QIMR learns tough lesson

Leading Queensland medical research centre QIMR has discovered that swapping intellectual property for shares has its downside.

The lesson involves 833,334 shares that QIMR owns in publicly-listed Amrad which it acquired in exchange for collaborative research work it did 10 years ago.

The parcel's value suffered this month when the drug discovery company's shares plunged 23 per cent after the announcement of unsuccessful clinical trials on one of its lead compounds.

Worse followed for QIMR when a newspaper report about its share parcel woes was headed "$250,000 loss on the sharemarket."

That prompted 'please explain' calls to QIMR from some of the philanthropic donors on whom the institute depends for the bulk of its funding.

They were apparently disquieted by the headline's implication that the medical research institute was using funds to invest in the stockmarket rather than support research.

Chief operations officer Michael Staley was forced to resort to the newspaper's letters to the editor page to explain the institute cannot buy shares under the terms of the Queensland legislation that governs it.

It can only acquire shares as payment for licensing its technology, expertise or facilities. The shares can be sold at the direction of the institute's governing council and proceeds ploughed back into its research program.

Staley says there was "definite evidence" of negative donor reaction to the headline. His concern was that an organisation as reliant on philanthropic donations as QIMR suffers serious damage "from any perception it is not doing the right thing."

For research institutes, the problem of managing share holdings acquired in return for intellectual property will grow in complexity as the biotech market matures.

The larger research organisations and universities have set up specialist companies to search out the best paths for obtaining financial returns from their work and construct strategies for maximising returns from share portfolios.

"It all comes down to governance structures," says David Evans, CEO of university-related investment manager UniSeed and a former managing director of Uniquest, the company responsible for commercialising Queensland University's IP.

The prudent way to handle high risk equity in speculative start-ups is by diversifying to spread the risk, says Jonathan Izant, business development director for NSW's Garvan Institute.

That is how venture capitalists deal with the problem but Australian research institute has individually developed enough IP to spawn a sufficiently diversified portfolio, says Izant.

"This is a problem that all research institutes in Australia are trying to deal with."

Making life even more difficult, especially for smaller institutes, is the question of how to support specialised internal staff.

World best practice suggests research institutes should have one full time business development or technology transfer specialist per 250 to 350 researchers, says Izant.

"If that is a reasonable economic model, you have to ask how an institute can afford it when they may have only 50 researchers...the simple math is that they can't."

A number of efforts are being launched to provide a solution by creating what might be called bureau services.

One is Biocomm International, a Victorian company which reportedly intends to make its expertise available to smaller research institutes on a fee-for-service basis.

Another is BioLink, a NSW effort involving Izant which is bidding to create with State government support a single centralised IP mining and business development service.