The Fruits of University Research

When universities license discoveries made by scientists to companies for commercialization, the whims of the marketplace determine the results. As with anything else in business, the odds of scoring a major financial hit are slight, but the payoff can be exceedingly large. This is especially true for the life sciences, where discoveries and patents in medicine and biology continue to produce the lion's share of revenues for universities and research institutions. Life science patents also contributed the most to overall research strength at US universities last year, outpacing discoveries in information technology and other fields. The latest survey from the Association of University Technology Managers (AUTM) 1 reveals that US and Canadian universities, teaching hospitals, and research institutions generated nearly $1.1 billion (US) in royalties and fees from discoveries licensed to companies in fiscal year (FY) 2001, which ended June 30, 2001 (the most recent AUTM data available). The top 10 income-generating universities collectively took in nearly $511 million. Most of this revenue was derived from life sciences-related patents. MONEY LEADERS Columbia University led the pack in revenue generation at $129.9 million, with about 90% coming from pharmaceutical patents, says spokesman Joe Kennedy. But Columbia's glory days appear to be threatened, as revenue streams are expected to dry up with the expiration of the Axel patents, five pioneering discoveries made by researchers Richard Axel and Saul Silverstein. Those patents cover the cotransformation process, a method for the recombinant DNA synthesis of complex proteins in mammalian cells. 2 The process has been licensed by 28 companies to make new pharmaceuticals and has brought the university more than $400 million since 1983. The patents began to expire in 2001, but the university has been seeking ways to extend their lives. Massachusetts Institute of Technology (MIT), with $74 million in revenue, is in second place "somewhat anomalously," says Technology Licensing Office director Lita Nelson. MIT collected $40 million to $50 million of that money from cashing-in equity held from two earlier initial public offerings (IPOs) of MIT spin-off companies: Praecis Pharmaceuticals, a biotech company developing therapies for prostate cancer and Alzheimer disease, and Akamai Technologies, an Internet services company. "It was in the era of irrational exuberance, at a time when IPO valuations were very high," Nelson says. Across the board, the 143 US universities responding to the AUTM survey each averaged $5.8 million in licensing revenue. European universities, which have only recently started to license their discoveries to businesses, typically average far less. The University of Cambridge, for instance, whose tech transfer organization is one of Europe's most active, took in only £1.69 million for the fiscal year ending July 2002. Many European universities find it difficult to even determine their tech transfer revenues, says Benedicte Callan, an economist with the Technology and Innovation Policy Division of the Organization for Economic Cooperation and Development in Paris. "Tracking isn't done on a regular, standardized basis at all," she says. The University of Sherbrooke was Canada's top-grossing institution in FY 2001, with nearly $10.6 million (US) in royalties. McGill University and its hospital and research centers took in $6.4 million, followed by the University of British Columbia at $5.5 million. Despite its relative magnitude, US and Canadian licensing revenue represents only 3.4% of the total sponsored-research expenditures at these institutions. Moreover, licensing income fell from $1.26 billion in FY 2000 to $1.07 billion in FY 2001. Unique events skew the results, however. In FY 2000, the University of California system (UC) had revenues of $251.5 million. But $200 million of that was a one-time payment from Genentech to settle a longstanding patent infringement lawsuit brought by the university over genetically engineered human growth hormone. That payment alone represents the amount of the decline from 2000 to 2001. Other AUTM survey results show that UC dropped to third place with $66.7 million, following Columbia and MIT. Winnings from major lawsuits "don't come very often and they're pretty painful," says Alan Bennett, executive director of UC's Office of Research Administration. About three-fourths of UC's current royalties are from the life sciences, Bennett says. The single largest license is for a hepatitis B vaccine ($24 million), followed by a license for a medical device to treat intracranial aneurysms ($6 million). This device, called the Guglielmi Detachable Coil, was developed at UCLA and licensed to Boston Scientific's Target division. John Fraser, director of technology transfer at fourth-place Florida State University (FSU), says his school's $62.1 million in FY 2001 was almost entirely based on royalties from Bristol-Myers Squibb for exclusive use of a patented process to manufacture the anticancer drug Taxol. "For us this is a major blockbuster. It's just enormous," Fraser says. "It swamps anything else we've done." Fifth-place Stanford University generated $38.8 million in royalties, with about 47% of the proceeds coming from discoveries in the School of Medicine, says Katharine Ku, director of the Office of Technology Licensing. Royalties from the seminal Cohen-Boyer patents (named after Stanford biologist Stanley N. Cohen and UC biologist Herbert W. Boyer) have been dropping for the two schools since the patents expired in 1997. Those patents broadly covered the basics of recombinant DNA technology. Loss of Cohen-Boyer represents a drop of about $12 million annually to each school. Gone from 2001's top-10 life sciences technology list are Columbia University, the University of Pennsylvania, and Duke University. They were replaced in 2002 by the University of Michigan, University of Wisconsin, and Pennsylvania State University. Despite the largesse collected by these schools, licensing is not primarily a financial game. "If this were a business," says MIT's Nelson, "the smartest strategy would be to drop out of it. We're in it to get the technology developed and to make a little money on the side." Ted Agres (tedagres@lycos.com) is a freelance writer in Washington, DC. References 1. L. Pressman, "AUTM Licensing Survey: FY 2001," Association of University Technology Managers, Northbrook, Ill., May 2003. 2. R. Axel et al., "Processes for inserting DNA into eucaryotic cells and for producing proteinaceous materials," US patent 4,399,216, issued August 16, 1983. BUILDING UNIVERSITY TECHNICAL STRENGTH Life sciences contribute the lion's share to overall university technology strength. In 2002, life sciences contributed 44% to the technological strength of the leading US universities, compared to a 35% contribution from information technology and a 21% contribution from all other technology categories, according to an analysis of data (see Life Sciences, Top Patent Garners, 83K) provided to The Scientist by CHI Research, a Haddon Heights, NJ, research and consulting company. This is increased from 2001, when the life sciences contributed 42%, IT contributed 35%, and all others supplied 23%. To obtain the measure of technological strength, CHI Research counted the number of US patents awarded to the universities (exclusive of design and special-case inventions). It multiplied this number by a "current impact index"--a measure of how frequently an institution's patents for the previous five years are cited by patents in the current year, relative to all US patents. By this measure, a university with an average number of citations has an impact value of 1.0. Weighing a university's patent portfolio against its impact index results in a measure of relative technology strength--a matter of quantity times quality. Continuing to head the life sciences tech strength list in 2002 was the University of California system, whose nine major campuses received 271 life sciences patents, overwhelming other universities largely because of the sheer number of scientists. MIT received 51 life sciences patents last year. But, those life sciences patents had an above-average impact index of 1.43, meaning they were cited 43% more often than would be expected, given the size and age of its portfolio. As a result, MIT's life sciences tech strength rose to 73, ranking it in third place. California Institute of Technology had the largest impact index among the top-10, at 1.51. The University of Washington had a fair number of key patents; its top invention, relating to DNA sequencing, was cited 49 times. 1 Pennsylvania State University had only four key patents that were cited more than 10 times each, the top two of which are related to pulmonary drug delivery. 1. M.S. Horwitz, "Method for producing novel DNA sequences with biological activity," US patent 5,824,469, issued Oct. 20, 1998. Please indicate on a 1 - 5 scale how strongly you would recommend this article to your colleagues? Not recommended 1 2 3 4 5 Highly recommended Please register your vote

The Fruits of University Research

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Ted Agres

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July 2003

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