M. D. Anderson Cancer Center
Date: February - April, 2008
Duration: 0 / 29:16
I'm gonna introduce right now Tom Lee. Tom Lee is B.A. from UT,
Texas. So, we're all UT here you know going back far. Tom
was active in biotech companies. He worked in the Woodlands with
I think at that time it was probably startup or maybe already a larger
biotech companies Zonagen and then after that he worked for a variety
of larger companies like Mallinckrodt and some other big ones.
So, he has experience in the whole gamut going from imaging technology
to devices to drugs. And in 1999, he joined our Office of
Technology Commercialization and is there helping people with, you
know, how to develop startup plans for a company or doing the licensing
deals. So, with that said, thank you very much for coming and
representing the opinion on what the Office of Technology
Commercialization has to say here.
Okay. Thank you Oli and I'd like to say it's a great
opportunity for me to be here and to meet with you all and as I look
out across and see the number of you. If we get startup companies
from just half of you, we need to hire more people. I'm a little
worried about that. Nonetheless, Dr. Wenker asked me to talk a
fair amount about license versus startup and I will get to that.
The presentation, however, is gonna touch on a number of areas that
already been touched on and I kinda gloss over some of those.
There may be a comment or two that are worth pointing out to you.
But we'll move forward. So, the background, I mean, we've talked
about this. You know, what is conceptualization, that's the "aha"
moment of a new idea and then what wasn't touched on a tremendous
amount was reduction to practice. And why I think that's
important, it was just a question about do we go ahead and file on
these patents. When should we disclose this? Well, one of
the thing, I think you should disclose it as soon as you realize that
you've had that "aha" moment. But I think the question then
becomes when does our office act on it and then file a patent
application? And reduction to practice is something that play
sort of a strategic role in that overall process. As an example,
if you have developed some sort of a composition of matter for a new
drug, you've shown activity in vitro but you haven't put it in the
animals at that moment. One of the things we might discuss if we
were talking is do you think over the course of the next year, we'll be
able to get this in animals because you have to show that you've
reduced it to practice in animals. It's a little less burdensome
when you are dealing with the device because you can often get away
with just technical drawings, but when you're talking about a drug and
you're talking about reduction to practice, we run up against the wall
because in 1 year after we file a probational patent application, we
have to convert that. At that time, you have to have been able to
have reduced the invention to practice. So, if we had filed
during that period and we didn't reduce it to practice, now we have a
little bit of a dilemma. We would either refile a probational all
over again or ultimately kinda just say, "Well, let's let this
ride." So, that's where it comes into play and I hope that that
point sets home with you because there's a little bit of a strategy
about when you want to file and then when you're gonna have this
technology reduced to practice. And then we talked a bit about
what are the standards of patentability, novel, non-obviousness and
usefulness. The one point I will make about is non-obviousness
and Liz alluded to this. It has become a much more difficult
burden on the part of the PTO. As an example, in the past, if you
had two technologies that were known but there was no teaching in the
prior art suggesting that you can link those two together. In the
past, you could link two things together and that was patentable.
That's not true today. So, it's a much tougher standard today and
I think in part, a lot of our outside attorneys who file these patents
for us, you know, we get a lot of kick back from them about well this
is obvious, and almost everything that you see today, you're gonna get
an obviousness rejection no matter what but that is a much tougher
burden. So, just bear that in mind as you sort of move
forward. Of course, the background when we talked about the
Bayh-Dole Act and that sort of thing, I don't know that there's a lot
more that needs to be discussed here but it was enacted in 1980 and
essentially it was to encourage collaboration between industries and to
promote and utilize these inventions and the universities must file on
the things that they want to own but then the other piece of that is
that government retains nonexclusive rights for this technology and can
come in the later day. Think about this if you're a startup a
company. If it were a critical technology, they could come in,
take over that technology and manufacture it because maybe the startup
didn't have enough resources to develop it as fast as the government
would want it for security or what have you. So, that's something
you need to just remember. But, you know, was this an important
factor in seeing an increase in the invention disclosure and I just
asked you to look at this, I mean the numbers are self evident. I
mean it was hugely successful in terms of getting the output that they
wanted. Now, to talk a bit about technology transfer function and
really, there are three pillars here that we sort of stand on. One is
the intellectual property management, then the licensing which includes
both startup companies as well as standard licensing practices and then
services to the faculty and I'll go over each of these a little bit
more.
Okay, Oli. Yeah, okay. Oh, I see.
Here we go. Well, you can see that there are number of steps in
the process. It is an uphill battle. There's a lot of work
associated with filing patents and transferring technology to the
market place. However, I can tell you I think it is worthy.
