University of Missouri licensing revenue hits $10 million

Antacid, medical devices, biofuels power university’s drive to $50 million goal.

The University of Missouri’s technology transfer program topped $10 million in licensing income for the first time ever.

System President Gary Forsee has even bigger things in mind. His goal is $50 million in licensing income in the next five years for the group that moves discoveries made on campus to the private sector.

Forsee is putting his money where his mouth is, dedicating increased resources to the tech transfer programs while cuts are being made in other departments. The system — which includes campuses in Columbia, St. Louis, Rolla and Kansas City — is adding an additional tech liaison position at each campus.

In addition, UM hired Anthony Harris on July 1 to provide marketing services for medical devices and technologies developed on its four campuses. The tech transfer office also hopes to add marketing professionals in the life science and engineering fields to court potential licensing deals.
AMbitious goal

Hitting the $50 million mark would put UM just behind the giants of technology transfer. The Massachusetts Institute of Technology (MIT) generated $75.5 million in 2009 income from its licensing office, and Stanford University reported $63.9 million in 2008.

Replicating that type of activity would be difficult for most universities, according to Washington University Chancellor Mark Wrighton, who previously worked for 23 years at MIT. He also chaired the National Academy of Sciences’ Committee on the Management of University Intellectual Property.

“MIT has a long, strong record in science and engineering and an exceptionally large research portfolio,” he said. “Most universities don’t have that or the culture of moving new discoveries into the marketplace.”

But Mike Nichols, vice president of research and economic development for the UM system, thinks the $50 million goal is within reach. He points out that the system has nearly doubled its licensing income almost every year over the past five years. Licensing revenue has increased 300 percent since UM brought in $2.6 million in 2004.

“We haven’t seen any slowing down,” Nichols said.

UM’s 2009 licensing income rose nearly 55 percent from $6.7 million in 2008.

The bulk of the ‘09 revenue, nearly $10.1 million, came from the Columbia campus. The St. Louis campus had one deal last year that generated income, with Deerfield, Ill.-based Alltech Associates, Inc., a maker of equipment that separates, identifies and quantifies compounds for chemists.

“I think Mizzou has made great progress in getting to that level,” said Brad Castanho, co-director of the office of technology management and assistant vice chancellor of research at Washington University. “You’ll find very few universities that get to that level.”

Washington University earned $17 million in 2008 royalties, a 40.5 percent increase from the $12.1 million it earned in 2007. The university doesn’t have final 2009 numbers yet. Castanho said the university’s licensing income has hovered in the $10 million to $12 million range for the last five years, but jumped to the $17 million mark last year due to a one-time payment on a single technology, which Castanho declined to identify.

The University of Missouri saw a similar spike to $9.1 million in fiscal year 2005 thanks to a one-time payment and a liquidation of stock received under a license agreement.

Medical devices have accounted for the system’s top returns over the past five years. Examples of university technologies that show promise of generating more money include:

• The university signed an agreement with a regenerative medicine company, Organovo Inc., on technology related to organ printing, which hopes to one day use the same technology as an ink-jet printer to “print” organs for transplant in humans.

• The university partnered with Massachusetts-based Allied Minds to create a start-up, LifeScreen Inc., led by three MU researchers who are working on a new approach to detecting breast cancer.

• Another researcher and his team formed Greenano Company, which aims at synthetically producing nanoparticles without creating a negative environmental impact.

Medical vaccines have yielded strong returns for Saint Louis University, which brought in $3.1 million in royalties in fiscal 2009, said Maurice Foxworth, director of the office of innovation and intellectual property at Saint Louis University. The tech transfer program’s claim to fame is Dr. Richard Bucholz’s surgery navigation system, the StealthStation.

Foxworth said licensing revenue has increased slowly in recent years, but the university is in the process of increasing its research capacity.
Deal flow

UM’s investment in patents to protect potentially licensable technology also continues to increase, with its net patent expenses topping $1 million for the first time in fiscal 2009.

In both fiscal 2008 and 2009, UM filed for a total of 98 U.S. patents, up 55.6 percent from 63 in 2004.

And more patents are prompted by more ideas, as can be seen in the growing number of disclosures coming into the tech transfer offices. Faculty members file a disclosure with the tech transfer office to notify it that they have an invention that may be marketable, including information such as a description of the invention, the date of conception and the funding that went into development. The tech transfer office then evaluates the disclosures for technical merit, marketability and patentability.

In fiscal 2009, faculty members filed 161 disclosures, up 71 percent from the 94 filed in 2004.

All of these numbers add up to more licensing deals, which, according to Nichols, is where the rubber really meets the road — when an established company is willing to bet on an emerging university technology.

“When I was back on the campus a couple years ago, the first thing I did was put a high premium on doing deals,” said Nichols, who served as director of the office of technology management for the University of Missouri-Columbia before taking on the role of leading research and economic development efforts for the system in 2007. “We’re making that a higher priority. We’re finding those licensees early, getting the word out and networking with the licensing associates.”

The efforts appear to be paying off, with a record 71 licenses or options signed in fiscal 2009, up more than threefold from the 20 license deals in 2004.

Even after a licensing deal is signed, it takes time for it to turn into money in the bank. For example, more than 200 licensing deals have been signed by the university system in the past decade, but only 11 licenses contributed to the $10.4 million in income generated last year.

In fact, much of that total was generated by one license — for the antacid Zegerid, which is produced by San Diego-based Santarus Inc. Fiscal 2009 licensing income from Santarus included a $2.5 million payment to the university system prompted by Zegerid exceeding a sales milestone.

UM expects more great things from Santarus, a public company that reported $34.8 million in revenue for the first quarter of 2009. Last year, Santarus signed a licensing agreement with Schering-Plough HealthCare Products Inc. to develop an over-the-counter version of Zegerid.

“Which means you’ll see it at Wal-Mart and Sam’s and pharmacies all over the world,” Nichols said. “The market they address is going to go up quite a bit, and we feel good that the income is going to continue to increase.”
Return on investment

It’s not unusual for a handful of licenses to account for a lion’s share of a university’s royalty income.

“Of all the deals you do, you only need about 10 percent of those to really be home runs,” Nichols said. “That’s a pretty good return on investment.”

It’s a similar story at Washington University, where a few medical technologies have accounted for most of the money generated.

“If we looked at our revenue stream, you could probably point to five to 10 technologies bringing in most of the money,” Castanho said. “We have hundreds of licenses. Most of them are quite small.”

The university’s biggest moneymaker has been a diagnostic tool for heart attacks. The patent on the technology, which was licensed nonexclusively to five or six companies, expired two years ago, causing a slight dip in royalty revenue.

Washington University typically inks 40 to 50 licensing deals each year, but Castanho expects that number to drop this year as the economy and consolidation in the life sciences industry prompts companies to rein in spending on licenses.

Foxworth said some of the startup companies that SLU has licensed technology to in the past are having a difficult time making ends meet, much less investing money in additional licensing deals.

“It’s a difficult environment in which to raise money, and some companies are working just to make it through these difficult times,” Foxworth said.

However, Scott Uhlmann, director of the office of intellectual property administration for the University of Missouri, thinks the economic slowdown could work in the university’s favor

“As companies are forced to scale back R&D budgets and staff, we hope they might look to outsource their R&D to the university in a sense,” Uhlmann said. “We see a lot of opportunities.”

with permission of St. Louis Business Journal ©September 2009