1. Commercialization of University Intellectual Property & Biotechnology
Jerry Thursby
Professor of Management
Marie Thursby

2. Incentive Issues in Commercialization of University IP
Majority of inventions embryonic
Risky investment in development
Technical and market uncertainty
Need for licensee to appropriate returns from investment
Need for faculty cooperation on technical issues
Tacit knowledge
Moral hazard issue—how to get cooperation
Bayh-Dole Provisions
Exclusive licenses of federally funded inventions
Royalties must be shared with inventor
University must file for patents
March-in rights of federal government

3. Incentive & Development Issues
Exclusive contracts address appropriability
But exclusivity has risk of shelving by licensee
Bayh-Dole march-in—never exercised
Contracts with annual fees & milestones can address
Contracts with milestone payments and output royalties address moral hazard
Faculty may prefer research to development
Shared royalties, sponsored research, consulting
Troublesome issues
Multiple objectives within universities
Lengthy negotiation of contracts—particularly sponsored research
Another issue is lengthy development
Particularly in health & biotechnology
Example—Cures Acceleration Network

4. University Inventions Generally in an Early Stage
University inventions at the time of a license are generally at a very early stage of development (embryonic).
Survey Percent
Stage
University
Business
Proof of concept (no prototype) 45 38
Prototype (only lab scale) 37 36
Preclinical stage 26 15
Clinical stage 10 5
Manufacturing feasibility known 9
Ready for practical or commercial use 12 7
Source: Thursby & Thursby surveys, 1996 & 1998

5. Early Stage Inventions
High failure rate
72% failure rate for “proof of concept” and “lab scale prototype”
43% failure rate for “ready for commercialization”
Percent
Reason
46.5
Failure of the technology
26.3
Lag time to market too long
17.6
Failure of the inventor to help
12.6
Technology would infringe on others IP
11.1
Other
Source: Thursby & Thursby industry survey, 1998

6. STAGE OF DEVELOPMENT & INVENTOR EFFORT (Business Survey)
Percent Faculty Involvement
Proof of Concept
Lab Prototype
Manufacturing Feasibility Known
Ready for Use
Why faculty involvement?

7. When faculty needed for further development, what is the reason?
Percent
Faculty have specialized knowledge
66.9
faculty development cheaper than in-house
16.7
Time constraints on company research staff
27.5
Company lab specializes in late stage development
14.3
Establish working relationship for future technologies
22.7

8. Different Stakeholders and Multiple Objectives
Measures of Licensing Success: % of respondents indicated “extremely important”
TTO
Faculty
Administration
Royalties/license fees generated
70.5
41.0
69.4
Sponsored research funds
34.4
75.4
48.4
Number of licenses/options signed
49.2
11.5
24.2
Number of patents awarded
16.4
16.7
14.5
Number of inventions commercialized
60.7
36.1
32.8
Lengthy negotiations a problem--TTOs arguing for royalties over unlikely event
of major commercialization success on individual license
Some firms only sponsoring research under umbrella agreements
Some universities introducing express license

9. This portion of talk
deals with the technical and market uncertainty faced by biotechnology firms that have licensed university IP and the extreme difficulty in anticipating outcomes.

10. Pharmaceutical Firms Rely on External Technologies
Overall, 60% of drug approvals were dependent upon external technologies/patents.
Source: Ceccagnoli, Graham, Higgins, Lee (2010)

11. Introduction
Almost all drugs with biotechnology origins come from university research.
These findings demonstrate the critical importance placed on the supply of technologies through the earlier stages of the external research value chain.
Our focus is on this flow of technologies from universities to biotechs to pharmaceuticals with an emphasis on the underlying characteristics of these inventions.
Universities
Biotechnology
Pharmaceuticals

12. Flow of Technology: Determination of ‘Success’
~ 3.34 years
835 unique patents
357 licenses
University
232 unique patents
100 licenses
Biotechnology
15 approved products identified in ReCap IP and FDA Orange Book ($16.5B sales through 08)
Pharmaceutical
Focus of ‘success’ is the flow of products that make it to the second license :
We are interested in the supply of potential products available to the pharmaceutical industry.
Most biotechnology firms lack the downstream assets to develop, manufacture,
distribute & market a new drug (Haeussler and Higgins, 2010)
~ 6.1 years
Data source: Deloitte ReCap,

13. Definitions
An “initial license” is a license between a university and a biotechnology firm
A “sublicense” is a license of the same technology, but it is between the biotechnology firm and a pharmaceutical firm (or another biotechnology firm)
The sublicense takes place after scientific development by the biotechnology firm

14. Paths can be straight forward
Emory University
Patent: (priority Oct 1992)
License: Jan. 1995
Stage: ???
Disease: Cancer
AtheroGenics
License: Oct. 1999
Stage: Phase II
Disease: Cardiovascular
Schering-Plough

15. Or paths can be more complex
Stanford
Rigel
Janssen
Pfizer
Novartis
Cell Genesys
12/1998
Discovery
Cancer
1/1999
Discovery
Allergic, Respiratory
5/1999
Discovery
Autoimmune/Infl.,
Transplantation
Patent:
License: 10/1996
Priority: 1/1996
Stage: Discovery
Disease: Other/Misc.
9/1999
Discovery
Cancer

16. Or Paths Can Be Even More Complex
MIT
Integra Life Science
- 1993
- Discovery
- Dermatologic
Adv. Tissue Science
- 1992
- Lead Molecule
- Dermatologic
Reprogenesis
- 1996
- Lead Molecule
- Genitourinary
- Gynecologic
- Transplantation
 Priority:
Multiple inventors, not all inventors on each patent

