Good practise study of sustainable funding models for Technology Transfer Offices

Therefore, creating a sustainable funding model is of importance when establishing a TTO

Sustainable funding models are important due to three challenges typical for valorization of academic research

It takes time to demonstrate the success of a TTO, regardless of if it is private or public, or if the main focus is on commercialization or social benefits

(1) Academic research is early-stage and rarely close to market

(2) Time and experience has shown to be a Key Success Factor for TTOs

(3) There is a lag time between undertakings and performance factors such as patents filed, license revenues and no of new start-ups

› To illustrate different sustainable funding models a case study of eight tech transfer actors and their funding models has been conducted. The actors differs in e.g. attitudes towards tech transfer, association with academic institutions, strategies and offered services.

The analysis is based on case studies of eight TTOs in Europe and US using different funding models

› Additional notes:

› Presented data, if not other stated, is for 2011 › Universities tend to define metrics such as e.g. TTO performance factors, faulty staff and university

research budget in different ways. Hence, this data shall be used carefully for comparing universities against each other, but rather be seen as indications for size and activity for the university per se

› Currency converted to € with rates as of September 2012

Regional actor formed by public private partnership

Central service unit for life science TT acting transregional with public funding

Well established with a mix of private and public actors

Young and strongly associated with the University and the region

Listed since 2006 with a strong focus on commercialization

Traditional actor also offering TTO consultancy services to others

Old university that have focused on commercialization since the 80s

The first TTO in US with large emphasis on social responsibility

PVA-MV

Ascenion

The Innovation System at Karolinska Institutet

The Innovation System at University of Gothenburg

Imperial Innovations Group PLC, Imperial College London

ISIS Innovation Ltd, Oxford University

Columbia Technology Ventures, Columbia University

Office of Technology Licensing, Stanford University

GER

MA

NY

SWED

EN

USA

U

K

› IP is owned by the researchers, not universities, due to the “Professor's privilege”

› Researchers and academics working in colleges and universities automatically own the intellectual property right to their inventions - an exemption from the Swedish Act 345 on Rights to Employees´ inventions. Hence, in the Swedish case studies the actors valorizing academic research are referred to as being part of an innovation systems instead of technology transfer offices.

› Two major governmental policy decisions taken during the last decade aiming to structure and finance valorization of research

› In 1994 the Swedish government allowed the creation of the Swedish universities first holding companies, e.g. at Uppsala University (UUAB), the University of Gothenburg (GU Holding) and Karolinska Institutet (KI Holding).

› The Swedish Parliament passed a resolution to establish eight innovation offices in Sweden in 2009, in line with Research Bill 2008/09:50.

Swedish prerequisites affecting the funding models of TTOs

The Innovation System (IS) at Karolinska Institutet

University IS

IS performance factors

IO aims “to contribute towards more ideas benefitting society”

KIABs vision “is to be the first choice for Nordic Life Science researchers who wish to commercially develop research results at the earliest opportunity for the benefit of society”

KD aims “to create value for investors, patients, and researchers by developing innovations from world class science into products that can be sold or out-licensed with high returns”

Founded 1810 Faculty 3137 Research budget c. €520 million

Founded 1996 (KIAB) Staff c. 30

Financing of IS (KD not included)

Income structure (tot. c. €3.4 million)

•Innovation office (tot. c. €1.6 million) - the Ministry of Education and Research (c. 50% of

operational funding ) - Karolinska Institutet (c. 50% of operational funding ) - Project based financing, through e.g. the Swedish Agency for Economic and Regional Growth and the European Regional Development Fund (ERDF)

•Karolinska Institutet Innovations AB (tot. c. €1.8 million) - Innovationsbron (c. €o.5 million per year 2009-2011) - Guaranteed income from KD, (sales, if any, deducted) - KI/KI Holding

During 2011: No. of guidance/evaluation sessions - for ideas 157 - for industry collaboration 23 No. of accepted projects by KIAB 1 No. of license deals/IP sales by KIAB 2

No. of evaluated projects since 2003 > 1200

Karolinska Institutet Innovation Office (IO)

Evaluation and incubator for KI and non-KI ideas, start-up and licensing activities.

Informs, inspires, offers idea guidance and facilitates industry collaboration at KI.

Karolinska Development AB (KD)

Karolinska Institutet Innovations AB (KIAB)

Listed investment firm, > 30 projects in 2011. Holding company owns c. 10 %.

