Report
1. Technology Transfer: Moving the Insights of Basic Research Into the Private Sector
Behind the convergence of biotechnology and information technology, another convergence is occurring. In the words of Alvin Kwiram, Vice Provost for Research at the University of Washington, “it’s almost as complicated as the scientific one, and is the subtext of everything we do.” He was referring to the convergence of interests, between, on the one hand, institutions dedicated to performing basic research, such as universities, national laboratories, and independently funded non-profit research agencies, and, on the other hand, companies in the private sector.
The University of Washington, like many other leading American research universities, has only recently acknowledged the importance of promoting and managing such interactions. The University’s Office of Technology Transfer was formed only six years ago. Still, it pre-dates any other organization at the university with a specific mission to move science out of labs and into the commercial development process.
A similar state of affairs was described by Dr. Susanne Huttner, of the University of California, who has been charged by UC’s president to identify emerging technology-transfer opportunities. In an address to Summit participants Huttner described how commercial biotechnology had managed to progress in the face of what until recently had been resistance to technology transfer at basic research institutions like the University of California.
“We’re starting to achieve a certain level of seamlessness between the kind of work that goes on in academic institutions — which is basic research — and applied research that goes on in commercial institutions.
Over the last decade it has been the strong and aggressive companies, interacting with and depending upon knowledge-generators in universities, which have been forging the new biotechnology industry.
“Over the last decade it has been the strong and aggressive companies, interacting with and depending upon knowledge-generators in universities, which have been forging the new biotechnology industry. But we’re seeing academic and other research institutions learning to develop strategic partnerships with industry, usually structured on a one-to-one basis, between individual faculty members and individual companies, and they’re usually defined around specific research projects that can lead to well-defined intellectual property rights. This has been very important in the development of commercial biotechnology because it has enabled companies to add value — literally to create value — in the research investments that they’re making in universities.”
Huttner has observed the emergence of biotechnology both as a viable academic research field and as a commercial endeavor. California, indeed, is the birthplace of the U.S. biotech industry and continues to this day to be host to the largest collection of entrepreneurial biotech companies.
One in three U.S. biotech firms is currently headquartered within 35 miles of a UC campus; nearly one in five of these companies was founded by a UC alumnus; 85 percent of all California biotech firms employ UC alumni in key scientific positions.
One of the objectives of Huttner’s work has been to determine whether the collaboration experience in California is a legitimate basis for generalization. Such information would be of considerable utility to those seeking to energize local economies around “magnet-institutions” such as major research universities or national labs.
“Despite earlier policies that discouraged commercialization of research activities, a trend of cooperation emerged,” Huttner explains. “This makes the statistics all the more impressive: One in three U.S. biotech firms is currently headquartered within 35 miles of a UC campus; nearly one in five of these companies was founded by a UC alumnus; 85 percent of all California biotech firms employ UC alumni in key scientific positions; six of the current top-ten selling biotech drugs have roots in UC basic research.
“Several factors have been at work. One — and possibly the most important — is the natural tendency of basic research to become a wellspring of innovation. Another is the tendency of high-quality graduate and postdoctoral education programs to provide the basis for a talented and highly skilled workforce. A third is the natural emergence of scientific leadership and a vision of future possibilities when faculty members serve on the scientific advisory boards of private-sector companies. A final factor is the inevitable payoff of involving one’s medical school in programs of clinical research.”
Although the “human factor” is key, Huttner feels that the development process should not be left to serendipity. In San Diego, where a devastated economy has been recalled to life in an efflorescence of entrepreneurialism in the biotechnology and wireless telecommunications sectors, experience has provided lessons that the University has built upon. Lacking the infrastructure benefits enjoyed by start-ups in Silicon Valley, every one of the technology pioneers in San Diego has been shown to have important links with UC’s San Diego campus. A program run by Huttner called UCSD-Connect now seeks to institutionalize campus-business relationships, by piecing together a “virtual infrastructure” of business and financial services to help fledgling entrepreneurs get their ventures off the ground. Another of Huttner’s projects, the BIOSTAR program, seeks to match $40 million in university and state funding with an equal amount of industry funding to promote innovative development-stage companies, particularly those stressing interdisciplinary research.
Universities have a particular role to play in the development of entrepreneurial enterprises, and in Huttner’s view it must be differentiated from the roles played by other institutional actors.
“What you find around most of the major research institutions across the U.S. are family trees, lineages. We’ll find a few entrepreneurial people at basic research labs who are willing to work with the private sector. The influence this can have on local economies is truly dramatic. The fact is that universities have a special role to play and it must be distinguished from the role that industry plays. Industry will be more successful if we at the university continue to focus on fundamental research and graduate education, knowledge generation, and the preparation of people. Conversely, we at the university are going to be in very bad shape if we focus on applied research. There’s an old saying that it’s like eating your seed corn. The message is clearly that basic research and graduate education matter a great deal in the development of entrepreneurial industries like biotechnology.”
