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CLOSING THE VENTURE GAP Research Corporation Technologies, independent since 1987\ helps commercialize university inventions Ann Thayer C&EN Houston
R
esearch Corporation Technologies (RCT) has its origins in one of the oldest intellectual property and technology management operations. Exist- £ ing as a program within g the 88-year-old Research | Corporation for many de- 1 cades, Tucson-based ^ RCT became an indepen- $ dent entity in 1987. With | its emergence, the organization's efforts accelerated, and it has moved beyondfilingand managing patents and licensing university inventions to take a more active role in technology development and Munsinger new business creation. RCT is doing more than simply patenting and licensing, explains RCT President Gary M. Munsinger. It is now "investing in development to create the utility of a product, based on an idea." As part of the private Research Corporation foundation, the technology management program was not allowed to take ownership in new businesses. As RCT it can, and it has stakes in several start-up firms. John P. Schaefer, Research Corporation's president, also serves as RCTs chairman. There has been a "huge increase in the attentiveness of universities and faculty to opportunities to exploit their ideas commercially," Munsinger says, precipitated in large part by the BayhDole Act of 1980, which allows universities and other research organizations to own and patent inventions developed under federal funding. "Universities have become much more attuned to and interested in creating their own capability for handling intellectual property." Universities and other research insti-
than 17,000 licenses and options were still active, meaning that a technology was being evaluated or developed. The technology transfer business has accelerated during the past 20 years, with double-digit growth in most of these measures of success. Today, more than 200 universities are actively engaged in the process, AUTM reports, more than eight times the number in^$^^êB^mM^:r volved in 1980. !Ώ,^
Frankly, we view them not as being com petitors, but as part tutions filed 4,808 patent ners, and we attempt applications in 1998, to work with selected while receiving 3,224 institutions that we U.S. patents and signthink have the ing 3,668 licenses, acÉÉIlk. potential for cording to the most recent data from the interesting Association of University technology," Munsinger says. AdmittedTechnology Managers ly, university technology transfer offices (AUTM). Northbrook, have become "much more numerous, Ill-based AUTM repre- better staffed, more sophisticated in their sents more than 300 U.S. activities," he notes. "But because faculty and Canadian universities members are more aware of the opportuand other institutions con- nities for commercialization of their disducting research. Li- coveries, these offices often are overcensed technologies from worked and limited by their budgets." this same group gave Working with a third party becomes birth to more than 364 a reasonable option for universities start-up firms in 1998, when "that third party brings something with the other licenses to the table," Munsinger adds. 'They going to existing large are always trying to find licensees, and and small companies. even we will be a licensee for their AUTM's annual sur- technologies." vey also found that uniRCTs staff of nearly four dozen inversity faculty made nearly 12,000 in- cludes individuals, most with scientific vention disclosures in 1998, while more and business training, who have the task of identifying and evaluating discoveries or technologies for their commercial potential. RCT also has instituResearch Corporation tional relations, communications, and Technologies information groups. Legal expertise at a glance helps inventors and university partners gain appropriate intellectual property Headquarters: Tucson, Ariz. protection. From there, business, comCreated: 1987 mercialization, and financial staff help Revenues: $ 1 1 2 million create development, licensing, and busi1 ness plans, while possibly seeking colDistributions' : $ 5 8 million laborators, investors, or licensees. Net gain: $ 4 8 million In 1999, RCT distributed nearly $58 million back to universities and inEmployees: 4 7 ventors as royalties, licensing, and other Affiliated organizations: BioVentures fees. Distributions have averaged about West (California), RCT BioVentures 60% of project revenues in the past six NE (Massachusetts), BioVentures years, and project revenues reached a Australia, Cambridge Research BioVentures (Ireland), Milestone Medirecord $104 million in 1999, up 37% from ca (Canada), Optics & Photonics Inthe previous year. Investments in startvestment Initiative (Arizona) up businesses brought in $8.2 million, up from a loss of $6.2 million in 1998. Note: All figures are for 1999. a Payments to inventors and institutions. RCTs 1999 net gain, including the change in value of marketable securities AUGUST 14, 2000 C&EN
17
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Department of Pharmaceutical Chemistry
business Benevolence breeds a research legacy
& Molecular Design Institute
Drug Design and Delivery University of California San Francisco Laurel Heights Conference Center San Francisco, California October 13-14, 2000
On October 13-14, scientists from academia and industry will meet in San Francisco to discuss drug design and discovery in the post genomics era. The meeting is chaired by Professors Peter Kollman, Ken Dill, and Irwin Kuntz. All who are interested in the interrelationships of genomics, macromolecular structure, combinatorial chemistry and drug design are invited to attend this stimulating meeting, including experts of the field. Poster sessions provide the opportunity for all who attend to present their recent results.