It's worthy both down the road for patients who are gonna benefit from
this. The technologies that we see here today for the future will
gonna be treatments that are treating these people and curing these
people with cancer down the road. So, from my vantage point, it's
tremendously worthwhile and so I salute each and every one of you for
taking the time and effort to make it all possible. Let me talk a
little bit about, Liz touched on this too, you inventors are key to the
overall marketing process. When you go to meetings, you're gonna
meet with people. You're gonna talk with companies and coming
from industry, I can tell you every industry I was associated with, we
had groups of researchers and marketing people and business development
people that were always going to the scientific presentation, sitting
in on the meetings, meeting with the inventors after the fact. We
would come back to the corporate office, sit down and have an
opportunity to review committee which we went over monthly and look at
opportunities that we had discussed at meetings and scientific
presentations. Those and some of those, we would end up acting
on. So every company out there today is looking for new
technology. None of the research and development departments are
filling their pipeline as fast as they needed to. So they need
new technology. So, if you're not taking an opportunity to visit
with industry and let them know under proper confidentiality, I would
say, I think you're missing an opportunity because everyone is
interested in new technology. And just as point 70 percent of the
licensing leads that we get in our office come directly from the
inventors. So, it's really key and I would just take the
opportunity to do so. So, publish your results, meet with the
industry under confidentiality. Licensing agreements. These
are the types of agreements that we actually execute in our
office. Confidential disclosure agreements. This differs a
little bit if you go through legal services. They have a standard
confidentiality agreement but the language is slightly different.
If you think you're going to touch on intellectual property, it might
be good to have our office develop that confidentiality agreement for
you. So, but this we do all the time, probably do three to four of these
a week. And so these are very critical and very important
agreement to put in place. Option agreements, either exclusive or
nonexclusive agreements. Typically here, what we do is provide a
company where someone who's interested a specific period of time to
evaluate the technology and normally we get some fee for this service,
okay? And then lastly our license agreements, again, this can
either be exclusive or nonexclusive and we'll go into that a little bit
more momentarily. The grant, what do we mean by grant?
Grant is actually what the institution is providing to the
licensee. So, we're gonna provide them terms of either exclusive
or non-exclusivity for that particular technology, the field or the
specific field of use. Very often, you come up with technologies
that can be applied to a wide variety of different settings or
marketplaces. We may choose to license an exclusive license to a
particular company for a specific field of use and then license that
technology, get exclusively to yet another company for a different
field of use. Thirdly, would be the territory that's going to be
worldwide, North America, Pacific Asia Rim, what have you but
nevertheless it could be, you know, would be one of those. So,
you're either licensing in the entire world or you're licensing some
specifically defined field of use and then the term is simply how long
you have this and it's typically for the like of the
patent or 20 years or something along that line although we have
executed license in shorter timeframes particularly where there is only
technology rights that are involved as opposed to patents.
Consideration, now this is what M. D. Anderson is going to extract from
the licensee and typically this is in the form of cash payments or
equity. But typically we're going to want to see an upfront or
initial license fee or transaction fee if you will. And in
addition to that, every year, we're going to have a maintenance payment
and every year that maintenance payment is going to go up. One of
the concerns we have at M. D. Anderson is someone taking the technology
and then they have a lot of time to try to hold on to this yet they're
not developing it. That's a problem because you want to see this
technology being developed and ultimately move forward towards product
and the company is sitting on the technology and we don't have payments
and fees and that sort of thing and ultimately they can carry this on
for years and years. So the maintenance fee is there to be a
little bit of a barrier for them. At some point, that gets
expensive enough that all of a sudden, they might think "Well gee, do
we want to write this check or do we wanna turn this technology back
over." But that's they're primarily to do two things, one, you
know, our office has overhead, we need to be able to pay for our office
and the overhead that we have and so that helps our office. Any
of these payments by the way are split according to the rule you share
in agreement, but nonetheless, maintenance payments are key and we
generally don't do a license today without maintenance fees and those
maintenance fees increase year to year. Minimum royalties.
Once you have a product for sale, we have a minimum annual royalty that
we want the company to adhere to and so that's the least they could pay
us year to year as they market the product. And then we have
standard royalties. This is generally as a percent on net sales
and then milestone payments through development. Generally, if
it's a drug it is gonna be payment at phase 1, at phase 2, at phase
3. At the time they submit the NDA and at the time the FDA
approves this for approval. And then we have patent reimbursement
for all patent expenses and then equity. And I'm gonna talk a
little bit more about equity momentarily because equity really depends
on the kind of deal it is. Someone here had a question about what
the deal looks like. I probably got five or six examples that I'm just
gonna talk to you about and the equity component will be different for
each one of those. And again, Liz went over this but just to
reinforce this, 50% of the proceeds go directly to you, the
inventor or inventors, 15% to the inventor's department or lab
and 10% to the chair and 25% to the institution.
