6/4/2015

THE ROLE OF THE UNIVERSITY IN CREATING PORTFOLIO VALUE

Mark A. Cochran, PhDExecutive DirectorJohns Hopkins Medicine

• Tech transfer landscape– Why, What, How– JHU Example– How has it evolved over the years– How has the relationship between industry and universities evolved?

• The Innovation Ecosystem– The new deal

• Intellectual Property Basics• The Players• Options to Product Development• Deal examples• Terms and their negotiation• Common pitfalls to commercialization• Striking the balance• Role of incubators at Universities• BD experience and career options 2

Topics

What is technology transfer?Technology transfer is the process of transferring scientific findings from one organization to another for the purpose of further development and commercialization. The process typically includes:• Identifying new technologies• Protecting technologies through patents and copyrights• Forming development and commercialization strategies such as

marketing and licensing to existing private sector companies or creating new startup companies based on the technology

Academic and research institutions engage in technology transfer for a variety of reasons, such as:• Compliance with federal regulations• Recognition for discoveries made at the institution• Attraction and retention of talented faculty• Local economic development• Attraction of corporate research support• Licensing revenue to support further research and

education

Reasons for University Technology Transfer

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Intellectual Property Policy• Bayh-Dole Act of 1980• IP Policy of the University defines split with inventor• Tech Transfer provides service of filing patents and

licensing technology• As a faculty member, inventions belong to the university,

but the process is a win-win-win for the faculty member, the university, and mankind

153 new FDA-approved drugs were discovered by public-sector research institutes in the last 40 years 93 small molecules, 36 biologicals, 15 vaccines, 8 in vivo

diagnostic materials and 1 OTC Represents 9.3% of all FDA approvals Includes 6 over $500M per year in US sales

Taxol®, Epogen®, Procrit®, Remicade, Lyrica and Neupogen® Several key technologies however were never

protected Milstein and Kohler generation of monoclonal anitbodies

via hybridoma technology

UNIVERSITY TECHNOLOGY: TRACK RECORD

Technology Transfer FY14 Results

*From JHTV FY2014 Annual report

Money raised to date by JHU startups* through grants, follow on funding and exits

*Data from 184 JHU related startups (not strictly licensed technology). Data source: Pitchbook

Grant FundingAwarded

Venture CapitalRaised

Exits(IPO, Acquisition)

MII, Coulter, SBIR, I-Corps, other

Amplimmune sold to MedImmune in 2013 for $225M plus milestones

Cardioxyl ~$60M Potenza ~$60M Kala $45M

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The Johns Hopkins Technology Ventures mission is to maximize the impact of JHU’s excellence in research by facilitating the translation and commercialization of discoveries into accessible technologies, products, and services for the benefit of society.

Mission StatementJohns Hopkins Technology Ventures: ventures.jhu.edu

Source: MARS Innovation

TECHNOLOGY TRANSFER PROCESS

01/01/01

File ProvI

01/01/02

File USIFile PCTI

06/01/02

USI PublishPCTI Publish

06/01/03

Nat’l Stage PCT1

File Prov2 File US2File PCT2

US2 PublishPCT2 Publish

06/01/04

Nat’l Stage PCT2

INTELLECTUAL PROPERTY BASICS

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Why is an innovation ecosystem important to the University?

Bring products to the world Competitiveness and retention

• Students and Faculty

Additional funding streams to the university Promotes regional economic development

Why is the University important to industrial economy, and how has it evolved?

• University are primary sources of innovation• Represent a critical mass of knowledge and research in 

fundamental areas• Research paradigm: idea, publish, test, refined idea, publish, 

test, repeat– Development is not a skill set at universities

• Industry is very good at development, manufacturing, marketing – it is not very good at innovation

• Partnerships have evolved to support an innovation ecosystem – thus bringing together those who are best at what they do.

SuccessRates

0 5 10 15

Grants / Foundations

Process Development

Formulation / Stability

Metabolism

Toxicology

APPROVAL

DrugSourcing

ScreeningLeadIdentified

Pre-ClinicalIND/CTCWorkup

FileCTCIND

Phase I Phase IIClinical

FileNDAPLA

PostFilingActivity

PatentProcess

Discovery ScreeningPre-ClinicalDevelopment

Clinical Development

Approval & Marketing

5/4,000compounds testedgo into humans

70% 33% 27% 20% INDS approved

% of INDS that go to next Phase

Years

RiskHigh Low

Venture Capital / Private Equity

Finance

Phase III

Drug Development Value Chain TECH TRANSFER: THE PLAYERS AND THEIR ROLES

University Looking to monetize discoveries to finance more of same

Commercialization Network Consolidated grouping of universities providing critical mass