Industry will be more successful if we at the university continue to focus on fundamental research and graduate education, knowledge generation, and the preparation of people.
This point was underlined by George B. Rathmann, Chairman and CEO of the Seattle-based biotech company ICOS Corporation. “It would be shortsighted for universities to think of their role in technology transfer in narrow terms — as simply an opportunity to make money from licensing and royalty agreements. Experience tells us that expectations need to be toned down. We need to think of technology transfer as a two-way street, an enormous opportunity to do a lot of good for science, for the local economy, and coincidentally for the health of our universities.”
The most important economic role of the research university, according to Rathmann, is in the “magnet-effect” it produces in a local economy, as cooperation between the university and emerging businesses quickens the rate of growth, helps produce a highly skilled workforce, attracts new talent and new investments, and thus generates increasing amounts of tax revenue.
Rathmann’s experience in the pharmaceutical and biotech industries is extensive, and includes a key period in the 1980s during which he served as Chairman and CEO of Amgen during that company’s first eight years of existence. Experience has taught Rathmann, like Huttner, that the most valuable partnerships that biotechnology ventures tend to develop involve small companies and a range of public and quasi-public institutions — academic, government, and non-profit. Put another way, “I think we may be missing the most important activity of recent years if we allow our heads to be turned by the recent spate of big ‘bio-buck’ deals between small biotech companies and large pharmaceutical firms. Over the last 12 months the value of these deals has been estimated in the trade press at more than $3 billion. But this is likely to be a considerable overstatement of the value of these strategic partnerships, when all is said and done. Many of them will not survive. And more than a few will end in lawsuits.”
…relationships between emerging biotech firms and academic research departments and national labs tend to be “almost all upside and no downside.”
Although there is a temptation for emerging biotech companies to feel that they “haven’t arrived until they’ve cut a big deal with a big pharmaceutical company,” Rathmann said, “these deals are clearly fraught with a lot of risk.” In contrast, he said, relationships between emerging biotech firms and academic research departments and national labs tend to be “almost all upside and no downside.”
You simply cannot have a biotech company without proximity to and technology transfer from major academic research institutions.
No fewer than 10 of the 14 products currently in the ICOS pipeline, including all of the company’s products now in Phase-II trials, have components in them related to university technology transfers, including several from the local knowledge-generator, the University of Washington. Rathmann concludes: “You simply cannot have a biotech company without proximity to and technology transfer from major academic research institutions.”
Rathmann and Dr. David Kingsbury of Chiron Corp. jointly considered the criteria pertinent to the formation of strategic alliances and partnerships. Rathmann first suggested some basic guidelines for universities. He advised that they should consider the probability of success of any given project (most will fail) and the amount of funding it can be expected to generate. If there’s an industrial partner whose presence is more likely to increase the chances of success, that should be weighted very heavily, he added.
More generally, Rathmann advised university administrators to use the same guidelines that venture capitalists use. “The VC likes to invest on the basis of the quality and track record of management. The quality and credentials of the key corporate scientists should count for a lot. Usually there should be a strong scientist-to-scientist interaction, and very often it helps if it’s a one-on-one interaction. Often overlooked, too, is something else the VCs consider: they have a local or regional bias. When they’re nearby, they have the feeling they can accomplish a better startup than if it’s across the country. Universities need to think more along these lines.”
Kingsbury agreed with Rathmann about the importance of relationships between collaborating scientists. In Kingsbury’s view, which reflects his long experience at universities, in government, and now at Chiron, one of the largest global biotechnology companies, the best relationships “are built between scientists, right at the beginning.” Chiron currently has over 1,400 alliances of one kind or another and “over the years the best have been those built on human relationships.”
It is almost impossible to determine in advance which technologies will pay dividends and which will not; plenty of promising ones fail.
“Access to the latest research findings and techniques is something that large companies are after,” Kingsbury said, “as is capitalizing on the federal funds being channeled into research across the nation, especially at universities, and largely via the NIH. In many cases, the big companies want the opportunity to explore new approaches without having to build their own infrastructure.”
This is a powerful argument for maintaining strength in basic research. It is almost impossible to determine in advance which technologies will pay dividends and which will not; plenty of promising ones fail. This is neither a scandal nor a news bulletin. The “news” often has been made by technology that seemed for all the world to have no practical application — technology which suddenly, on wings of an inspired vision, took flight. Genomics is such a technology and by all accounts it is only in the early phases of what is already a soaring trajectory.
