciences, faculty members recognise that in many cases, particularly those of new therapeutics or diagnostics, having a patent is critical in order to convince people to invest. Yet, in other cases, obtaining a patent may not be the most effective way to transfer technology.

“You have to be out there talking to people all the time, at investment banking conferences, at scientific meetings, wherever potential investors are...you can’t expect it to happen passively.”

Dealing with a new gene, for instance, or a new target for discovery, can benefit more from a material transfer agreement—an agreement covering the transfer and use of materials from owner to recipient for research purposes. In the time that it takes for a patent to be granted, a licensee could have published their findings, giving other interested parties the opportunity to use them and resulting in probable loss of revenue for the licensee.

Yale’s OCR is not only about future targets and plans—it has already had much success. Kolltan Pharmaceuticals was started in 2009, built around faculty member Joseph Schlessinger and his work in developing the crystal structure of receptor tyrosine kinase. More than $35 million was raised to finance the start-up company, including funding from Purdue Pharma, HBM Capital Partners and Pfizer, as well as “a lot of help from friends”.

Schlessinger had already been successful with Sugen (later purchased by Pfizer) and the drug Sutent, used to treat advanced kidney cancer and gastrointestinal stromal tumour (a rare cancer of the stomach, bowel or esophagus). The venture included reforming the team that brought Sugen forward, creating a confidence that attracted investors.

It is one of a number of life sciences companies that are, in part, the result of research at Yale. Other companies developed by Yale include Rib-X Pharmaceuticals, a small molecule drug discovery and development company focusing on antibiotics, and Connecticut-based CGI Pharmaceuticals, which develops small molecule therapeutics for oncology and auto-immune/ inflammatory diseases.

Soderstrom cites d4T as a personal technology transfer achievement. Licensed to Bristol-Myers Squibb and developed as Zerit, it is one of the most highly prescribed drugs to treat Aids and a key ingredient of the drug cocktail that changed the treatment of the disease in the 1990s. It was also the first reverse transcriptase drug to be approved by the Food & Drug Administration.

But more satisfying success came later when a controversy developed over the price of Aids drugs and Yale reacted. Together with Bristol- Myers Squibb, the university made its IP rights available to third parties so that the drug could be more affordable in developing countries.

"Yale [as key patents holder] was able to work with Bristol-Myers Squibb to come up with a strategy that would make it available generically—that was the first of its class and it reduced the price of the Aids cocktail significantly in the developing world,” Soderstrom says.

The various events held by the OCR to educate and encourage collaborations between faculty members underlines the importance of communication. The BioHaven Entrepreneurship series aims to educate faculty staff, graduate students and post-graduate students about what is commercially interesting, allowing them to see first-hand the types of cases the OCR looks at—the licence, the process it goes through—via a panel consisting of an entrepreneur, a faculty member and an investor discussing a particular example.

‘Faculty Lounge’ meetings provide another opportunity to get faculty members together to talk about new and exciting areas. “We try and steer the conversation around to ‘well, that’s impressive science, what difference is it going to make?’, ” says Soderstrom. “And because you have faculty from a variety of disciplines, it often leads to interesting collaborations that would not have otherwise occurred.”

In fact, these internal meetings reflect the example given by AUTM. Founded in 1974 as the Society of University Patent Administrators, AUTM exists to help train the next generation of technology transfer officers and provides opportunities for colleagues to get together and talk about what works and what trends are developing.

As AUTM and its facilities have grown, institutions such as Yale have been able to use it for education and professional development in ways that benefit the industry. Soderstrom adds that for individuals: “[AUTM] provides an opportunity to find us and talk to us in an environment where we’re all trying to solve the issue of moving technology into the marketplace together.”

Yale is perhaps atypical in its approach to technology transfer. Soderstrom is keen to stress that its way is not necessarily the right way—rather the one that is right for Yale.

“All tech transfer offices are unique, just as the individual universities are unique. Some may put the emphasis on doing straight-up licences to generate revenue, but the emphasis at Yale is on local economic development. Ultimately, everything we do is about licensing IP. The big question is whether the agreement will be with an existing company or one that is yet to be formed,” he explains.

“Doing start-ups in and around New Haven is important to Yale simply because we want to have a vibrant and local economy that supports not only the Yale faculty and their families, but makes it an attractive place for others as well.”

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