BigU's Tech Transfer Problem
Or What Happens When the Goose Stops Laying Golden Eggs?
The anti-AIDS drug Ziagen has been good to the University of Minnesota. Maybe a little too good.
The drug generates 95 percent of the school's annual licensing income. To make matters worse, Ziagen's patents expire overseas next year and in the United States in 2013. That leaves the U scrambling to replace the more than $50 million in annual royalty payments that Ziagen now generates.
At a time when the state's economy is slowing and its medical device sector is maturing, the U's long commercialization slump has attracted the urgent attention of lawmakers, venture capitalists and others concerned about where Minnesota's next Medtronic or St. Jude will come from.
But compared with leading national universities and its regional peers, the U's commercialization efforts lag significantly. From 1984 to 2004, the university spun off 101 companies but only three went public, according to a study conducted by MBA students at the University's Carlson School of Management.
That translates to a 3 percent success rate, compared with 8 percent for public universities and 14 percent for "premier" universities like the Massachusetts Institute of Technology and Stanford, the study says.
In 2006, it spent $595 million on research, placing ninth among all public universities. But the school generated only $56 million in license income that year, most of it from Ziagen, according to an annual survey by the Association of University Technology Managers. In a field where commercialization lead times are measured in years, the U's challenge is immense.
But some venture capitalists view the University of Minnesota as a liability rather than an asset to the state.
The university "provides all sorts of disincentives to new technology," John Alexander, president of Twin Cities Angels, a local investor group, recently told the state's House Committee on Biosciences and Emerging Technology.
The school is more interested in protecting its intellectual property than collaborating with the business community, he said: "It is a pleasure working with MIT; the same can't be said of Minnesota. I think that's the widely held consensus of the business and venture capital community."
Alexander, who is also chief executive of Plymouth-based Chameleon Scientific, suggested that the university's near monopoly on high-tech research in the region is stifling innovation. The state should think about dividing the school or creating a second research university, he said.
In 1995, a federal grand jury indicted Dr. John Najarian, a renowned transplant surgeon, on charges of fraud, theft and tax evasion relating to the illegal sale of ALG, an experimental anti-rejection drug.
Although the Food and Drug Administration never approved ALG, the school's surgery department, which Najarian chaired, sold $80 million worth of ALG throughout the 1970s and 1980s, with much of that money benefiting the U.
A jury acquitted Najarian the following year, but the damage was done. The school paid $32 million in fines, and the National Institutes of Health placed severe restrictions on the university's freedom to use research money.
After the scandal, the school instituted new accounting controls but ultimately shied away from technology transfer, said Rep. Tim Mahoney, DFL-St. Paul, chairman of the House Committee on Biosciences and Emerging Technology.
"The U erred on the side of caution," Mahoney said. "Now it has become institutionalized."
Some blame university policies that jealously guard intellectual property, making deals unattractive to firms interested in licensing technology or collaborating on research.
"It was difficult to get access to intellectual property," said Dale Wahlstrom, a former Medtronic executive who is now chief executive of the BioBusiness Alliance of Minnesota. "It was a one-sided discussion. If they couldn't get the optimal deal, they wouldn't do anything."
For example, companies that want to use the school's animal research labs to test products like medical devices must cede at least some ownership of the technology to the university. As a result, companies have fled to private facilities in Coon Rapids and Wisconsin, Mike Berman, a prominent medical device entrepreneur, recently told the House Committee on Biosciences and Emerging Technology.