Commercialisation: Doing the hard-sell on research

Much to the chagrin of those actually at the coalface, the technical achievements of our leading scientific institutions and successful partnering with industry to bring them to market have long been tainted by the myth that not enough is being done and other countries are doing it better.

In September of this year, however, the findings of the first-ever study into research commercialisation in Australia revealed that quite the opposite was true and that relative to the US and Canada, indigenous research institutes had in fact been as, and in some areas more, successful.

The National Survey of Research Commercialisation was the culmination of a partnership between the Australian Research Council (ARC), CSIRO and the National Health and Medical Research Council (NHMRC). The survey collected information about patenting and licensing of IP arising from research being conducted within Australian universities, publicly funded medical research institutes and the CSIRO. It also collected information about the formation of start-up companies on the basis of that IP.

Comparing data from the Licensing Survey put out by the Association of University Technology Managers (AUTM) -- which looked at technology, licensing and related performance for US and Canadian academic and non-profit institutions and patent management firms in the US and Canada -- it was found that Australia is in fact doing a lot better than many would have thought. Australia, the survey concluded is on track to generate from public investment in research over 250 new companies over the period from 2000 to 2004. Data on the generation of licenses and patents was also very positive, showing, amongst other things, a strong correlation between an institution's experience in managing IP and actual returns on these assets.

The survey noted that key to meeting future targets would be closer ties between universities and commercial groups as well as major government grant schemes including the Commonwealth's Backing Australia's Ability program. Backing Australia's Ability has pledged $2.9 billion over five years to support technology innovation and generally enhance the country's general competitiveness, prosperity and well being. Several other grant schemes at both State and Federal level are also expected to play a crucial role. The fact that Australian universities performed well in all of the key commercial indicators was hardly received as a revelation by the community of technical and business professionals working in this area. Rather, all heaved a heavy sigh of relief that at least one of the prevailing myths about Australian innovation could now be laid to rest.

"Commercialisation of Australian biotechnology is moving in leaps and bounds and there are a lot of positive signs," says Mike Hirshorn, chief executive of St George Innovations, part of VC group Nanyang Ventures.

"The culture in so far as this is concerned is changing, encouraged by things like changes in capital gains tax, start grants and DIST (Department of Industry Science and Tourism) grants."

According to Claire Baxter, director of the Business Liaison Office at the University of Sydney, the survey findings reflect once again the traditional stoicism of Australian biotech professionals, be they in lab coats or suits, in that we have been able to deliver the goods on par with Canada and especially the US, despite "being relatively under-resourced".

"We're all trying to do better and better and clearly there are a whole lot more companies being formed," she says.

"I think there's been a lot of gradual change over the years and there's definitely a greater willingness on the part of universities to embrace collaboration with industry.

"It was nice to show from the evidence that we aren't so bad."

But what is meant by commercialisation? Is it simply about turning IP into product, slapping a patent on it and waiting for the cheque in the mail?

According to the Garvan Institute's Jon Izant, commercialisation is an oft-misunderstood term but one which fundamentally must be approached as much more than simply chasing a dollar. "The only way for a scientist to get their discoveries into a clinical setting that helps people is through some process of commercialisation," he says.

"There is an opportunity for groups to participate in the economic benefits and receive their flow-on effects but it is especially important for research groups to focus on 'appropriate' commercialisation."

For instance, he continues, there are myriad research results which may be "absolutely incredible" but which may be very difficult to turn into money.

Take, say, cell growth in fruit flies: very interesting and maybe appropriate for patenting but probably difficult to commercialise in terms of what the expression means for many people. "You may not be able to make a dollar out of it but you may have really accomplished the goals of getting something out that has a positive impact on the community," Izant says.

Research may lead to many things of potentially important benefit for the community at large beyond simply a crude financial benefit. A scientific discovery may greatly enhance the reputation of a particular institution or individual or eventually lead to improved clinical care in hospitals. All very valuable, Izant says, which is why governments need to see the bigger picture, particularly in their design of grant schemes. Ultimately for scientists, he believes there remains a schism between what is expected of them often by the entrepreneurs and lawyers, and what is actually practical or possible. "It is a very complex problem and usually these people are having to live up to certain metrics which don't actually reflect the real situation".

Hoping to address such concerns, the Knowledge Commercialisation Association (KCA) -- is running a conference next year from March 26-28 in Sydney, called Commercialisation: Forum and Fair of Ideas. Chief organiser, University of Technology Sydney commercialisation manager Paul Field says that the conference will be a milestone event for Australian technology commercialisation.

Formerly the Australian Tertiary Institutes Commercial Companies Association (ATICCA), KCA acts as an umbrella organisation for all of the major research and commercialisation groups throughout Australian universities. One of the key objectives for the March 2003 event, Field says is to foster constructive dialogue between commercial and academic groups on how to better bring indigenous innovation to market and into the community. A key difference with this event, he believes is an emphasis on practical outcomes with KCA offering, for the first year, a $100,000 prize for the best 'poster', or formal plan for commercialising a particular idea. The prize is to be named in honour of eminent Australian scientist and Nobel Laureate Peter Doherty.