The Professor In love with their science, looking for recognition, respect, fame, fortune

The Financier Looking for the deal with room for at least 10X return

The Biotech Executive Charged to build value, answers to BOD, investors

The Pharma Company Accessing innovation to build pipeline

Foundation Motivated to advance discoveries to meet medical needs

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COMMON GOALS, DIFFERING PERSPECTIVES

TECH TRANSFER: THE LANDSCAPE TODAY

More deals subsequently sublicensed Consolidation of tech transfer groups into networks Greater pressure on universities to make tech transfer

a profit center Universities taking greater share of revenue More uni:pharma licensing and under evolving

conditions New model emerging to participate in innovation rather than just mining it

Source: Hofmann et al. 13

GLOBAL PERSPECTIVE

Source: Hofmann et al.

GLOBAL PERSPECTIVE

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KEY TERMS IN TECHNOLOGY LICENSES

Pre-commercial payments: Upfront fee Research payments License maintenance fees Clinical milestone payments Sublicense revenue sharing

Post-commercial payments: Royalties

Minimum annual royalty Sublicense revenue sharing

LICENSING TEMPLATES

Many universities offer draft examples of agreements C4 example on-line

Some agreements pre-negotiated by universities and venture groups are available Carolina Express License Agreement

10% of sublicensing revenue; 20% of royalty revenue Published licenses can be obtained on EDGAR

for publicly traded companies Analyses sometimes available for key licenses through

Recap.com

Implemented July 2014 Vetted with local law firms who advise startups 9 JHU startups year to date (FY15) Express license has required substantially less time for

negotiation, reducing the time to close a deal on average from four months to less than two weeks

Services: Express License for Faculty Startups

DEAL EXAMPLES

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The New Deal

• No so new – but much better for all players

VALUE CREATION: UNI-BIOTECH-PHARMA

Source: Deloitte Recap LLC

NEW MODEL AT UCSF

Partner Date Asset Value ($M)

Bayer 01/2011 Research collaborations and official opening of Bayer’s U.S. Innovation Center in Mission Bay

--

Sanofi-Aventis 01/2011 Funding of research in pharmacological science for multiple therapeutic areas and oncology partnership to accelerate research through POC for UCSF's Program for Breakthrough Biomedical Research (PBBR)

--

Sanofi-Aventis 01/2011 Oncology research through clinical proof of concept --

Pfizer 11/2010 Global Centers for Therapeutic Innovation collaboration $85

Takeda 09/2009 Sponsored research collaboration for antibody discovery and development --

Pfizer 06/2008 Broad focus research collaboration & drug discovery $9.5

Sigma-Aldrich 06/2008 Monoclonal Antibodies for cancer, stem cell and autoimmune research --

Celera Diagnostics, Celera Corporation

11/2002 Identify novel genetic markers for breast cancer --

Daiichi Pharmaceutical 11/1992 Atherosclerosis research $20

Source: Deloitte Recap LLC

MORE NEW MODEL DEALS

University Partner Date Asset Value ($M)

Stanford sanofi-aventis 04/2011 Research collaboration with Stanford University Bio-X to focus on early-stage scientific research

--

Yale Gilead 03/2011 Cancer research collaboration with option to license resulting discoveries

$40

Columbia University sanofi-aventis 03/2011 Evaluation of osteocalcin osteoblast-secreted peptide for diabetes management

--

Harvard UCB 02/2011 $6M in funding to support antibody research projects $6

Baylor Research Institute

Roche 12/2010 Collaboration to develop programs emerging from the human immunology research

--

Harvard sanofi-aventis 10/2010 Translational biomedical research collaboration for multiple therapeutic areas

--

Washington University Pfizer 05/2010 New indications discovery for existing Pfizer pharmaceutical candidates

$22

MIT sanofi-aventis 05/2010 sanofi-aventis Biomedical Innovation Program --

University of Pennsylvania

AstraZeneca 03/2010 Alzheimer's disease drug discovery collaboration --

University of Virginia AstraZeneca 12/2009 Research collaboration to develop treatments for cardiovascular disease

--

Vanderbilt University Johnson & Johnson 01/2009 Schizophrenia drug discovery collaboration $110

Source: Deloitte Recap LLC

6/4/2015

Recent Activities (Academic-Pharma Partnerships)

AstraZeneca and Karolinska Institute opening a $100MM translational research center