Ownership through Holding company

• KD has a first right of refusal deal for investments in KIAB projects

The Innovation System (IS) University of Gothenburg

University IS

IS performance factors

The Innovation Service purpose “is to strengthen the University’s competitiveness and to contribute as an element in the University’s task of participating in social development”

GU Holdings mission “is to provide funds and business competence for new companies to ensure growth of value and development of companies based on top-notch academic competence and research within University of Gothenburg”

Founded 1891 Faculty 3876 Research budget c. €350 million

Founded 1995 (Holding) Staff c. 20

Financing of IS

Income structure

• The Research and Innovation Service is funded through the University budget

• GU Holding receives it’s operational funding from the Västra Götaland county

• Both GU Holding and the Universities Research & Innovation Service receives project based funding from e.g. the Swedish Agency for Economic and Regional Growth, VINNOVA – Sweden’s innovation agency, the European Regional Development Fund

During 2011:

No. of patents granted 4 No. of investments 15

No. of new firms since 1995 > 70

(Other presented factors includes i.e. divestments, employees)

University of Gothenburg

Research & Innovation Service

Innovation service offers innovation advice and guidance within commercial law to researchers and students

Offers seed capital and business competence. Wholly owned by Uni.

GU Holding AB

• The University is also one of four owners of Sahlgrenska Science Park and receives resources from Innovation Office West

› Acknowledged academic institutions early influenced by the US Bayh-Dole model

› With highly regarded universities , UK has more than 110 Nobel Laureates second to US and their 320 Nobel Laureates with a population five time the size

› Governmental schemes promotes knowledge transfer in a broad sense

› Knowledge transfer (KT), a collective term for transferring ideas, research results and skills from research organizations to business, government and the wider community, is commonly used in UK. KT has been promoted in UK policy documents since early 90s .

› The funding program HEIF (Higher Education Innovation Fund, created in 1999) is the core mechanism for supporting KT within the English Higher Education Sector. The third round of HEIF (£164 million) , initiated 2006, has contributed to most universities are having Knowledge Transfer Offices (KTOs) today.

UK prerequisites affecting the funding models of TTOs

Further reading: Ingenious Britain (2010) Making the UK the leading high tech exporter in Europe

Isis Innovation Ltd, Oxford University

University TTO

TTO performance factors

Isis mission “is to be the leading international technology transfer organisation, to transfer technology and expertise from the University of Oxford, to deliver value to all our clients, and to maximise social and economic benefits in a commercial manner”

Founded Unknown, c.1118 Faculty 4,700 researchers Research budget c. €630 million

Founded 1987 Staff 68

Financing of TTO

Income structure (tot. c. €14 million)

•Sales Turnover (c. €10.7 million) - Technology Transfer license income (c. €6.9 million) - Oxford University Consulting Income (c. €1.3 million) - ISIS Enterprise consulting income (c. €1.9 million) - OIS membership subscription (c. €0.6 million)

• University Subvention (c. €3.1 million) - To invest in into technology transfer projects, c. €3.1 million (no. 3 payment of 5 years growth plan) - Small amount o support e.g. marketing activities

March 2011 – February 2012: No. of patents 100 filed (manages >470 app. families) No. of licenses 113 deals (manages >700 agreements) No. of new firms 8 start-ups & spin-outs/start-ups

No. of spin-outs 20 pre 2000, 63 post 2000

(Other presented factors include net return to University and consultancy engagements)

Oxford University

Isis Technology Transfer

Isis Enterprise Isis University

Consulting

Isis Innovation Ltd

Consulting for external clients

Access to academic consultancy and services from Oxford

Commercialisation of Oxford IP

• Isis Technology Transfer (1) licensing, (2) spin-outs by e.g. attracting investment and management and (3) material sales.

• “Oxford Innovation Fund” launched in 2010, receives donations

Imperial Innovations Group PLC, Imperial College London

University TTO

TTO performance factors

Imperial Innovations goal ”is to bring valuable ideas to market either by building businesses or licensing to industry”

Founded 1907 Faculty c. 3400 Research income c.€375 million

Founded 1986 at uni. 1997 as sub. Staff c. 20

Financing of TTO

Income structure (tot. c. €5.8 million)

• Licenses and IP transactions - From initial payments and IP licenses, c. €2.4 million • Services - Such as IP management consultancy fees, c. €1.5million

• Corporate finance fees - c. €1.6 million

• Dividends - c. €0.3 million

(In addition, fundraising enabling to increase the size of investments)

During 2011:

No. of patents filed 52 No. of licenses 25 No. of funded companies w. mgm teams 3

