‘Biotechs and the City’ Part 7b/7 - Audience Q&A

The following panel transcript is Audience Q&A taken from the 4th September ‘Biotechs and the City’ – Tech Transfer, Translational Funding and Start-Up Capital event held at Imperial College Incubator, and produced by Biotech and Money and sponsored by Marks & Clerk LLP.

The panel included Keith Blundy from Cancer Research Technology, Dr Allan Marchington from Apposite Capital, Tony Hickson from Imperial Innovations, Dr Mike Capaldi from Edinburgh BioQuarter, Richard Seabrook from the Wellcome Trust and Simon Portman from Marks and Clerk.

Terry O’Dwyer: I’m going to open up to the floor now, does anyone have any questions?

David Campbell: I’m David Campbell, I’m the Chief Executive of a company called Magnus Life Science. I think the panel have done a very good job of talking about some of the issues and challenges external to their own organisation. They’ve talked about the need for strong management teams, strong finance etc., but I’m not sure I accept that all of the failures over the last few years have lain entirely on the fact we haven’t had the right funding or management teams in place. What I’d like to ask the panels to do is look internally honestly and say are there issues or challenges in terms of the way that technology transfer is set up in the UK? And what can we do there, or what can your organisations do there to help strengthen the process from an internal perspective?

Mike Capaldi: I agree. I think that technology transfer, if we looked at the states we see a completely different breed of people working in technology transfer offices. But guess what? If you want to take those people on you’re going to have to pay them decent salaries. They’re not going to come and work for technology transfer offices for half of what they were earning in GSK or any other company

So that’s a crucial issue. Frankly I think universities need to wake up to this. Universities have the capability of making lots of money from intellectual property. They’ve got to stop putting it in the hands of scientists who got bored working in a lab and decided they wanted to go do something commercial so started working in the technology transfer office. That’s a sweeping statement. There’s good people working in technology transfer as well.

But as a generalisation, the universities need to professionalise the way that they work. Professionalise the way the work with industry. Professionalise the way they project manage collaborations when they get put in place. I could go on and on and on. What this essentially means is you need to bring a different quality of people with different experiences and pay them a going wage. Then I think we’d start to see big improvements.

Terry O’Dwyer: Before I turn to anyone else on the panel, there’s a couple of other universities and TTOs in the audience. I know Isis Innovation and Cambridge Enterprise are here, do you have anything to add to this?

James Hamilton: A voice from the non-Russell group, James Hamilton from St George’s. I agree that what tech transfer offices need more of is not necessarily funding but is capability and expertise. Tony hit on the point earlier that expertise is really what we’re lacking. The challenges I face when I try to put together a package that is attractive to investors is we lack expertise in regulatory affairs. We need someone to put together a clinical development plan which is going to be attractive to pharma. We don’t have those skills internally, our founders don’t have those skills. How can we acquire those skills with very limited funding and even identifying the people who could provide you with those capabilities is a challenge, much less at any price you could afford.

So I do think in terms of what we can do to strengthen tech transfer in general, I don’t know how it’s going to work. Mike made the point that you’re not going to get people to work for free or for cheap, but we need to do something to recognise the development of life sciences requires a very broad skill set and the skill-set that we have in tech transfer offices is largely around the technical and scientific side, which is not what is lacking in the package. Whatever can be done, an entrepreneur in residence programme is helpful, some of the Wellcome trust programmes are helpful because they put together a steering group where someone from industry can provide that industry view point and give you guidance on what industry will find attractive and what industry will find reeks of amateurism. Those sort of things are very helpful, but there needs to be a lot more of it and I don’t know how we incentivise people with those skills to come and assist academia.

Keith Blundy: I wanted to reflect back to the questioner first of all, because I’m not sure what we’re talking about when we speak of failures. Are we talking of the failure of the technology transfer organisations to pass their science out into partners? I’m not quite sure what the question was and how to address it.

