A MORE unlikely basis for a drug than carbon monoxide is hard to imagine. But vascular biologist Roberto Motterlini is working on it. In the right dose, CO has many powerful health benefits, such as preventing damage to heart tissue after a heart attack. “It’s a totally new class of molecules, and a totally novel approach,” he claims. So when Motterlini realised there was nothing on the market for delivering the gas within the body, he set about inventing it.
Working with his boss Colin Green at Northwick Park Institute for Medical Research (NPIMR) in London, Motterlini spent a long time working out what to do with his discovery. “In the end we decided it was best to run the risk of founding a company ourselves.” And in April they set up HemoCORM in London to exploit Motterlini’s new CO-releasing molecules.
Motterlini is far from alone in taking this path. The number of UK spin-offs has increased rapidly in the past five years, and now forms a higher proportion of research expenditure than in either the US or Canada. In 2000-2001, 248 companies were spun off from the UK’s higher-education sector, an increase of 22 per cent on the previous year. British universities created one spin-off for every £12 million of research expenditure, compared with one for every £46 million in the US. But in the five years from 1994 to 1999 the total had only been 338.
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So how does an academic researcher go about turning a discovery into a commercial enterprise? What are the ingredients for a successful company, and what challenges will those budding biotech Bransons meet along the way?
A good idea is the sine qua non of course. But venture capitalists and biotech entrepreneurs listen to brilliant ideas from researchers all the time, and they reckon that it is other factors that make the difference. “There is no lack of good ideas, but the things that are most lacking are good management teams to make it happen, and good early stage funding,” says Andy Richards, a Cambridge-based biotech entrepreneur and founder of Chiroscience, now part of Celltech. “And good funding follows good management teams.”
HemoCORM’s founding scientists had to go about putting together the right mix of people the hard way. Because the NPIMR is a charity rather than part of a university, they were not able to tap into the university-level support network.
Instead, the lucky break came when Motterlini met Philip Ledger, who had worked for 20 years as a business development and general manager in the pharmaceutical industry. He became the fledgling company’s business manager and is now helping it get onto a secure financial footing.
University researchers have access to more support for this key commercialisation process, especially through their technology-transfer units. “We spend a lot of time helping academics understand the value of their results, so when they have a bright idea, they come and talk to us about it,” says Tony Raven of the Centre of Enterprise and Innovation (CEI) at the University of Southampton.
The technology-transfer office weighs up the commercial potential of an idea, and then helps protect it with a patent. The technology can then be licensed to an external company, or spun off into a company in its own right. “If something is suitable for a spin-off,” Raven says, “we put a lot of work into developing a business case, putting together financial backing to enable them to set up as an individual entity.”
Many universities have seed funds for spin-offs, and the government offers early-stage funding too. Between 1998 and 2001, the Department of Trade and Industry allocated £174 million for “knowledge transfer” through various schemes: the University Challenge Fund, the Higher Education Innovation Fund (HEIF), the LINK programme and Faraday partnerships. From next year such knowledge-transfer schemes will all come under the umbrella of the HEIF.
A new player has recently entered the field. IP2IPO is an Oxford-based intellectual property business that helps universities commercialise their intellectual property, in return for a stake in any resulting business. It has partnerships with the universities of Oxford and Southampton, and with King’s College London.
Stephen Holgate, world-renowned asthma specialist based at the University of Southampton, received support from both his university enterprise centre and IP2IPO when he wanted to set up a company. “IP2IPO and the CEI helped get us through all the legal loopholes and contracting. Otherwise I wouldn’t have had a clue,” Holgate says. The resulting company, SynAirgen, was launched in August.
Its plan is to develop new ways to treat chronic lung disease and asthma. Holgate wants to reproduce the disease process in cultures of lung cells that would then be used to test new therapeutic agents before these were tested on humans. An enviable leg-up for the company is the commercial links SynAirgen is currently forging with five biotech and pharmaceutical companies. This will generate income at the vital early stage which can then be ploughed back into fundamental research projects.
At present, Holgate and the two other co-founders are employed as consultants to SynAirgen, and still work for the university. So would he jump ship? “If the business is a brilliant success, I might do,” he laughs. “That’s something to think about.”
The hard choice between business and academia must preoccupy anyone embarking on the spin-off process. Fortunately, there do seem to be ways of accommodating both. “There are all sorts of structures, from being on the scientific advisory board of the company and just turning up to board meetings, to working one or two days a week as a consultant, or being on a one-year sabbatical as the company is being set up,” Richards says.
Possibly the toughest challenge is persuading tough-minded external investors to put their money into the new company. “You have to have a thick skin,” says Paul Goldsmith, founder of Cambridge based drug-discovery company DanioLabs (see Box). And as more and more companies are spun off, competition for funds becomes harder. “There isn’t enough money to go round and underfunded companies will almost always fail,” Richards says.
Government seems aware of this. A recent report for the Treasury highlights concerns that the spin-off process has become a victim of its own success, and that in the rush to set up companies, there has been too much emphasis on quantity rather than quality. In the US, for example, the smaller numbers of spin-offs per research dollar per university are much better financed. So the spin-off system may need some fine-tuning if the UK wants to end up with truly sustainable companies in the future. But at last the message of the value of discoveries is getting through.
And remember the high-tech sector. It may be in the middle of a downturn, but at its most powerful, every other company seemed to be a spin-off. And some of them even lived to tell the tale.
Case study: DanioLabs
The year 2001 was a big one for Paul Goldsmith: his company, Cambridge-based DanioLabs, was born – and so was his first child.
While he was doing his PhD, Goldsmith, a clinical neurologist, realised that he would have more impact on the health of patients if he developed new drugs than if he remained purely an academic. “I went into research with this noble ideal of trying to get drugs into the clinic, but I realised that there was a large gap between what could be achieved in academia and what I wanted to achieve.”
Having had an idea about a novel way to discover new drugs, he realised that he had to leave the academic environment. “It wasn’t the right set-up, there weren’t the right people or resources. The only way I was going to achieve what I wanted was to do it in an industrial setting.”
It took him about a year to get the company set up, during which he set out to teach himself the business of biotech, relying heavily on friends and contacts he met through the Cambridge entrepreneurship centre. Eventually he met Simon Campbell, a former head of R&D at Pfizer. “Whenever he came to Cambridge, I would meet him and talk through ideas and get a better understanding of the reality of drug discovery.” It was hard work. “I was finishing my PhD, doing clinics…and doing the commercial stuff,” he remembers.
DanioLabs uses human-mimicking zebrafish embryos to identify new therapeutics in neurology and ophthalmology. The company has come a long way since 2001. It has changed its business plan from genomics to therapeutics, and most important, generated revenues in the first year of trading by testing out a potential drug for another biotech company. “We were really pleased about that. Obviously it helped the cash position, but the most important thing was validating our technology,” Goldsmith says.
The company plans to treble in size over the next year. “We’ve been careful not to grow too quickly, mainly to preserve cash, and partly to get the management structures right. If you haven’t got the right characteristics to do it on your own, don’t be put off. You just need the right people.”