Raised from investors 2005-2011: c.€260 million Investments 2006-2010: c.€105 million

(Other presented factors includes invention disclosures, exits, net gain in portfolio)

Imperial College

Imperial Innovations Group PLC

Team 3: Investments - Portfolio management

Team 2: Ventures - Create and Incubate companies

Team 1: Technology Transfer - Assess IP, manage IPRs, advise to staff

• Imperial Innovations listed on Alternative Investment Market of the London Stock Exchange 2006

• Technology pipeline agreement (TPA) with Imperial College – acts as TTO and has right to IP emerging from research until 2020

TPA

› The worlds longest history of academic technology transfer which by tradition is focused on licensing activities

› Bayh-Dole Act adopted in 1980 created a uniform patent policy giving small businesses and non-profit organizations, including universities, the right and obligation to patent research stemming from the federal government’s research funding schemes.

› US has many best case examples of TTOs, but the models have shown hard to implement in European countries due to e.g. different prerequisites.

US prerequisites affecting the funding models of TTOs

Further reading: http://www.autm.net/Bayh_Dole_Act1.htm

Office of Technology Licensing (OTL), Stanford University

University TTO

TTO performance factors

OTLs mission “is to promote the transfer of Stanford technology for society's use and benefit while generating unrestricted income to support research and education”

Founded 1891 Faculty c. 1934 Research budget c. €800 million

Founded 1970 Staff 38 at OTL

Financing of TTO (ICO not included)

Income structure (tot. ≥ €10 million)

• OTL is financially self-supported

• 15 % of royalty revenue from licenses* - Covers operating expenses (c. €4.2 million/year) as well as patent and other legal expenses (c. €5.8 million/year) * Net royalties is then divided equally between inventor, inventor’s department and inventor’s school.

During 2011:

No. of evaluated invention disclosures 504 No. of new licenses 101 No. of firms that OTL have taken equity in 8

Gross royalty revenue* €52 million (Other presented factors include raised capital to e.g. research funds and no. of inventor checks) * From 600 technologies whereof 98% came from licenses signed several years ago

• OTL tasks: (1) Evaluation of invention disclosures, (2) Management of Stanford’s IPS portfolio and (3) Advice to faculty/students/staff

• The first TTO in America

• Emphasizes social responsible licensing - OTLs objective is to optimize the likelihood that new knowledge will be used for the public good, whether locally or globally

Stanford University

Stanford OTL-LLC

Office of Technology Licensing (OTL)

Wholly-owned by OTL, acts as licensing agent for non-profit organizations

Industrial Contracts Office (ICO)

Handles e.g. sponsored research contracts and material transfer agreements. 7 employees 2011.

Columbia Technology Ventures, Columbia University

University TTO

TTO performance factors

CTVs mission is to:

• “Facilitate the translation of academic research into practical applications, for the benefit of society on a local, national and global basis”

• “Support research, education and teaching at Columbia by generating funding for the University and facilitating partnerships with industry where appropriate”

• “Educate and serve as a resource for the Columbia community on matters relating to entrepreneurship, intellectual property, and technology commercialization”

Founded 1754 Faculty > 3500 Research finding c.€ 540 million

Founded 1982 Staff c.45

Financing of TTO

Income structure In 2007: C. €105 million in gross revenues from license Columbia Technology Ventures is known for their high licensing revenues, which historically have been possible through the patents relating to blockbuster drugs or methodologies. For example, the patents covering co-transformation – a fundamental step in the field of recombinant DNA research – based on research by Richard Axel resulting in >€600 million in earnings for the TTO before they expired.

Per year: No. of license deals 50 No. of industry sponsored agreements 100 No of faculty spin-offs 12-15 No. of managed patents since 1982 >1000 No. of managed inventions since 1982 >3500 No. of launched companies since 1982 >115

Columbia University

Columbia Technology Ventures

• Text

NB that general data fort he research budget is from 2008

Team 1: Management

Team 2: Licensing Officers

Team 3: Venture Lab -Advisory service for faculty, staff and students

Team 4: Operations staff

› National reforms around a decade ago have had significant impact on technology transfer models in Germany

› The Professors’ privilege was abolished in 2002

› As a consequence the universities were requested to form structures to handle technology transfer. As a result a fairly wide range of TTOs (PVAs) emerged as a result.

› PVAs have public funding for management and patenting. › The financing model has varied over the years combining ministries, regional funding and

contribution by the universities.

