In our series of articles and research notes regarding the longevity industry Michael Corcoran, Jamie Foster and James Lawford Davies, partners in our life sciences group, discuss the importance of universities commercialising intellectual property and fostering innovation.
In the laboratories and lecture halls of the UK’s world-leading medical research universities, some of the brightest minds are collaborating to create new treatments to fight diseases associated with ageing. The past decade has seen a rapid increase in the number of ‘longevity’ focused companies, which have been set up with the goal of finding ways for people to live longer, healthier lives – whether by slowing, stopping or potentially reversing the ageing process.
While the UK has a strong track record of funding world-class research (with some contribution from the EU), it has been less good at commercialising the intellectual property that comes out of this work.
In this second of a series of articles regarding longevity we discuss how the commercialisation of intellectual property (IP) created in universities can foster innovation in the longevity space.
The power of intellectual property
For any life sciences company, particularly those at an early stage, the potential of the business and its ability to raise capital and develop drugs and technologies lies largely with its portfolio of IP and its capacity to protect it. Biotechnology and drug development companies generally invest a higher proportion of their revenues in research and development (R&D) (in the range of 40 – 50%) than start-ups in other sectors would ordinarily. The research-intensive nature of these companies means that their most important assets are the results of their research, which is both expensive and time consuming to undertake. The prime threat to life sciences and biotech companies is that their ideas may be reverse engineered and imitated with relative ease or, worse still, that their work is already being advanced by other groups (independently), or that competing IP is available or at a more advanced stage of development – all of which have the potential to render the R&D investment meaningless (or at the very least less valuable than hoped). If it is less valuable, the potential to fund continued research and attract the best academics and research partners is reduced.
It is important that longevity companies protect their IP – meaning the ideas, developments and inventions that are generated from their research – to reduce the risk of IP being copied or stolen and to ensure it can be commercialised. There are a variety of different ways of protecting IP, ranging from confidentiality agreements to patents and trademarks. A robust approach to IP will give companies the power to raise barriers of entry to competitors and enable the high profit margins that produce high company valuations. The security of having IP ownership also spurs innovative activity by increasing the financial returns on ideas and innovation. Developing an IP strategy from the outset is essential.
Universities in the UK commercialising their intellectual property
In the last 30 years there has been a trend of inventions originating in UK universities, but with capital for development and subsequent commercialisation being sourced in the US. For example, Humira, a rheumatoid arthritis drug developed in the UK but funded and commercialised in the US, is now the world’s best-selling drug and has annual sales for AbbVie of $13 billion.
More recently, however, leading UK universities have started to follow the model adopted in the US. Where previously universities sought to develop IP internally, the university is increasingly a partner in a spin-out SPV (a ‘special purpose vehicle’), together with the key founders and academics. By setting up the spin-out company – often with commercial licences for relevant IP granted by the university to the company – the university and academic founders together set up a clean single-asset drug development company that can approach investors and/or research funding groups, to help advance their project. Seed capital for the spin-off may come from the university itself (which will also support the endeavour with lab space, PhD students and other forms of soft support), from university-associated venture funds, from regional or national or disease specific development funds or charities, or from private organisations and investors (including institutional investors who are increasingly looking to invest in the best early-stage opportunities).
Imperial College London has been at the forefront of this new trend, 20 years ago setting up Imperial Innovations, a fund that provides management expertise and long-term capital to budding university start-ups. Twenty years later, and more of the UK’s leading universities are commercialising their IP. The University of Oxford has set up Oxford Sciences Innovation (OSI), a £300 million fund to invest in IP from the university. Similarly, University College London’s UCL Technology Fund is a £50 million fund set up to invest in its own IP. The top UK universities are also collaborating in this regard: the 6U is a group of universities (Cambridge, Edinburgh, Imperial, Manchester, Oxford and UCL) that meet regularly to exchange strategies and best practices for commercialising their research. Moreover, for London-based universities there is the challenge and opportunity of maximising their geographical USP – access to the City of London for finance, something the leading R&D centres globally lack.
Governments around the world are also showing significant interest in how to drive innovation from universities for economic benefit. The UK government’s Industrial Strategy identified universities as key drivers of innovation. David Sweeney, Research England’s executive chair, stated that the government wishes to build a more R&D intensive economy, adding that commercialisation is a key driver towards the government’s 2.4% R&D target.