17. Or Paths Can Be Even More Complex
Smith & Nephew
- 1996
- Phase III
- Endo. & Metabolic
- Dermatologic
MIT
Adv. Tissue Science
- 1992
- Lead Molecule
- Dermatologic
Medtronic
- 2001
- Lead Molecule
- Cardio./CNS
- Endo. & Metabolic
 Priority:
Multiple inventors, not all inventors on each patent

18. Or Paths Can Be Even More Complex
MIT
Integra Life Science
- 1993
- Discovery
- Dermatologic
Ethicon
- 1999
- Distribution
- Dermatologic
Reprogenesis
- 1996
- Lead Molecule
- Genitourinary
- Gynecologic
- Transplantation
 Priority:
Multiple inventors, not all inventors on each patent

19. Stage of Development Patent/License Pairs Pairs as % of
Initial License
Sublicense
Total
Initial Licenses
Sublicenses
Discovery
283
112
395
28.4%
27.7%
Lead Molecule
368 54
422
36.9%
13.3%
Preclinical 45 52 97
4.5%
12.8%
Phase I 15 4 19
1.5%
1.0%
Phase II 39 29 68
3.9%
7.2%
Phase III 9 20
0.9%
4.9%
BLA/NDA filed or Approved 8 12
0.8%
3.0%
BLANK
158 75
233
15.8%
18.5%
Formulation 72 47
119
11.6%
997
405
1402
100.0%

20. Patents Found in Both Initial and Sublicense
Initial License Stage
Sublicense Stage
Disc.
Lead Mole.
Preclin.
Phase I&II
Form.
BLANK
Total
Discovery 77 24 1 4
106
Lead Molecule 9 36 7 2 54
Preclinical 37 3 5 51
Phase I
PhaseII 12 8 33
Phase III 13 16
BLA/NDA Filed or Approved 6
Formulation 49 25 10 30 70
131
137 18 59 45
395

21. Disease Category Initial License Sublicense Total Cancer 235 85 320
Central Nervous System
154 66
220
Cardiovascular
126 64
190
Infectious
140 50
Endocrinological & Metabolic 22 87
109
Dermatologic 54 42 96
Autoimmune/Inflammatory 26 76
Hematologic 46 7 53
Renal 12 33 45
Respiratory 19 24 43
Psychiatric 15 41
Transplantation 32 39
Bone Disease 16 28
Ophthalmic 4
Dental/Oral 17 21

22. If the initial license indicates central nervous system, what diseases are in in the sublicense?
Initial License Disease(s)
Sublicense Disease(s)
CNS, Cardio
CNS
CNS, Psychiatric
CNS, Dermatologic
Total 7
CNS, Cardio, Endoc & Metab, Renal
210
CNS, Psychiatric, Respiratory 18
Endoc & Metab 42
Dermatologic, Other 12
Autoimmune/ Inflammatory 2
Other
Psychiatric
266 4
295

23. If the sublicense indicates central nervous system, what diseases are in in the initial license?
Initial License Disease(s)
Sublicense Disease(s)
CNS
CNS, Cardio
CNS, Dermatol
BLANK
Psychiatric
Cancer
Dermatol, Renal
Gastroint
Total 7 24 2 33
CNS, Cardio, Endocrin & Metab, Renal
210
CNS, Cardio, Endocrin & Metab, Other 54
CNS, Cancer 18
CNS, Psychiatric, Respiratory
CNS, Psychiatric 16
CNS, Cardio, Psychiatric 6
CNS, Autoimmune/ Inflammatory 42
357

24. Initial License Disease(s)
If the initial license indicates cancer, what diseases are in the sublicense?
Initial License Disease(s)
Sublicense Disease(s)
Cancer
Cancer, Infectious
Total 38 8 46
Cancer, CNS 18
Cancer, Autoim/Inflam, Endocrin & Metab, Transplantation 5
Ophthalmic 2
Transplantation 1
Cardiovascular
Infectious 65 10 75

25. If the sublicense indicates cancer, what diseases are in the initial license?
Initial License Disease(s)
Sublicense Disease(s)
Cancer
Cancer, Infect.
BLANK
Auto/ Infl, Infect.
Auto/Infl
Hema.
Infect.
Endocrin & Metab
Other
Total 38 8 3 2 53
Cancer, Infectious 10 20
Cancer, Central Nervous System 18
Cancer, Cardiovascular, Auto/Infl, Endocrin & Metab
Cancer, Cardiovascular, Auto/Infl 9
Cancer, Auto/Infl, Endocrin & Metab, Transplantation 5
Cancer, Cardiovascular, Infectious 61 19
118

26. In Summary: University Biotechnology IP
Process slow even after leaving university
3.3 years from initial to sublicense (IF sublicensed)
Tremendous uncertainty even after biotech development
80% still preclinical or earlier
Current data consistent with very basic university research in biotechnology
Very common for the disease indication to change between the initial license (from the university) to the sublicense (biotech to pharma)

27. A Word of Caution
Our purpose is exploratory rather than normative -- we provide neither causal modeling nor policy prescriptions.
Our analysis shows that the process of discovery to market is quite complex—the process from universities to biotechnology to market is not simple or quick.
As we have argued elsewhere, there is a strong cautionary message:
Taking too simplistic a view of the interface between fundamental scientific discovery in universities and the marketplace can be quite misleading (Thursby and Thursby, 2010).