› Currently a consolidation process is on-going

› More recently, trans-regional and sectorial commercialisation structures and initiatives have emerged to complement the traditional regionally focused PVA structures.

German prerequisites affecting the funding models of TTOs

PVA-MV (Patent and Valorisation Agency - Mecklenburg-Vorpommern)

Universities TTO

TTO performance factors

PVA-MV aims to “implement an economic sustainable commercialization process in order to generate returns out of research”

Founded N/A Faculty c. 5000 Research funding N/A

Founded 2001 Staff c. 8

Financing of TTO

Income structure

• 2008- 2011, (in total c. €850k per year) - Operating costs covered 50% with funding from BMWI

and 50% from Bundensland MV, in total c. €700k/year - Patent costs also covered 50% with funding from BMWI

and 50% from Bundensland MV, in total c. €150k/year

- In addition to the c. €840k/year, PVA-MV has since 2008 increased the usage of regional, national and EU-based financial instruments to:

1) increase the access of funds not designated to operating costs or patents to e.g. use for proof-of- concept funds

2) build networks and strengthen competence by e.g. engaging in EU-projects such as Valor

Increases PVA-MVs sustainable dimension

During 2011: No. of invention disclosures 65 No. of filed patents 37 No. of license agreements 10

• PVA-MV is exclusively responsible for (1) screening, (2) patenting and (3) commercialization of research results stemming from the regional universities and research institutes in the federal region Mecklenburg-Vorpommern

University of Applied Sciences Neubrandenburg

University of Technology,

Business and Design Wismar

Research Institute for the Biology of

Farm Animals

- University of Applied Sciences

Stralsund

Fraunhofer Institute for Computer Graphics

Ernst-Moritz-Arndt-University

of Greifswald

University of Rostock

PVA-MV

Ascenion GmbH, nationwide

University TTO

TTO performance factors

The Life Science Foundation aims ”to promote, through the support of research projects, the general public in the field of science and research.”

Founded N/A Faculty N/A Research funding N/A

Founded 2001 Staff c. 25

Financing of TTO

Income structure

• In 2011 Ascenion had an income from license agreement at €15.7 million

• Of this, €0.4 was paid out to the Life Science Foundation

• Ascenion has been self-sustainable since its launch in 2001. For three years revenues commercialization (commissions and exit proceeds) have exceeded the cost of running Ascenion – profits are passed on to the Life Science Foundation to provide research funds for its members.

During 2011: No. of patents filed 57 No. of agreements, incl. licenses 70 No. of start-ups 1

New jobs 2001-2010 >400 Coached spin-offs 2001-2010 c. 30

• The Life Science Foundation is an independent public foundation founded by eight research institutes with a sole function on Life Science and especially medicine, endowment of €1 million.

• Proceeds from commercialization and other revenues generated by Ascenion are reinvested in publicly funded research

Team 4:

Life Science Foundation for the Promotion of Science and Research

Identifies and asses commercially attractive research results, negotiate agreements with industry, educate scientists, steer and support patenting processes

Exclusive technology transfer partner to:

Wholly owned sub.

Ascenion GmbH

General budget items

Operating costs (salaries, office etc)

Patent costs (applications & fees)

University subvention

License fees and revenues *

Sources of basic funding:

Temporary projects (gov./EU)

Research Contracts

Additional funding sources:

Most TTOs follows a model of generic budget items and uses a collection of potential funding sources

Funding sources

› Allocated funds for budget items and types of funding sources varies between TTOs

• The relation between the size of budgeted funds to cover operating costs and patent costs varies extremely

• High license revenues is often due to one or a few “big hits“ – e.g. Lyrica/Northwestern, Remicade/New York University and Stanford's sale of equity stakes in Google

Governmental grants and funding schemes

Dividends & Divestments

Services (mainly consulting)

Membership fees & Donations

• In general, license revenues is higher for US TTOs than European where the focus by tradition has been more on spin-outs - license revenues as % of research expenses was 1% in Europe and 3% in US in 2009

• Medical and/or engineering faculty present patent and license activity increases

*Examples of distribution of license revenues in Appendix

Newly established TTOs linked to a University without a large research budget are often in need of external funding

Age

of

TTO

University research budget

Potential to be self-sustainable

Often in need of public and/or private funding

› Support from earlier studies

• In a survey of US TTOs in 2009 Abrams et al found a very clear correlation between the size of a university’s research budget and how it’s TTO is financed; among universities with small research budgets over 60% of the TTOs were entirely funded by institution and none funded entirely by licensing income, while TTOs at universities with large research budgets had a more even distribution between being entirely funded by license income and institutions.