David Campbell: It’s potentially on a couple of levels. I’m trying to be quite provocative as well, I don’t want anyone on the panel to think I’m pointing fingers at success or at failure. I heard from the panel earlier this idea of a large number of spin outs, a lot of them failing, potentially should never have been set up as companies. So I do wonder if at some level there is a lack of the capabilities that the individual from the audience just mentioned here around filtering out opportunities in their own institutes and being honest with the scientist and within your own organisations about the fact that this thing is never going to fly. There aren’t the right patents in place, there isn’t the right IP in place. And I remember that IP isn’t just about patents it’s about data as well, that’s incredibly important for us to remember. Does it just need a few more years in an academic situation? Does it need more TSB funding? Some Hick funding from the Wellcome Trust etc… or should it just never exist?

The other issue I think I keep seeing is misalignment between the objectives of a university. So you mentioned earlier this idea that universities can raise an awful lot of money from their IP. Maybe there’s a bit of concern that’s a misaligned objective and it’s not about raising an awful lot of money from IP but about getting the right technologies out there and developed and into the hands of the individuals that are going to use it at the end of the day. So I suspect I’m throwing a lot of different questions out there, but fundamentally are we doing the right thing by all of these opportunities by having 200 opportunities in a portfolio. The introduction suggested that Cancer Research Technology have 200 opportunities in their portfolio? Is that the right number? Should it be 5, should it be 50, should it be 1500?

Keith Blundy: The last question is a fair question, we can do that over a beer as to what that means. The first response I’d make is that it’s very sad and very British, that we always knock our own. We’re always saying that UK tech transfer is the problem and it’s much worse than anywhere else. You might say how can I say anything else, because I’m a practitioner. But I employ someone who used to run a US tech transfer office, worked in Harvard, ran Van Der Belt, ran other universities. And he works for us and runs our subsidiary in Boston.

Does he think that the organisations that he sees here, including ours, are better or worse than those in the US? He’s of no doubt that what he sees in the UK is easily as good, use whatever adjective you want, but I don’t believe on the scale that those in the UK are any worse or any better than those in the US. I think it’s really unfair. There’s been a lot of really good innovation in this country. People like Innovations have floated, taken on all sorts of models. All kind of models have happened here way before they happened in the US. The US is just there because it’s bigger, it’s older, and therefore more successes have come out. That doesn’t mean we shouldn’t look at ourselves and ask how we can do things better. There’s no doubt that there are many instances where we haggle over things we shouldn’t haggle and we try and over price things or business development people are inexperienced. But believe me there are people on the other side of the table who are just the same.  So we all have to try harder shall we say.

Richard Seabrook: If I could just make a comment as well, really endorsing what Keith has said. From the funders perspective we see hundreds and hundreds of proposals a year. Rarely are they very, very poor. There are always issues with any proposal, you’ve got to consider it for funding. But the tech transfer groups do a pretty good job actually. They do a lot of filtering, which they probably don’t get credit for because it’s probably not an easy thing to do. We do tend to compare ourselves to the US. In the US when they get things right they get it very, very right. So the best things from the US are really good but we do pretty well over all. Things aren’t perfect in the US, and they have their failures.

Tony Hickson: You’re going to see some different things happening structurally. Tech transfer is tarred with one brush, everyone is the same. Actually it’s immensely heterogeneous, there are big offices that are well resourced with lots of facilities behind them, and there are tiny little offices with 2 or 3 people who are expected to do everything, they have an impossible task. They are doing sponsored research contracts, they’re doing consultancy, they’re doing IP filings. How can someone in that position have any chance of being an expert or specialist or be able to test the market?

I suspect the response that may happen over the next 10 or 20 years will be greater consolidation of tech transfer and sharing of resources. So if you have bigger offices that have access to market research capability, are able to test the market, you may see smaller offices teaming up with them to access that resource. You’re always going to need a local presence; dealing with academia and ideas is a contact sport, you can’t get away from that. But I think you will see some consolidation in the sector.

Mike Capaldi: Just to pick up on something there. You often hear the argument, I used to argue with my next door neighbour with this one over the hedge. If you work for university then it’s public money so IP should be for free, because people have already paid for it. You can adopt that view but you asked me a question about entrepreneurialism, it’s quite important that our academics start to become more entrepreneurial as well. What’s wrong with them making some money if they invent something that’s really cool and takes off in the market? We need to share the rewards here and we should be encouraging an environment of entrepreneurialism amongst academics and in order to do that, clearly they need to make some money as well rather than ‘I’ve been publically funded so I’m just going to give that away.’ I understand the argument but I everyone should benefit from this. But back to something else we talked about everyone should share the risk as well.

