[lbo-talk] University Inc

Doug Henwood dhenwood at panix.com
Fri Nov 18 10:33:50 PST 2005


Chronicle of Higher Education - web daily - November 18, 2005

Universities Collected Near-Record Revenues From Commercial Activity in 2004, Study Finds

By GOLDIE BLUMENSTYK

Colleges created a record number of start-up companies based on the inventions of their professors and students in the 2004 fiscal year, and they collected more than $1-billion in revenues from licenses on a host of new drugs, agricultural products, high-tech components, and other breakthrough technologies, according to a survey scheduled for release today.

The number of new start-ups -- 425 -- was just one indicator of the growing pace of commercialization activity on American campuses.

The 164 institutions in the survey filed more applications for U.S. patents than ever before, and they executed more deals for licenses and options on licenses -- 4,087 -- than in any previous year. The Association of University Technology Managers, which includes officials from universities, hospitals, and companies among its members, conducts the annual survey.

The colleges and universities also were busy developing their pipeline for new income-producing deals: The number of "invention disclosures" -- findings with the potential for patenting and commercialization -- topped 15,000.

The institutions also spent a record amount in legal fees to obtain and defend their patents, and develop their deals. Legal costs for the respondents exceeded $189-million. Institutions later recover some of those costs from legal settlements and judgments, or from companies whose licenses typically require them to pay patenting costs. In 2004 the total of reimbursed legal costs was nearly $80-million.

The licensing-revenue total in 2004, $1.034-billion, was the second-highest ever reported. The highest was $1.076-billion in the 2000 fiscal year. Year-to-year comparisons of the surveys are imperfect, however, because the same institutions do not necessarily respond to the survey every year. In addition, revenue numbers can fluctuate greatly because in some years they might include the proceeds of a big legal settlement (as was the case for the University of Colorado System in 2004) or the sales of start-up companies in which the institutions held equity. Such sales can produce big one-time payoffs.

Institutions that conduct the most research also tend to do the most commercialization. As a result, the association tries to gather data from the institutions spending the most on research; in the latest survey, 96 of the 100 most research-intensive institutions participated.

Two institutions in New York City accounted for about 20 percent of all revenues reported. Columbia University earned more than $116-million, and New York University reported earnings of more than $109-million. NYU ranks highest in revenues in the survey.

Columbia's figures do not appear because it was one of eight universities that refused to provide their information by name, even though it has reported its 2004 licensing revenues on its Web site, along with many other measures of its technology-transfer activity. (The other anonymous respondents were: the College of William & Mary, the Texas A&M University System, the University of Wyoming, Worcester Polytechnic Institute, and Marquette, Rockefeller, and Yale Universities.)

The concentration of licensing revenue among a small number of universities is typical. Eight institutions accounted for more than half of all revenues reported. At least 22 institutions besides Columbia reported earnings of $10-million or more. (See table below. A fuller table with results from all universities responding to the survey will appear in a forthcoming issue of The Chronicle. A searchable and sortable database, with selected information from the 2004 survey, will be available soon on The Chronicle's Web site, where databases of previous surveys are now available.)

Universities share proceeds from commercialization with inventors. Although formulas vary, inventors typically receive about one-third of the total. In many cases, additional allocations from the institution's share go to their school, department, or laboratory.

As in previous years, royalties on drug sales were the major source of revenues.

That was certainly the case for NYU. Abram Goldfinger, NYU's director of technology transfer, said that royalties on sales of Remicade accounted for the "biggest piece" of its income stream in 2004, although the university also has licenses related to 19 other drugs, medical devices, and diagnostic tests that are now on the market. Remicade is used to treat Crohn's disease, arthritis, and other ailments. Mr. Goldfinger noted that NYU also earned a bit of money from a genetic technique to promote plant growth, an agricultural invention that might not be the kind of thing most associated with this urban institution.

Pharmaceutical-related inventions also produced windfalls for Ohio University and the University of Mississippi. Ohio marked its first major hit with a newly approved drug called Somavert, which controls the abnormal growth of tissue, bone, or muscle from a rare endocrine disorder called acromegaly. At Ohio, revenue grew from $43,000 in 2003 to nearly $2.4-million in 2004 -- an increase of more than 5,000 percent. The university's research on growth hormones underlying the drug began in the late 1980s.