One thing I would tell you, I think it's fair to say that 50% is
the most lucrative deal in the country, is that right? So, other
institutions particularly west coast, east coast, you will see the
proceeds that go to the inventor substantially reduced. So, this
is very lucrative for the inventor. Now, I'm gonna spend a little
bit of time on this one. I head up a section called Active
Venture Development and I will go into that a little bit more but I'm
gonna spend a little bit of time here talking license versus startup
company and the first thing that I would tell you is that the financing
paradigm for startup companies has evolved dramatically since the late
80s, 90s and that sort of thing. Venture capital use to identify
a group of investors that came in at very early stage. Generally,
that would be in the preclinical phase of development. And they
would begin to fund projects at the point. Today, it is pretty
rare to see venture capital investing companies that are not at least
through a phase 1 clinical trial. Why? Well, what they have
found is that there is so much risk, so many drugs have gone all the
way through to the FDA phase 3 and have failed their end point.
So, you got a high risk. They have said, "That's way too risky
for us to invest back at this level, so we're only going to invest in
deals that are much further down the development site." So,
that's now put the burden back on us to try to figure out how we're
gonna fund these things. We heard Keith talk about the new
ignition fund and then there are plenty other funding mechanisms, the
TRC. All of these are really a response to the changing financial
dynamics relative to drug development and biotech development.
So, in some cases, I would say, yes, I agree with Keith. Money is
wildly available today if you got the rank deal and if it's at the
right stage of development and so that's a critical component.
Let me give you a couple of hard and fast rules about licensing versus
startup companies. Most investors that we deal with on a daily
basis and who are those? Well, they are venture capital
companies. They are angel investors or some cases foundations and
they are companies who will often take a strategic interest in a
position and actually invest in the company and get equity in addition
to aid the development of the project. What is interest do they
have? They, for the most part if you're talking to a drug
company, they want a product that at least a billion dollars
opportunity a year. Well, there are only so many of these.
Then if you talk with biotech companies and certain venture capital
groups, it's gotta be a hundred million dollars or higher a year.
So the hurdle rate is pretty substantial. You cannot get this
people interested in your project unless you sort of get that 100
million dollar opportunity. That's 100 million dollars a year in
sales. They got to have that at least and then move up. So,
that's something to contemplate when you start talking about, "Gee do I
wanna do a startup company?" Now having said that, there are a
lot of opportunities that I see here at M.D. Anderson that don't meet
that 100 million dollar threshold. Would they be good
opportunities for you to become an inventor-founder? Very
possibly, although what I can say is a lot of the resources that we
have to assist you are probably not there because we don't know the
people who are interested in that hundred million dollar plus
range. Generally, you start with friends, family and fools to
make those kinds of investments early on. The other issue that I
would say is where are you in the development mode? If you are
preclinical, no tox work, none of that sort of thing in the case of a
drug, that's very difficult to get funding, again you're way early and
even if you got a huge opportunity as an example, I was having lunch
with the venture capital group Monday, we have a fascinating technology
that we were talking about, huge market but it's a CNS project and they
said, "You know, the problem we have is this is preclinical, the CNS
requirements are gonna take at least five to eight million dollars to get
through the tox package and a preclinical package before we start
IND. I'm not sure we wanna invest to that kind of money even
though we think it's a great opportunity". So, that's the kind of
trouble you'll run into in some of these projects. And then one
of the other factors I think that you ought to think about is how much
time and effort do you really want to put into it as well. Now,
obviously, there's some constraints but I can tell you, it's being an
inventor and being with a startup group can be somewhat taxing but I
think it will all be huge rewarding as well, but that's something I
would consider. Let me talk a little bit about the types of
companies that you can end up licensing technology too. Faculty
startups. That's where you as a faculty member come to the Office
of Technology Commercialization and say, "We wanna license technology
and we wanna carry it forward." We say, fine. We strike
some sort of a deal with you and you move forward. Another type
would be we license to some sort of existing company that's already out
there. It may not have any technology but it's an incorporated
entity with the management team looking for a technology. And the
equity stake and the license compensation is gonna change somewhat with
the different kinds of startup companies that we're licensing
into. Another would be to license to a company that already exist
but they're looking for additional technology to fill their
pipeline. And then we've license into a founder company.