Allan Marchington: In the rush of big pharma into academia, and as you say the blurring of boundaries and removal of boundaries, how do you guys ensure that you maintain your identity and that you don’t start to be branded by who you collaborate with?

Richard Seabrook: I can give you one answer for that. We’re usually pretty clear, and the industry is becoming pretty clear. Industry comes to us because we’re experts in the biology, and we’ve got the models. We go to industry because they’re experts in drug development or device development or whatever it is. I think that’s where the boundary is. There’s an area of mutual learning in the middle, and that’s great because as academics do more collaboration with industry so they begin to up their game as well. Likewise as industry starts to work more with academics it starts to see some of the challenges that academics face as well so that’s really good. But for me, there’s a clear boundary there. We do the biology, we have the models, and industry does product development.

Mike Capaldi: Can I just turn the question back, so if a university group has strong association with a particular company, does that put other companies off?

Allan Marchington: Sure, I was maybe hinting at that risk. Maybe some guys at Cambridge with the sort of rush of AstraZeneca into Cambridge, how much of it is for the general innovation to develop and how much is to own certain areas of biology within Cambridge. The establishment of CTIs by Pfizer within academic centres of interest, how much was it to benefit those areas or how much was it to lock in the science into a company? Those are the kind of thoughts I wanted to discuss with you guys.

I wouldn’t actually see that. My experience certainly in the US has been that when a pharma company goes somewhere, like J&J Innovation centres in San Diego, or the CTI in Boston with Pfizer, other pharma’s tend to want to go there as well, they’re wondering what the hell is going on there and want to have a look. So it actually acts as a magnet for other pharma to nucleate and start to build and grow, I see it more as a positive. It’s a bit like 5 years, 10 years ago, having a corporate venture fund come into your company. Having Pfizer invest or SR1 invest into your company, you think no other pharma company is going to buy my company and I’m not going to be able to exit, that’s just old hat now. You want one of those guys in because you want their expertise.

Mike Capaldi: Biotech companies do multiple deals with companies. You do a deal with one company, it gives you credibility, and more companies want to get involved.

Richard Seabrook: I was going to say the same thing, it’s partly you sell for an industry, why do you look at academics, why can’t they work with more than one partner? Why can’t an institution have more than one industrial partner? Why can’t they have Chinese walls and be able to do that. It’s because you believe they’re not capable of doing that. The worlds changing and it is going to happen that way. We’ve got multiple partnerships with different companies with the same groups of scientists, and they manage it so the world’s changing. One of the things we would try and do also is we often retain control. If we have a major partnership with an industrial player, we will retain control of that which we’re going to show. So there will never be an all-encompassing one company will get to see everything in that area. We will choose, which means there’s still other science that could be developed from that same area with other people.

Terry O’Dwyer: Time for one or two questions. Davidson Ateh, CEO of BioMoti at the back?

Davidson Ateh: Hi, just going to ask the panel to comment on a question around failure and attitude to failure in organisations. By its very nature there’s going to be a lot of failure in our industry. Incidentally I disagree with the comment about choosing winners. You can’t at the early stage, it’s just not clear cut enough to know whether they will succeed later or not. But whatever we do deal with tech transfer professionals, or when I have, they seem to be scared rigid of two things actually. Failure in terms of backing something, putting resources in something that doesn’t pan out. Or backing something that succeeds wildly but they haven’t then taken enough equity or whatever it is. So they’ve let the golden jewels out of the house. What is your comment from your experience in various organisations? Do you sit down and tell people hey it’s okay to fail, you’re allowed X amount of duds a year, or how do you deal with that?

Tony Hickson: I think the opposite, we’re embracing failure. We want to fail things as quickly as possible, because we have very tight budgets, we’re managing large portfolios of patents and IP. We’ve got lots of individuals with high expectations of us delivering something, and we need to know very quickly if this is going to fly or not. It’s very hard to do it with the limited information you’re first presented with. SO we’re using small amounts of money, proof of concept funding we call it, to try and do those killer fast fail experiments to quickly ascertain if this is going to fail or not. I mean the numbers we get out of Imperial, if there are 400 invention disclosures, we take forward about 50 or 60 of those. So 340 disappointed individuals we have to deal with each year, but we’ve got to have that type of attrition rate, because we’ve got to focus our resources on the ones we think are going to fly.