Takeda launched a $20MM Tri-Institutional Therapeutics Discovery Institute with Sloan, Rockefeller, and Cornell Medical

Sanofi and UCSF entered into a $3.1MM agreement to share expertise in diabetes research and identify drug targets that could lead to new therapies for diabetes

GSK convened several institutes to The Oncology Clinical and Translational Consortium (OCTC) to focus on clinical trials and translational research. This brings together Memorial Sloan-Kettering Cancer center, Netherlands Cancer Institute, Princess Margaret Cancer Center, University of Texas MD Anderson Cancer center, and Vall d’Hebron Institute of Oncology to develop oncology therapeutics from early stage discovery through clinical trial stage

ONE EXAMPLE OF NEW MODEL STRATEGIES

Sanofi R&D and investment strategy No new corporate R&D centers

Considered resource-intensive and unproductive Establish integrated discovery efforts at the world’s best

research institutes (Stanford, Harvard, MIT) Co-invest with venture and PE firms

Start-ups and subsequent financings Ramp up collaborations and acquisitions

Commercialization process:Best if transparent, accessible, and easy

Disclosure process Technology dev. and funding Technology licensing Startup creation and support

Technology accessibility Technology bundling Efficient, responsive, and collaborative

service

Achieved through one front door, concierge service, and new technological support

(New software deployments: Inteum, Salesforce)

Internal Partners External Partners

R&D Service Company Structure: 

Services Provider / Incubator 

Access to innovation pipeline & early research services

Option for growth by acquisition

BioPharma

Venture Firm Access to translational capabilities Exit strategy via build to buy BioPharma

partnership model

Access to cash and late stage translational capabilities

2

3Venture Incubator

PHARMA

1

32

1

Inception4

*= Exclusive relationship within Indication Area around a specific novel target and pathway

Milestone PaymentsTranslational  Research 

R&D of Rx agents  by Indication

Equity $$Strategic build to buy play 

“ Discovery Incubator” backed by Versant

Benefit to Participants*

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Paradigms for successful business models centered around translation

CURRENT Paradigm: Gladstone NOVEL Paradigm: CALIBR

Key Players:   Philanthropy and Grants Academic Medical Center: UCSF Industry: Takeda, Bristol‐Myers Squibb, H. 

Lundbeck AVS

TA focus:  Cardiovascular, Infectious diseases, 

Neurology

Valuation History:  1971: Created in with  trust valued at 

$8MM 1979: Gained financial sustainability  with 

surplus to fund institutes Today: Annual revenues of $70MM, with a 

total valuation  of ~$160MM (grew 20‐fold since inception)

Key Players:   Academic Scientists  Industry: Merck  Venture: 5AM

Business Model: Merck provides funding of up to $90MM 

over 7 years  Merck maintains option to obtain exclusive 

commercial license Calibr can seek alternative funds for projects 

not licensed with Merck; both share in license  revenues

Independent Board of Directors, headed by 5AM founder to oversee activities 

Proposals (from scientific community) reviewed by scientific advisory board

TERMS AND THEIR NEGOTIATION

Do your homework and know what the value is for all players, and any sub-licensor How much could uni, professor, network etc. make?

Sublicensing Revenues Share of any payment to licensor by sub-licensee

Must be fair to each party leaving room for profit for investor (15-20% is go-to range)

Must never reach through (no set pass-through royalty) Agreement should include requirement for licensor to provide

licensee with complete copies of any downstream alliance the leverages the licensed technology

Should exclude payments for R&D Beware of university overhead charges

COMMERCIAL EVALUATION OF CANDIDATE PROJECTS

Price (M)

Dosage (g/day)

COGS (DM/kg)

Penetration rate (years)

-1500 -1000 -500 0 500 1000 1500 2000 2500 3000 3500

500 5000

3000

2000

1500

2.0 1.5 1.0

2500

5 46

NPV (DM millions)

Base Case = 791Source: Bayer AG

COMMON PITFALLS TO UNIVERSITY LICENSING

Poorly vetted patent applications Prior art; little diligence

Buy-back provisions In the case of not-best-efforts

Sublicensing terms that reach through taking more than is available, fundable or worthwhile All parties need to keep in mind the whole value chain

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STRIKING A BALANCE

For the university – big number, back-end loaded against milestones; indemnification; audit rights

For the investor – reasonable sub-licensing terms; royalties on first license revenues

For the inventor – R&D support; consultancy retainer For pharma/biotech – broad license with payments for

value-creating milestones; option for further IP (ROFR) In all cases – diligence in advancing program with grant-

back provisions; trust; transparency

Role of incubators at Universities• Need an infrastructure to support the university‐based entrepreneur