Now, what does that mean by that? What I mean by that? That
means M. D. Anderson has been a founder along with some other group in
developing the startup company. So, automatically the institution
is gonna have a much bigger stake in that kind of deal because they
were a founder in setting up the company initially. And then
lastly, an incubated company and that's where our office would
basically take on a project, incubate this thing. We might serve
as an interim management, gather in other people and other resources to
actually do the proof of concept, develop that and move it
forward. And obviously, at the start, the institutions gonna own
a 100% of that deal. So, and we can, you know, questions,
I'll be happy to answer some additional questions about this afterwards
but hopefully that gives you a little bit of flavor. Different
kinds of deal structures for different kinds of projects. Now, if
our office were doing a deal today, what would be important to
us? And I'm gonna refer back, we want a validated
technology. We want to see the lead management team that's
already in place, so we know that we've got comfort zone with who is
gonna be leading the management. We'd like to see a corporate
partner, why? That validates the technology. That tells us
that there's some company out there that see value in this technology
and would wanna help in either development or maybe even acquire some
equity. Funding would also be critical. In addition to the
corporate partner, we'd like to see if they have funding and in fine
length, the license. When all of that is pulled together, we
launch the company and move forward. I'll talk a little bit about
common activities that are permitted on the part of the
institution. Faculty members are permitted to hold equity with
responsive research from a company into the lab with some
oversight. You can have consulting relationships and you know
scientific advisory board. Now, these were all subject to
conflict of interest, policies and you should check those. If you
need to see copies of conflict of interest, policies and you let me
know or anyone in our office. We can send those to you directly
and then there are some no-no's that I'll probably just touch on and
that is serving as a PI for a sponsored technology into either an
animal or clinical study, being a board of director or holding a
management position. Now, you actually can be both of these with
permission from the president of the institution for some period of
time but I think the concern is that, you all have day jobs and the
institution doesn't wanna have to worry about are you spending enough
time doing your work here as opposed to doing work at the company and
that sort of thing. But for some interim period with president's
permission, you can actually be either a board of director or president
or some management position in the company. And then let me just
touch on this, the services that we provide to the faculty.
Counseling and education for the intellectual property issues and tech
transfer issues, assistance and preparing some of the invention
disclosures. Strategic planning and I think this is very
important to me. For the transfer of technology to commercial
interest, I mean it's very critical to see how are you gonna lay this
out, who you are going to be contacting, what needs are gonna be there
down the road and I think sometimes, we wanna tend to shotgun approach
this thing and the fact to the matter is overexposure is almost as bad
as not having any exposure at all. The venture capitalists are
out there and everybody has seen the deal I can promise you it's a deal
that won't get funding. So you have to be very selective.
And then negotiation of the contracts and then management of the post
license, you know, what is that? Well, that's reporting, the
revenue collection, proceeds, distributing the proceeds and things of
that nature. And then closing, what I would say is the importance
of what we believe we provide aiding in the fulfilling of the
institutional mission contributes to the research and educational
resources. The fact is if we create a profit, ultimately, that
goes back into the profit and M. D. Anderson every year write some
check back into research here at the institution and then in the active
venture development, one of the things that we do is not only we look
for opportunities that are unmet. Hopefully, we find a technology
here at M. D. Anderson that fulfills that need, if not we may hear that
there's a company down the way that has a technology that might look
good. It's been our aim to bring some of these technologies here,
see if we can interest some of you faculty members to work with us,
develop additional intellectual property and move forward. So, in
closing, I thank you for the opportunity to visit with you.
Again, I'm a little worried if we get as many startups as what we might
see from you guys but I think we'll manage. I'll entertain any
questions you might have now assuming we have time.
Question, yeah.
I don't know who to ask this question to but does M. D. Anderson
have several technologies for which they are looking for new
applications?
Technologies that were looking for new applications. What do you mean by that exactly?
For example, we do cancer vaccine development but we often see these
things synergize with other drugs that we wouldn't have, I think are
non-obvious. So, are there drugs out there for example that we
have, M. D. Anderson has IP for but that haven't been examined in that
area, for example.
You know, the answer is I don't know. But I would suggest that
you come and talk with us. You know, we'd be happy to sit down
with you and discuss that. If there's an opportunity, we're
interested. Again, please, we'd much rather do a deal as not do a
deal and if there's one there that we can find, let's work on it.
I have a related question actually, do M. D. Anderson or UT has a
mechanism as a showcase of the technology which are being developed in
this institute. I mean if companies interested to find out what
you know people are doing actually at M. D. Anderson Cancer
Center. Is there a Web site or a place where they can verify?
There is a web site, if you go to our web site, you'll see that we have
all of our technologies listed there. As a matter of fact, we
get. The last time I checked was about 3, 000 hits a month.
So, yeah, we have one and it is used pretty regularly. I probably
get, just myself, get probably, someone I have to respond to once every
other week. That's just been from the Web site. Is that
it? All right. Thank you again.
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