Richard Seabrook: Can I just make a comment on that, because Imperial Innovations tend to be several years ahead of everyone else frankly, you guys have taken it to a different level. Your average university is a very conservative organisation. We’ve talked about that most technology transfer offices are under capitalised in one shape or form. Which means of course you’re scared of investing money in something, because the vice chancellor is coming and knocking on your door and asking you why you invested £30,000 on that when it failed 6 months later. Again it’s a culture change thing, universities have to change their attitude towards risk. Places like Imperial have done that, clearly because you’ve done what you’ve done. That decision was taken 10-15 years ago. I think it will take time for the rest of the university environment to catch up with that but we need to get there.

Terry O’Dwyer: A few more questions?

Steve Scholar: My name is Steve Scholar, I’m actually also from Magnus, with my learned colleague behind me, David. I come from private equity, and there’s been some incredibly interesting points made surrounding IP and the risks that surround that and the ability to be able to improve ultimately that you are in controlled ownership of that. I can’t remember who made the point, but I’m always thinking about my exit when I’m coming in on the first day. I think that’s a really important thing for everyone to do. The gap funding, it’s a world that I know very well. In every project I’ve been involved in there is that point where there is a gap in funding. That there are two things, one thing we can do well is with good management and good controls is we can anticipate that gap. For any investor, whether that’s private equity or VC, whoever is coming in, anticipating that with a good glide path makes them feel more comfortable, we’re going to run out of money at the end of the month, kind of shock around the board room table, so that is good.

However, the challenge that we really face is not really understanding what pharma are looking for, whether they are looking for pre-phase 2, post-phase 2, and they are very big jumps in equity or in capital requirements. When you are pre-revenue there is no real opportunity for bank investment. You’re always looking for some type of capital play, that is complex and there is no particular guidance as to what model pharma is looking for in a particular type of therapy.  If there’s anything at all that keeps me awake, certainly the patents and the IP. I think that’s something we can always fix, good people, good management, good patent attorneys, you can fix those with some time. What I can’t understand well enough is what’s likely to work for pharma.

Mike Capaldi: The short answer to that is it is difficult to predict. Because things can change in the industry, inside companies.

Simon Portman: Pharma don’t know, that’s the trouble.

Mike Capaldi: Well that was going to be my next point. Actually you know we’ve talked about failure and we’ve talked about what do we have to do to attract a pharmaceutical company. I recall a project we funded in the early days of seeding drug discovery, which was a rare disease project, and actually it didn’t go very well and we stopped it. It was the first project to get partnered with a large pharmaceutical company. We could have not predicted that rare diseases 10 years ago, that rare diseases would be on the radar screen for pharmaceutical companies, very difficult to do. Alzheimer’s and obesity are really difficult to partner so it’s a moving target and I don’t think there’s an easy answer to it. What you have to do is keep talking to the companies and find out, build those relationships. The really good thing about the environment right now is the companies, and there are a few here tonight, they’re prepared to invest time to understand what is happening at the early stage, which I think is a healthy and new development.

Tony Hickson: I don’t think you can predict it. I spend a lot of time walking around pharma trying to understand what’s going on and where they are going, then the management changes and it all changes again. So I didn’t give up, I keep talking to them. But I think you’ve got to do your diligence, understand your science, is this the best thing out here, and just believe. It’s a bit like Evil Knievel going for the ramp; you invest and you leave it full open and hopefully you will jump the buses.

Simon Portman: I’ve found several cases where… I mean we’ve talked about the different culture of academia versus industry, but you get equal disconnect between little bio and big pharma, where I’ve had little bio clients where quite some way through the negotiations something gets dropped because something has happened internally in big pharma, and you don’t know what. There’s been a management change or a direction change or someone new has come on who thinks they don’t want to do that, that’s what the last person did. And you will never get any visibility of it or why they drop it and it’s got nothing to do with the virtue or otherwise of what you’re offering. So it is a real challenge.

Remember you can download the full 7 piece transcript here including the group Q&A.

If you’d like to attend any of the forthcoming events in the ‘Biotechs and the City’ series, you can see our October and November offering here. 

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