› Case study examples

• E.g. Office of Technology Licensing at Stanford University (US)

• E.g. Innovation System at Karolinska Institutet (Sweden)

• E.g. PVA-MV (Germany)

• In a study performed by the European Investment Fund(2009), the size and experience of a TTO, as well as the e.g. the quality of the research, was stated to be crucial fir the success of the tech transfer.

The newly established TTOs core drivers as well as its relation to the university affects its potential funding sources

Likelihood of attracting private funding and eventually being self-financed through license revenues increases

Academic Institution (E.g. university)

Private or Private

TTO Private or Public

TTO Private or Public

Subsidiary of or wholly owned by

In some way associated with one or more

Drivers implied in mission statement

Key performance factors used

Financial measures vs. Non-financial measures

E.g. patents filed, spin-outs, size of investment and divestments

E.g. number of given guidance sessions or accepted projects into incubator programs

Hard drivers vs. Soft drivers

Financial objectives e.g. generating/maximizing income or revenue,

Non-financial objectives e.g. service to faculty, translation of research results, social benefit

› Focus on commercialization measured by objectives and operating as a private actor*

› Focus on valorization, the best for

society and being strongly connected to the University

Likelihood of attracting public funding increases

* In study of US TTOs performed by Abrams et al 2009 only 11% reported that revenue maximization was their most important driver

The relationship between driver and source of TTO funding can be exemplified with three of the actors in the case study

MAIN FOCUS COMMERCIALIZATION

The Innovation Service at University of Gothenburg

• “The purpose is to strengthen the Universities competitiveness and to contribute as an element in the University’s task of participating in social development”

Columbia Technology Licensing, Columbia University (US)

• “Facilitate the translation of academic research into practical

applications, for the benefit of society on a local, national and global basis” - “Support research, education and teaching at Columbia by generating funding for the University and facilitating partnerships with industry where appropriate” - “Educate and serve as a resource for the Columbia community on matters relating to entrepreneurship, intellectual property, and technology commercialization”

MAIN FOCUS VALORIZATION

Isis Innovation Ltd, Oxford University

• Isis mission is to be the leading international technology transfer organisation, to transfer technology and expertise from the University of Oxford, to deliver value to all our clients, and to maximise social and economic benefits in a commercial manner”

• Majority of funding from the University and other public actors

• Funded with license revenues

• Around 1/4 of the funding is from the University, 3/4 from sales turnover

Summary of lessons learned

› The potential funding structure of a TTO varies foremost with its geographical location, commercialization/valorization focus, age, size, it’s relationship to the academic institution(s) it is to transfer technology from as well as that academic institution(s) S&T emphasis, age and research budget since a critical mass of inventions is needed.

› Additional factors to relate to since they have the possibility to affect the creation and maintenance of a sustainable TTO funding model

• Politicians – A regional support for the process of knowledge sharing and technology transfer gives the TTO advantages, as in Gothenburg where the county council funds the Holding company’s operational costs.

• Juridical issues & policy frameworks – especially to ensure that regulations for operations relating to any revenue sharing arrangements between academic institutions and TTOs is in order and followed

• Economical trends – times of economic downturns strikes TTOs as well as other actors

• Surrounding ecosystem – An ecosystem of commercializing actors such as investors, entrepreneurs and patent agencies and its degree of openness may contribute to sustainable funding model for a TTOs since there are entrepreneurs to take in to help grow start-ups and investors to conduct divestments to.

APPENDIX

Examples of policy’s on distribution of license revenues

Science and Technology Ventures at Columbia University (US)

PVA-MV (Germany)

The policy of distribution of future license revenues is decided upon from case to case and depend on e.g. the amount ownership in the spin-out, if any, and the amount of funding spent on IPRs such as patent protections for the license. In general, the license revenues are divided between the research behind the invention and Karolinska Institutet Innovations AB.

Karolinska Institutet Innovations AB (Sweden)

University

Revenue

100%

30%

70%

Researcher

PVA-MV

70% 30%

• Abrams et al, “How are U.S. Technology Transfer Offices Tasked and Motivated – Is It All About the Money?”,

Research Management Review Vol 17 (1), 2009

• Darcy et al ,“Financing technology transfer”, European Investment Fund Working Paper 2009/002 NB Data collected for TTOs abstracted from webpage and other information material such as annual reports

Sources for “further reading” (if not stated in slide)