• Need to create an innovation ecosystem– Fully inform and develop innovators for the world of business

– What is a PRODUCT?– How to capture, profile, develop a business plan– Access to finance, investors, partners

JHU as an anchor of a larger regional economic development plan

These initiatives are connected to our anchor institution efforts Goal is for companies to start and stay in Baltimore Studies show that anchor institutions can play a central role in

promoting organic through entrepreneurship activities as a bridge between intellectual talent and the market

Each high tech job yields 5 additional jobs in local economy Public-Private-Philanthropic collaboration can yield remarkable

benefits Federal, state and local policies can support efforts We can look at other regions such as San Diego, Pittsburgh, St. Louis as

models

Space

Funding

Services

Office SpaceLab Space

Design Studio

MentorshipCorporate PartnershipsEntrepreneur Training

Core FacilitiesPre-Seed GrantsInvestment Fund

Three areas of focusInnovation Committee

Recommendations

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14 participants for 2015, launched in January MIRs work with students, faculty, and JHTV staff and bring

deep domain expertise to help accelerate the path of promising JHU technologies and startups

MIRs are encouraged to develop close ties with our inventors, entrepreneurs, and technology licensing team in order to help JHU further develop these technologies

Areas of expertise include:• Personalized Medicine, Life Science Tools & Services,

Oncology Development, Genomics, Computational Discovery, Software, Medical Device, Engineering, Angel/Venture Investment, General Business

Services: Mentors in Residence

70 participants from Johns Hopkins East Baltimore Schools• 47% Graduate students and residents• 42% Faculty• 11% Post docs

32 departments represented 23 start-ups were formed Plan to have all-campus bootcamp in 2015

Services: 2014 JHU Entrepreneurship Bootcamp

I-Corps 2014 (JHU joined DC-node in June 2014)• 8 JHU went through Regional I-Corps cohorts (representing

SOM and WSE)• 1 JHU company went through the National NIH I-Corps;

received $50k award Both programs provide real world, hands-on training on how

to successfully incorporate innovations into successful products.

Benefit: Helps teams make a go/no-go decision by validating their technology's market potential and identifying a solid product-market fit and building a viable business model.

Funding/Services: I-Corps Program for Startup Training FastForward Innovations: our home for start-ups

• Provides affordable, turnkey space for start up companies and venture concepts who wish to locate near JHU campuses

• Provides resources to entrepreneurs that will augment their experience including networking events, access to subject matter experts, business analysis support, educational programming, and introductions to funding sources

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3 dedicated ‘site miners’ who serve as industry mentors to faculty with a focus on commercial relevance of the invention

57 Awards to date; average grant size ~$100k Funded projects/companies representing SOM, WSE,

JHSPH, Peabody including many joint SOM/WSE collaborations

9 funded projects are now Maryland based startups Total JHU funding for PIs and companies FY 13-15 ~

$5.6M

Funding: Maryland Innovation Initiative- a TEDCO (State of Maryland) Program

9 companies in 2014 cycle• 5 of the 9 companies had a JHU affiliation• 4 of the 9 companies (3 JHU affiliated) have term sheets for

>$500k seed round or committed revenues 6 companies 2015 cycle kicked off January 2015 2015 partners: JHU, BHI/EAGB, UMB, Abell, DBED

Funding/Services: DreamIt Health

RELATED DOCUMENTS University of Virginia Patent Foundation. Operating Manual.

http://uvapf.org/operatingmanual

Ashley J. Stevens et al. The Role of Public-Sector Research in the Discovery of Drugs and Vaccines. NEJM: 364;6 February 10, 2011. http://www.nejm.org/

"IP Licensing in 2011: Five Best Practices for Life Sciences Companies”. http://www.datasite.com/

Mark Edwards et al. 2003. “Value Creation And Sharing Among Universities, Biotechnology And Pharma”. Nature Biotechnology 21:535-541. http://www.signalsmag.com/signalsmag.nsf/0/C233187B7556141E88256D8700658BE9/$file/Value_Creation0603.pdf

Carolina Express License Agreement and Users Guide: http://otd.unc.edu/starting_a_company.php#CaroExLic

Hofmann et al. Benchmarking Technology Transfer Metrics from Different Countries. http://www.autm.net/AM/Template.cfm?Section=Licensing_Surveys_Affilated_Organizations&Template=/CM/ContentDisplay.cfm&ContentID=2152

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