Field says that KCA expects to receive around 200 posters from the CSIRO, universities and research groups like the Garvan Institute, with all entries restricted to a strict template. A major catalyst for the new prize, Field added, was to highlight the value of discipline and imagination in successfully commercialising ideas. "Eight years ago commercialisation was seen really as getting a commercial partner for an ARC grant," he says, adding that people realize now that commercialisation is a long process and things like ARC Linkage Grants are just one outcome.

"Commercialisation is a discipline in its own right -- it's not just about patents but much broader issues such as partnership and entrepreneurial vision." The technology commercialisation divisions of the major universities, for instance, are starting to garner respect within both academic and business circles as a result of slight cultural changes and a better understanding of common goals between what were usually mutually exclusive worlds.

"Tech comm offices are not retirement homes for academics -- they are increasingly being made more accountable for commercial targets," Field says.

Nanyang's Hirshorn agrees: "Leadership from major heads of publicly funded research institutes is proving very valuable." However, there are certain areas of Australian business which are some ways away from being converted and view the academic world as still having its head in the sand. Institutional capital has long been lauded as a panacea for many of the woes of Australia's biotech industry.

But while the number of venture capital funds investing in biotech has increased over recent years, the risks associated with funding early-stage university innovations are considered extremely high, with cultural barriers playing no small part. "We tend to shy away from the commercialisation arms of the major universities," says a senior VC executive in the biotech space. Invariably, he added, their IP is "very messy" in terms of how it is housed and handled. In addition, language barriers have been found to be prohibitive.

"They don't understand concepts like return."

"They think that if they have identified a big market then their business should be worth something like that, so you get this disconnect between valuation and adjusting for risk which makes it hard to guide their expectations."

Another major barrier, he added, is a basic understanding of how to approach getting money. "When you're pitching for money there's a certain way and skill of doing that --very few people in unis have that skill. We have found that they just don't get it".

Garvan's Izant thinks, however, that so-called disconnects occur right along the value chain and that business professionals are often guilty of "missing the point". Some innovations, he points out, are great opportunities for specific licences, often concerning patents which are a good way to generate cheques. At the same time spin-offs are great ways of building the industry. Unfortunately though, the two get confused. "It's not necessarily a good investment opportunity to create a spin-off company, some innovations may point to licensing whereas others may present a clear case for a spin-off he says.

"But confusing the two is very dangerous and is complicated by the pressure some groups bring to bear on trying to spin out as many companies as possible

"Nobody benefits from a failed spin-off -- it is really the expertise that is being leveraged into the commercial world rather than a patent or a company," Izant says.

According to Dr Andy Sierakowski, director of the Office of Industry and Innovation, University of Western Australia, there are risks associated with any sort of biotech venture, so getting the mix right is extremely important. "I guess it stands a lot on the merits of the technology and taking it to market with the right team, "You have to take the risk and occasionally you may get a reward."

Unfortunately for Australian biotech ventures, however, local investors are averse to speculative biotech stocks, preferring instead to take a punt on long-shot mining hopes or property developers. Even with the obvious advances being made by listed Australian biotechnology companies, their counterparts in the US are capitalised four times higher.

Prof Bill Sawyer, executive director of biological science and biotechnology with the Australian Research Council admits that while organisations like the ARC have greatly assisted in the commercialisation of biotech groups in Australia, more could probably be done to support good concepts and generally foster a stronger industry.

One of the ARC's more notable success stories is Proteome Systems, which relied heavily on ARC grants at its inception and which is now commonly held as the example of what all commercialisation think-tanks should be aiming for. But of course there is only one Proteome.

What needs to be addressed now, Sawyer believes, is the issue of filling in some of the obvious gaps in the current funding regime despite ARC coffers having recently been more than doubled to $560 million. "The funding has improved a lot but we need to look at what is going to happen in the next 10-15 years, especially as competing countries gather steam," Sawyer says.

For instance, at the basic research level, the distinction between upstream clinical research -- which defines much of the biotech area -- and applied research must be more clearly articulated. The ARC recently sealed what Sawyer views as a watershed agreement with the Australian Grains Research and Development Cooperation with the two groups agreeing to develop what will be called the Australian Centre for Plant Functional Genomics. It was the first time the ARC had entered into an agreement outside of its own group.

ARC also expects to announce before the end of the year formation of eight new centres of excellence, some of which will have definite relevance for the biotech industry. However, he warns, patience is an important virtue. "In terms of the discovery research we usually don't see the biotech commercialisation coming out of that for 8-10 years."

Yes Australian universities have done very well in commercialising their ideas, but as Garvan's Izant cautions, there are many hurdles yet to be overcome. Research funding, while improving in Australia, remains well below the current levels in much of Europe and the US while the low number of globally competitive spin-off companies, lack of experienced biotech entrepreneurs and institutional investors are set to impede commercialisation of Australian research for some time. "Australia faces challenges at every level."