Keynote Speaker Paul Anderson Senior VP DuPont
Pharmaceuticals
Speakers: Johan Aqvist, Uppsala University Ken Dill, UCSF Robert Fletterick, UCSF Simon Kearsley, Merck Research Laboratories Peter Kollman, UCSF Irwin Kuntz, UCSF Robert McDowell, Sunesis Jonathan Mason, Bristol Myers Squibb Kenneth Merz, Pharmacopeia David Pearlman, Vertex Thomas Scanlan, UCSF Bruce Tidor, MIT Dennis Underwood, Dupont Pharmaceuticals Gennady Verkhivker, Agouron
Frederick Gardner Cottrell had a unique vision. In 1912, with the help of Charles Doolittle Walcott, then secretary ofthe Smithsonian Institution, he created Research Corporation and endowed it with the rights to his invention— the electrostatic precipitator for controlling industrial air pollution. As one of the first philanthropic foundations in the U.S., and wholly dedicated to the advancement of science and technology, it was chartered "to make inventions and patent rights more available and effective in the Schaefer useful arts and manufactures," and to use its earnings 'to provide means for scientific research and experimentation/' Today, Tucson-based Research Corporation has an endowment of about $170 million and awards between 2 0 0 and 300 grants per year, worth a combined $5 million to $7 million. 'We're not an extremely large organization in terms of our endowment," says John P. Schaefer, Research Corporation's president. "Because we're more restricted in resources, we have tried to be smarter in how we disperse those and have targeted areas where we feel we can make a difference." The foundation funds research only in chemistry, physics, and astronomy. The organization has several different award programs, Schaefer explains. Some target young researchers in the first three to four years of their academic careers. The organization also supports faculty at many undergraduate and liberal arts colleges, as well as at larger universities. Another program helps midcareer and senior scientists looking to reestablish or initiate research
programs. Its Partners in Science program, which gives high school teachers stipends to participate in university research during the summer, has just been transferred to the M. J. Murdock Charitable Trust. "We try to emphasize both the importance of teaching and research," he adds. A chemist by training, Schaefer has been with Research Corporation since 1982 and is former president of the University of Arizona, Tucson. "We also have a very active effort to go into the field and visit colleges and universities so that we realty have the flavor of the institutions as well as the individuals." Grants are made to schools in both the U.S. and Canada. Research Corporation receives close to 5 0 0 applications per year, Schaefer says, and these are reviewed externally and then evaluated by a committee
Research Corporation at a glance Headquarters: Tucson, Ariz. Founded: 1912 Endowment: $ 1 7 0 million Employees: 14 Grants awarded: $5.89 million in total to 199 U.S. and Canadian college and university faculty in departments of physics, chemistry, and astronomy Note: All figures are for 1999.
Registration Registration is US$800(corporate) or US$400 (academic) including food. To register contact: Kristina Clarke (fax: 415-502-4690; email:
[email protected]) or visit the UCSF-MDI web site for registration information and upcoming meetings: http://mdi.ucsf.edu. Conference fees are waived for Corporate Scholars Program members.
18 AUGUST 14, 2000 C&EN
it holds, was $48.1 million, up 174% from the previous year. 'This business is highly cyclical, and it's very difficult to have steady growth in revenue," Munsinger says. "RCT really is investing for the long term, making very early investments that aren't going to pay off, if in fact they do pay off, for several years." However, RCT considers its overall financial stability as one of its strengths as a third-party technology manager. It has reported a net gain in each of the past six years. Another strength, Munsinger believes, is RCT's willingness to take on risk to advance discoveries and make
them suitable for commercialization. However, it does not have in-house R&D capabilities and uses contractors, often at the university where a technology originated, when further development work is needed. RCT refers to this focus on finding embryonic or earlystage technologies and moving them through needed development as "venture gap." The gap is a result of venture-capital investors or larger companies wanting to take on less risk and invest in or license more developed technologies. 'They are willing to pay more for that, where they have lower risk in making
twice per year. "I think we've b e e n able to identify the best and the brightest," he notes. The foundation's programs have aided about 1 5 , 0 0 0 scientists, nearly 3 0 of whom have won Nobel Prizes. Among notable scientists who have received grants are Ernest O. Lawrence, Robert J. Van de Graaff, Edward C. Kendall, Robert B. Woodward, Robert H. Goddard, and Edward M. Purcell. S c i e n t i s t s a l s o have c o n t r i b u t e d rights to important inventions to help fund R e s e a r c h Corporation grants. These include the synthesis of vitamin B - l , contributed by Robert R. Williams and Robert E. Waterman ( 1 9 3 5 ) ; the process for growing hybrid s e e d corn, from Donald F. J o n e s and Paul C. Mangelsdorf ( 1 9 4 9 ) ; the first antifungal antibiotic, donated by Elizabeth Hazen and Rachel Brown ( 1 9 5 1 ) ; and t h e m a s e r - l a s e r c o n c e p t , given by Charles H. Townes ( 1 9 5 1 ) . Although Research Corporation was established with CottrelFs patent rights, it had to first build a business to design and install precipitators. Its first 2 0 years were spent creating this business, which was later sold to establish a more conventional endowment. Although its grants primarily support research and training in the physical sciences, it d o e s encourage efforts that further the development and application of useful discoveries. However, Research Corporation's original charter—which for many years m a n i f e s t e d a program to evaluate, patent, and license university-based discoveries—has spawned another organization. In 1 9 8 7 , Research Corporation Technologies (RCT) was created a s an independent entity to handle the technology transfer efforts in a manner consistent with federal tax law. Research Corporation is still allowed to hold a program-related investment in RCT, which is responsive to the foundation's original technology transfer mission.
