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At AUTM, Biotech Execs Dispense Friendly Advice to TTOs to Improve Deal-Making

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SAN FRANCISCO – Be flexible with timelines, don’t overvalue your IP, and be willing to negotiate on the fly – that was the advice biotech industry executives gave tech-transfer offices at the Association for University Technology Managers’ annual meeting, held here last week.
 
Licensing executives from a diverse array of companies – including Stratagene, Genentech, and Medarex – shared their perspectives on industry-academia relationships with a roomful of mostly academic and non-profit technology-transfer officials during an AUTM educational forum-cum-industry gripe session.
 
Although industry gripes included a few picayune items such as poor websites and off-target marketing, by the end of the session, several common themes emerged.
 
Perhaps the most oft-discussed topic was the need for flexibility on the part of university TTOs when it comes to licensing agreements, including the freedom to renegotiate product commercialization timelines and the freedom to re-work agreements as the market changes.
 
For example, Jennifer Cygan, a business development executive from Genentech, told attendees that university licensors should be willing to renegotiate a deal in response to R&D results or changes in a company’s strategy, and that companies and universities need to have an ongoing dialogue about additional inventions and improvements in related research.
 
“An example of this is if [Genentech] develops a therapeutic, and then realizes down the road that a companion diagnostic may be needed,” Cygan said.
 
Andrew Filler, vice president of intellectual property for nanotechnology firm Nanosys, said that university research is often at the “embryonic” level, is generally “unrefined” and “untested,” and that market development of such technologies carries a great deal of risk and requires a large amount of resources.
 
“These technologies are often not ready to be commercialized yet, and may take months to years, and lots of R&D dollars from the company,” Filler said. “Although these are only anecdotal numbers, it’s estimated that 98 to 99 percent of inventions do not reach market.” It is unclear whether he was referring to all inventions, or just those out-licensed by TTOs.
 
Because of this, commercialization timelines can vary wildly, particularly in the therapeutic, diagnostic, and medical device markets, where products are subject to the scrutiny of regulatory officials. Therefore, it is important that licensors are flexible from the beginning when it comes to diligence, according to Mindy Brooks, senior director of business development at Medarex.
 
“We understand that different universities have different expectations, but we really want the recognition up front that there is not always a hard and fast timeline,” Brooks said. In addition, she said, Medarex especially likes provisions stating that the development timeline will be extended if the company shows diligence toward goals, or that the company’s requests for timeline extensions will not be “unreasonably denied.”
 
Nanosys’ Filler also highlighted the need for a flexible approach regarding the possible failure to meet diligence milestones.
 
Filler said that licensing terms should include provisions for converting diligence milestones to minimum royalty payments, and the ability to renegotiate diligence milestones to “more rational time horizons” as a technology matures.
 
In addition, instead of immediately terminating licenses or converting exclusive licenses to non-exclusive ones in response to unmet diligence milestones, universities should consider allowing a company to maintain a license as exclusive, but to require the company to sublicense the technology to one or more third parties to attempt commercialization.
 
Genentech’s Cygan urged TTOs to use diligence standards, as well, rather than strict timelines. She said that licensors need to understand that science does not work on a timeline, and that development plans are “effort-intensive and highly proprietary, and often aren’t generated until the project reaches a certain stage of maturity, then continually evolve.”
 
Overpriced IP and Other Issues
 
Another sticking point related to the relative immaturity of licensed technologies is the unreasonable price tag that some institutions put on them, said Gavin Fischer, Stratagene’s director of business development.
 
Stratagene last year licensed more than 100 technologies, which is abnormally high, Fischer said (he did not specify whether these were all academic in-licenses). He also said that approximately 94 percent of Stratagene’s products in the research space depend on licensed IP.
 
One important point that research institutions need to keep in mind when dealing with Stratagene, he added, is that it licenses a number of individual technologies related to each of its products – most notably 27 licenses for polymerase-related technology, for which it pays out about 30 percent of product revenues in royalties.
 
“An incremental improvement to qPCR shouldn’t cost more than the core qPCR licenses we pay out to our competitor,” Fischer said, or if it’s “not worth more than we are currently paying to our court opponent,” he added, referring to its ongoing litigation with Applera.
 
Fischer provided some examples of overvalued proposals to his company from recent history. “Antibodies are not worth $200,000 up front,” he said. “A patent on a gene might be worth something, but … $1 million is out of the park. This comes mostly from our diagnostics side of things. We want genes to develop into diagnostics, but when we license these, they are in the very early stage and not worth this kind of money.”
 

“An incremental improvement to qPCR shouldn’t cost more than the core qPCR licenses we pay out to our competitor.”

Even within the life sciences sector, different companies have different requirements, as evidenced by Genentech’s Cygan’s stressing the importance of negotiating broad commercialization rights to IP in an agreement. This broad patent protection is especially crucial to companies developing therapeutics, she said.
 
“Fifty percent of the worldwide market is ex-US, so it’s critical to have worldwide rights,” Cygan said. “Companies would much rather have the benefits of patent protection” and are willing to pay for it, she said.
 
In addition, Cygan said that we “need all the related IP for freedom to operate,” as opposed to just IP from one specific laboratory within the institution. TTOs need to recognize that the company will have to license third-party IP and develop its own IP to support commercialization of many products, she said.
 
As an example of obtaining broad commercialization rights, Cygan discussed Genentech’s Rituxin mAb-based therapy for non-Hodgkins lymphoma. “This is a very successful product,” she said, “but we are now exploring it for use in other disease areas. If we had been constrained to oncology only, we wouldn’t have been able to do this.”
 
Yet another issue related to therapeutic or diagnostic development is that “most universities’ idea of validation and the FDA’s idea of validation don’t overlap.” This means that often times a university will license a technology to a company with the assurance that it will meet specific FDA requirements, but the FDA doesn’t always accept data from the smaller studies often conducted at research institutions.
 
“We’ve been burnt on this pretty extensively,” Fischer said. “Don’t make me pay to repeat your work. For you to say ‘we spent all this money on clinical trials and we want it back,’ I’m going to be unreceptive to that.”
 
Company licensing executives did not agree on all points, however. While Medarex’s Brooks lamented “off-target marketing,” or universities approaching a company with technologies unrelated to its core business, Stratagene’s Fischer actually urged TTOs to send all off-topic marketing his way.
 
“I think I have a better searchable index of your technologies than you do,” Fischer said, adding that he takes all of the emails from TTOs with available technologies, puts them into a database on his computer, and uses Google desktop to search them.
 
“Your websites are horrible,” he said.

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