There is a terrific article in Nature Biotechnology entitled Keys to the Kingdom.
The article discusses a number of issues bioentrepreneurs may encounter when trying to license technology from a University.
Most interesting are the differences between UK and US universities, especially with respect to equity distribution / division between the University and the remaining shareholders.
As we’re pursuing this path ourselves, it’s interesting to read that some of the issues we are encountering are not unique to us:
Lack of Guiding Metrics – CDAs, competitive forces, and plain old secrecy make it difficult to gather data around “standard” metrics, such as the % of the equity for the University, Royalty rates back to the University, and so forth.
The authors did a nice job collecting survey data on equity taken by selected universities in the US and the UK. Surprising (to us at least) was the notion that 50/50 equity splits between new companies and universities in the UK is “standard” practice. Meanwhile, US universities tend to get from 5% up to 100%, although we would imagine that much of this is highly negotiable.
Leverage – Who has the leverage when licensing technology from a University? Generally, the technology holder has the leverage, assuming the technology is unique and valuable. However, this can be overcome with great offers. As we’ve discovered, we are competing with some big pockets in the form of large pharmaceutical companies. In those cases, any leverage which the University has can be quickly shifted the other way when major dollars are contemplated.
Lack of Preparation – The authors’ survey found that bioentrepreneurs, at times, do not research their markets sufficiently. We found this quite surprising, given that this exercise is necessary for licensing, for business planning purposes, and critically, for fund raising. Why a bioentrepreneur would enter into serious discussions without conducting the necessary market research is beyond us.
Lack of Funding – Bioentrepreneurs can’t raise capital without technology. But this is where the option agreement comes into play. From the article, it sounds like this idea of securing an exclusive option before entering a full license agreement remains unknown in some parts of our little world, which is surprising.
Conflicts of Interest – University licenses can result in any number of problems for the university and their faculty. Fortunately, the Universities we have spoken with so far have very clear policies and procedures to identify potential conflicts and to address them. For example, one university prohibits PIs from being involved in a clinical trial at their institution with their technology. Another completely prohibits the clinical trial from taking place at their hospital.
Our approach with these issues has been simple…just let the University guide and handle any potential conflicts of interest with their faculty.
Our advice is this. If you are contemplating approaching a university in an attempt to license a technology or patent, then definitely read this article. Also, seek guidance from those who have done this before. And, be prepared for what can be a lengthy process.