Fullerene International, to commercialize the materials in Asia. MER has been a U.S.-based developer and producer of fullerenes and nanotubes for several years. The new company will have a manufacturing facility in Japan through subcontractor Honjo Chemical and will collaborate with other Japanese companies for fullerene applications. RCT also has founded or supported early-stage biomedical companies such as Aeson Therapeutics, Sertoli Technologies, MetaProbe, Therapeutic Human Polyclonals, and NP Photonics. The company evaluates a large number of discoveries, inventions, and technologies each year. "The more ideas you see, the better off you are and the better decisions you can make," Munsinger believes, "because when you see so many opportunities, you'll know what's working and what isn't." To help it in its search and selection processes, the company has set up alliances with organizations around the world. In the U.S., it has two regional affiliates, BioVentures West, created in November 1997 in California, and RCT
thought our capabilities were and our ability to work to a little tighter focus," Munsinger says. "It also was representative of what we thought the opportunities were. So it was a match of our perception of the opportunities and our perception of our capabilities." RCT is continuing a major initiative in optics and photonics. Since 1990, RCT also has managed the commercialization of fullerene production technology, based on work by Donald R. Huffman at the University of Arizona and Wolfgang Kràtschmer at the Max Planck Institute for Nuclear Physics in Heidelberg, Germany. RCT has filed for patent protection for the C60 and C70 forms and general techniques for their production. Composition of matter and production process patents have been issued in Australia, Japan, Europe, and South Korea, and applications are pending in the U.S. Just last month, RCT announced that it was joining with licensing partner Materials & Electrochemical Research Corp. (MER) of Tucson and Japan's Mitsubishi Corp. to create a joint venture,
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their investment," Munsinger comments. "One of the changes in the environment that we have addressed, and I think others who deal with universitybased inventions have had to address, is having to take technologies through a development process before we can effectively attract partners to carry on development and eventually produce and sell a product" This is especially true in pharmaceutical, biotechnology, and biomedical areas, where RCT has recently concentrated more of its efforts. Putting greater emphasis on life sciences was "a business decision based on what we
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BioVentures NE, formed in March 1999 and based in Concord, Mass. BioVentures NE has committed $15 million to target early-stage life sciences discoveries in the region. To expand into Canada, RCT partnered with Royal Bank Ventures, a subsidiary of Royal Bank Financial Group, to create Milestone Medica, headquartered in Toronto, in February 1998. The venture-development firm focuses on early-stage biomedical discoveries from Canadian universities and research cen-
ters. In June, Milestone Medica, University Medical Discoveries Inc., and the University of British Columbia helped fund UBC spin-off Neuro Therapeutics' program for initial commercial development and preclinical studies of a nerve regeneration technology. Overseas, RCT created BioVentures Australia in March 1999 as a joint venture with venture-capital firm Start-up Australia. RCT initially allocated up to nearly $6 million to the venture. This year, RCT formed a cooperative venture
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in Ireland with Cambridge-based Emerging Technology Services. Together, they formed a more than $5 million venture called Cambridge Research BioVentures, based in Dublin. In addition to finding technologies, these worldwide ventures will seek to move promising innovations closer to commercialization either by supporting further development, providing management assistance, or creating new start-ups. "Commercialization is obviously the goal," Munsinger explains. "It's important to very carefully monitor the development process and assess whether or not milestones that have been designated have indeed been met. And if not, why not? One of the most important things in this business is to know when to stop—I suppose that is always the case when you are developing products at an early stage." RCT has had good overall success with the choices it has made, Munsinger says. 'The game certainly isn't over in any of the cases, and we can strike out on probably any one of them yet," he admits. "But we've got a talented group of people, and we look at a lot of opportunities. We try to be smart about the ones that we move forward with, those in which we invest, and thus far we have a reasonable batting average." RCT has its competitors, but it's hard to find ones with revenues that have been as consistently high or stable. A new breed is emerging on the Internet (C&EN, July 10, page 19). Some of the new dot-coms, such as the Patent & License Exchange and Yet2.com, bring together industry subscribers. Others— such as TechEx, with a biomedical emphasis; University Ventures Inc., which works with university discoveries; or Technology Ventures, serving government labs—are trying to bring together sellers and buyers of technology. ChemicalPartners, which works across many areas and with many different parties, will provide technology development and business management for commercialization as well. Munsinger, however, sees the job as much more than matching up potential interests and brokering deals, especially when trying to bridge the venture gap. "Intellectual property is a long way from being a commodity," Munsinger points out. "Each discovery is a little bit different and requires a good deal of work and interaction to ascertain its valued
