Not all successful university spin-offs generate big returns to host institutions

Sherbrooke ranks #1

Canadian universities have done a poor job of obtaining adequate financial benefit from discoveries made within their jurisdictions, suggests a new study by PARTEQ Innovations to identify the Top 10 technologies generated by Canadian universities. It shows that many universities that were home to successfully commercialized and profitable technologies often have little to show for their participation, often due to benign neglect.

The PARTEQ research was presented last month at the conference of the Alliance for the Commercialization of Canadian Technology (ACCT Canada), a national association of university and college technology transfer offices. It provides an in-depth examination of the Top 10 technologies over the past 25 years and ranked them according to their economic and social impact.

"It's one of the lessons learned. It's important that universities realize a fair return on public funding," says PARTEQ president and CEO John Molloy. "Low returns are unfortunate. Technology transfer professionals are more sophisticated now but policies are still in place where researchers can go off and not return anything to the universities. As a result, some universities (behind the Top 10) didn't get much at all."

The Top 10 technologies have generated many billions in sales and often healthy profits for the firms involved. Yet the royalties returned for all 10 are less than $250 million. Of that amount, half is accounted for by the #1 ranked technology from the Univ of Sherbrooke (see chart next page) — a blockbuster CODEC technology whose royalty stream has often been compared to the Univ of Florida's success with Gatorade.

The Top 10 ranking provides a fascinating collection of case studies for how technologies are successfully transferred to the marketplace, illustrating that each deal possesses a set of characteristics that make each unique.

Some technologies that should have been included on the list could were omitted for various reasons, or included with provisos. A case in point is a technology emanating from the Univ of Windsor, which Molloy says would most likely be on the top 10 except that "the licensee would not confirm or deny that they are actually using the technology". For the #3 ranked Lamivudine, revenue flowing to the Univ of Alberta is unknown as the university did not cooperate with the study.

Perhaps the lowest return on a profitable discovery was experienced by the Univ of Calgary. It was home to the wireless technology behind the remarkable success of Wi-LAN — a company founded to commercialize and market hardware incorporating Wideband Orthogonal Frequency Division Multiplexing. Despite Wi-LAN's market cap of $2 billion in early 2000 and its success today as a pure play IP licensing firm with more than 400 patents, U of C has seen less than $500,000 flow back to the university, based on equity it received upon formation of the company.

Even Molloy's own institution — Queen's Univ — realized only a fraction of what he says it should have received from the sales of the cancer drug Taxol, ranked #2 in the Top 10. Since its introduction, it has generated sales of $13 billion and counting. The realization by Queen's that it actually had an intellectual property claim on Taxol is one of the more complex and bizarre stories behind the Top 10 ranking. In his ACCT Canada presentation, Molloy revealed that the university was unaware it had any claim to the IP behind Taxol until PARTEQ was informed by a competitor to Bristol Myers Squibb (the pharmaceutical firm that commercialized the IP). The company eventually agreed to provide Queen's with a guarantee of $15 million but Molloy says the whole experience could be summed up as "10 things not to do when working with large pharma".

Molloy is quick to point out that monetary return is not the only nor even the most important criterion used to rank the Top 10. The process used to determine ultimate ranking often pitted financial gain against widespread health benefits, resulting in what Molloy says became a "very subjective" yet time-consuming exercise.

"It was a lot more work than I thought and often involved comparing apples and oranges. Lamivudine was number three and Open Text was number four. Why not the other way around? It often came down to sales versus lives saved," says Molloy.

Some universities have adopted a similar attitude, such as the Univ of Waterloo. Search and retrieval software developed for the digitization of the Oxford English dictionary was spun off in 1989 as Open Text with the university granting a non-exclusive, royalty-free licence. The $1 million the university eventually received came from a minor equity stake it was given as a gesture of appreciation.

Not all tech transfer practitioners agree that universities aren't being fairly compensated for their inventions. Angus Livingstone, managing director of the Univ of British Columbia's university-industry liaison office, says the negligible financial returns to some institutions on the Top 10 "are particular to a time period and organization".

"In the 1980s and early 1990s, IP was often encouraged or allowed to go out the side door," he says. "The ones that go out the side door are not being properly dealt with."

Livingstone says UBC's success in placing three technologies in the top 10 is a reflection of the consistency with which his office has approached tech transfer since its inception in 1984. He also says the return the university realized in all three instances represented fair value.

Livingstone says there should be follow-up to Molloy's research as it helps to bring alive success stories that most Canadians are completely unaware of.

"It helps to draw attention to what the broader outputs are," he says. "The more we can quantify benefits that come out the better. They are very rich stories."

Molloy says that while researching the Top 10 was an illuminating and often surprising project, he has no intention of devoting any more time digging into past examples of top technologies. He would be willing, however, to give presentations on the original research and focus future research efforts on the top five technology from the past year or so.

"It's been helpful from a number of different perspectives. Everyone wants to see the impact of technology transfer and commercialization in ways they can relate to," he says. "We can also use it as a motivational tool for those in the profession to show how it (technology transfer) can lead to seriously important things."

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