Mississippi, which saw a jump in its revenues from $141,000 in 2003 to nearly $3.2-million in 2004 (an increase of more than 2,000 percent), said payments related to four potential new drugs, now in various stages of clinical testing, had produced most of the income. One is for mitigating the effects of chemotherapy, another is for malaria, a third is for ulcers of the mouth, and the fourth is designed to treat AIDS-related pneumonia. The university has also earned some money from a new drug-delivery system to be used instead of skin patches: a disk that delivers drugs through the mouth. Mississippi has made drug discovery a high priority for research since 1999.

Ashley J. Stevens, director of technology transfer at Boston University and manager of the association's survey, said the "big-time" rebound in the number of new start-up companies, after two years of declines, was the most striking trend in 2004. In 2003 universities reported forming a total of 348 start-up companies; in 2002 they reported 364. The figure in 2001 was 402.

Seven institutions reported forming 10 or more companies, including such traditional players as the Massachusetts Institute of Technology (with 20). The others were: the University of Illinois system (16), the Georgia Institute of Technology (15), the California Institute of Technology (14). the University of Michigan (13), Duke University (10), and the University of Pittsburgh (10).

Two institutions that normally lead in start-ups -- Stanford University and the University of California system -- formed 9 and 5, respectively.

For the first time, the survey asked universities to indicate sources of capital for their start-ups; and a report accompanying the survey shows that "friends and family" and "angel investors" were bigger sources than were professionally managed venture-capital funds.

Michael Batalia, director of technology asset management at Wake Forest University Health Sciences, said that with venture capitalists now tending to invest at later stages of a company's development, universities are having to turn more to informal networks, and to their own funds, to help jump-start their early-stage companies or to further develop inventions so they will be attractive to potential licensees.

His institution, which has begun earning significant amounts of money from a wound-healing device known as the VAC (Vacuum-Assisted Closure), has begun to set aside some of the proceeds for just such a purpose.

The University of Colorado System, which saw a big bump in its 2004 revenues from a settlement with the pharmaceutical company Wyeth (The Chronicle, April 30, 2004), is doing the same in an even more formal way. About $28-million of the $34-million in revenues it reported in 2004 came from that settlement. It has since taken a portion of those proceeds to establish an $8-million endowed Proof of Concept Investment Program. The university now uses that fund to provide loans of up to $100,000 to five start-up companies a year.

Colorado's economic climate is unusually good for starting companies because it is home to many wealthy people and serial entrepreneurs, said David N. Allen, the university's associate vice president for technology transfer. Still, he said, a fund like that will help because "the hardest thing is finding that early money."

Colorado reported forming nine start-up companies in 2004. Mr. Allen said it formed an additional nine in the 2005 fiscal year, and he expects to form even more this academic year.

For copies of the association's "U.S. Licensing Survey: 2004," contact it through its Web site <http://www.autm.net/>.

Universities With Licensing Income Above $10-Million, Fiscal 2004

New York U. $109,023,125 U. of California system $74,275,000 Wisconsin Alumni Research Foundation,

U. of Wisconsin at Madison $47,689,165 Stanford U. $47,272,397 U. of Minnesota $45,550,764 U. of Florida $37,402,284 Michigan State U. $36,402,250 Wake Forest U. $34,296,000 U. of Colorado System $34,128,958 U. of Rochester $33,736,882 U. of Massachusetts $26,258,577 Massachusetts Institute of Technology $25,781,923 U. of Washington, Washington

Research Foundation $22,808,483 Emory U. $22,517,830 Harvard U. $16,654,975 U. of Utah $14,510,087 Florida State U. $14,316,563 State U. of New York

Research Foundation $13,363,714 U. of Texas Southwestern Medical

Center at Dallas $11,541,081 Case Western Reserve U. $11,028,447 U. of Iowa Research Foundation $10,712,706 U. of Michigan $10,633,528

SOURCE: Association of University Technology Managers



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