Attracting and retaining talent
Universities face a perpetual battle to secure the best academic talent with the best projects. Part of the challenge is implementing a clear pathway to commercialise IP. Those universities that can show an effective, well-trodden path to commercialisation are more attractive to researchers and academics. As a minimum, universities must have an institutional IP policy framework and an innovations technology transfer office that can facilitate the commercialisation of the IP generated by their researchers and academics.
A number of UK universities have come under criticism for the extent of ownership they take in the spin-offs formed by their researchers. In the US, it is customary in universities such as MIT or Stanford for the university to take a relatively small equity stake (around 5 – 10%) in the spin-off company, supported by a licence that pays the university for future milestones or commercialisation of the IP. Universities in the UK take a much larger proportion of equity by comparison. For example, the University of Oxford typically takes a 50% equity stake, plus IP royalties.
Cambridge Enterprise (‘CE’), the commercialisation arm of the University of Cambridge, has made efforts to give its researchers more control over the spin-offs they form. CE decides the terms of the IP on a case-by-case basis between the research academics and the research office. CE owns the unencumbered registrable IP, but gives academics the power to opt out and take personal assignment of the IP should they wish. It is clear that universities are under growing pressure to offer better deals to their academics to start new companies. Those universities that believe the IP is ‘entirely or largely theirs’ will lose the battle of attracting the best academic talent.
Universities should also ensure they have the right entrepreneurial infrastructure to promote the commercialisation of IP. We have seen a trend of leading universities creating physical spaces where research entrepreneurs can co-habit and collaborate. Imperial College’s White City innovation campus is home to Europe’s largest bio-incubator, co-working spaces and is a co-location for major technology and science-based businesses. Similarly, the University of Oxford opened the Oxford BioEscalator in June 2019, which is an incubator for medical science companies located on the university’s medical research campus. These scale-up incubators will attract small and growing longevity companies who will benefit from working alongside other researchers in an entrepreneurial environment.
Successful commercialisation stories
EGenesis, a biotech spin-off led by academics at the University of Alabama in the US and St Vincent’s Hospital in Melbourne, successfully raised $100 million in a recent funding round led by Fresenius Medical Care Ventures. The company aims to be a leader in xenotransplants: the transfer of animal organs into humans.
Closer to home, Hill Dickinson continues to advise iOx Therapeutics, a spin-off company from the University of Oxford established as a joint venture with SalvaRx Ltd. to commercialise discoveries made as part of a collaboration between Oxford and the Ludwig Institute for Cancer Research. iOx intends to develop and commercialise multiple synthetic lipid compounds. Another University of Oxford spin-off company is Ultromics, which was founded in May 2017 at the University of Oxford by Ross Upton and Professor Paul Leeson, consultant cardiologist and head of the Oxford Cardiovascular Research Facility, to develop the world’s ﬁrst outcomes-driven, AI-based ultrasonic diagnostic support solution for coronary artery disease
Apterna is an example of a transatlantic collaborative university spin-off company in the longevity space. Founded by professors John Rossi and Nagy Habib (based at Research Institute of City of Hope and Imperial College London respectively), Apterna aims to develop an immunological treatment for all types of advanced metastatic cancer and in particular pancreatic cancer, Hill Dickinson is instructed by Apterna on its seed round financing. Professor Habib also founded EMcision Limited, a spinout company that created the HabibTM EndoHPB probe, a novel endoscopic bipolar radiofrequency device, which coagulates tissue in the gastrointestinal (GI) tract. The Habib EndoHPB probe is used by physicians in the treatment and palliative care of patients living with pancreaticobiliary cancers. Boston Scientific acquired EMcision in March 2018.
Hill Dickinson: longevity, IP and the law
The Hill Dickinson life sciences team provides expert practical, commercial legal advice to clients at all stages of development, from start-up to established multi-national. We have experience supporting academics and universities from an idea in a lab, to helping incorporate the spin-off company, raising capital from investors, protecting and licensing intellectual property, signing strategic partnerships and, ultimately, commercialising life-changing treatments and technologies. We also help clients navigate a legal landscape that is continuously evolving in response to innovation as well as societal, regulatory and ethical challenges. Our integrated team provides high quality, trusted advice to some of the world’s leading life sciences companies.
Universities or academics that wish to speak to Hill Dickinson’s life sciences team regarding options for commercialising IP or establishing a spin-off company to fund further research and development should contact Jamie Foster or James Lawford Davies in the first instance. Calls and/or emails are confidential and are on a no-fee basis for preliminary advice.