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Research Corporation Technologies, independent since 1987, helps commercialize university inventions Ann Thayer C&EN Houston Research Corporation Technologies (RCT) has its origins in one of the oldest intellectual property and technology management operations. Existing as a program within the 88-year-old Research Corporation for many decades, Tucson-based RCT became an independent entity in 1987. With its emergence, the organization's efforts accelerated, and it has moved beyond filing and managing patents and licensing university inventions to take a more active role in technology development and new business creation. RCT is doing more than simply patenting and licensing, explains RCT President Gary M. Munsinger. It is now "investing in development to create the utility of a product, based on an idea." As part of the private Research Corporation foundation, the technology management program was not allowed to take ownership in new businesses. As RCT it can, and it has stakes in several start-up firms. John P. Schaefer, Research Corporation's president, also serves as RCT's chairman. There has been a "huge increase in the attentiveness of universities and faculty to opportunities to exploit their ideas commercially," Munsinger says, precipitated in large part by the Bayh-Dole Act of 1980, which allows universities and other research organizations to own and patent inventions developed under federal funding. "Universities have become much more attuned to and interested in creating their own capability for handling intellectual property." Universities and other research institutions filed 4,808 patent applications in 1998, while receiving 3,224 U.S. patents and signing 3,668 licenses, according to the most recent data from the Association of University Technology Managers (AUTM). Northbrook, Ill.-based AUTM represents more than 300 U.S. and Canadian universities and other institutions conducting research. Licensed technologies from this same group gave birth to more than 364 start-up firms in 1998, with the other licenses going to existing large and small companies. Munsinger [Courtesy of Wolf Photograph] AUTM's annual survey also found that university faculty made nearly 12,000 invention disclosures in 1998, while more than 17,000 licenses and options were still active, meaning that a technology was being evaluated or developed. The technology transfer business has accelerated during the past 20 years, with double-digit growth in most of these measures of success. Today, more than 200 universities are actively engaged in the process, AUTM reports, more than eight times the number involved in 1980. "Frankly, we view them not as being competitors, but as partners, and we attempt to work with selected institutions that we think have the potential for interesting technology," Munsinger says. Admittedly, university technology transfer offices have become "much more numerous, better staffed, more sophisticated in their activities," he notes. "But because faculty members are more aware of the opportunities for commercialization of their discoveries, these offices often are overworked and limited by their budgets." Working with a third party becomes a reasonable option for universities when "that third party brings something to the table," Munsinger adds. "They are always trying to find licensees, and even we will be a licensee for their technologies." Research Corporation Technologies at a glance Headquarters: Tucson, Ariz. Created: 1987 Revenues: $112 million Distributionsa: $58 million Net gain: $48 million Employees: 47 Affiliated organizations: BioVentures West (California), RCT BioVentures NE (Massachusetts), BioVentures Australia, Cambridge Research BioVentures (Ireland), Milestone Medica (Canada), Optics & Photonics Investment Initiative (Arizona) Note: All figures are for 1999. a Payments to inventors and institutions. -------------------------------------------------------------------------------- RCT's staff of nearly four dozen includes individuals, most with scientific and business training, who have the task of identifying and evaluating discoveries or technologies for their commercial potential. RCT also has institutional relations, communications, and information groups. Legal expertise helps inventors and university partners gain appropriate intellectual property protection. From there, business, commercialization, and financial staff help create development, licensing, and business plans, while possibly seeking collaborators, investors, or licensees. In 1999, RCT distributed nearly $58 million back to universities and inventors as royalties, licensing, and other fees. Distributions have averaged about 60% of project revenues in the past six years, and project revenues reached a record $104 million in 1999, up 37% from the previous year. Investments in start-up businesses brought in $8.2 million, up from a loss of $6.2 million in 1998. RCT's 1999 net gain, including the change in value of marketable securities it holds, was $48.1 million, up 174% from the previous year. "This business is highly cyclical, and it's very difficult to have steady growth in revenue," Munsinger says. "RCT really is investing for the long term, making very early investments that aren't going to pay off, if in fact they do pay off, for several years." However, RCT considers its overall financial stability as one of its strengths as a third-party technology manager. It has reported a net gain in each of the past six years. Another strength, Munsinger believes, is RCT's willingness to take on risk to advance discoveries and make them suitable for commercialization. However, it does not have in-house R&D capabilities and uses contractors, often at the university where a technology originated, when further development work is needed. RCT refers to this focus on finding embryonic or early-stage technologies and moving them through needed development as "venture gap." The gap is a result of venture-capital investors or larger companies wanting to take on less risk and invest in or license more developed technologies. "They are willing to pay more for that, where they have lower risk in making their investment," Munsinger comments. "One of the changes in the environment that we have addressed, and I think others who deal with university-based inventions have had to address, is having to take technologies through a development process before we can effectively attract partners to carry on development and eventually produce and sell a product." This is especially true in pharmaceutical, biotechnology, and biomedical areas, where RCT has recently concentrated more of its efforts. Putting greater emphasis on life sciences was "a business decision based on what we thought our capabilities were and our ability to work to a little tighter focus," Munsinger says. "It also was representative of what we thought the opportunities were. So it was a match of our perception of the opportunities and our perception of our capabilities." RCT is continuing a major initiative in optics and photonics. Since 1990, RCT also has managed the commercialization of fullerene production technology, based on work by Donald R. Huffman at the University of Arizona and Wolfgang Krätschmer at the Max Planck Institute for Nuclear Physics in Heidelberg, Germany. RCT has filed for patent protection for the C60 and C70 forms and general techniques for their production. Composition of matter and production process patents have been issued in Australia, Japan, Europe, and South Korea, and applications are pending in the U.S. Just last month, RCT announced that it was joining with licensing partner Materials & Electrochemical Research Corp. (MER) of Tucson and Japan's Mitsubishi Corp. to create a joint venture, Fullerene International, to commercialize the materials in Asia. MER has been a U.S.-based developer and producer of fullerenes and nanotubes for several years. The new company will have a manufacturing facility in Japan through subcontractor Honjo Chemical and will collaborate with other Japanese companies for fullerene applications. Research Corporation Technologies has advanced major technologies Cisplatin and carboplatin anticancer agents Prostate-specific antigen blood test for prostate cancer Technetium-99M complexes for cardiac imaging Recombinant protein expression in Pichia pastoris Fullerenes (production of research and commercial quantities) Silver sulfadiazine burn ointment Nonimmunogenic delivery of protein-based drugs Granulocyte-macrophage colony-stimulating factor for white blood cell production Blue Noise Mask for halftone printing RCT also has founded or supported early-stage biomedical companies such as Aeson Therapeutics, Sertoli Technologies, MetaProbe, Therapeutic Human Polyclonals, and NP Photonics. The company evaluates a large number of discoveries, inventions, and technologies each year. "The more ideas you see, the better off you are and the better decisions you can make," Munsinger believes, "because when you see so many opportunities, you'll know what's working and what isn't." To help it in its search and selection processes, the company has set up alliances with organizations around the world. In the U.S., it has two regional affiliates, BioVentures West, created in November 1997 in California, and RCT BioVentures NE, formed in March 1999 and based in Concord, Mass. BioVentures NE has committed $15 million to target early-stage life sciences discoveries in the region. To expand into Canada, RCT partnered with Royal Bank Ventures, a subsidiary of Royal Bank Financial Group, to create Milestone Medica, headquartered in Toronto, in February 1998. The venture-development firm focuses on early-stage biomedical discoveries from Canadian universities and research centers. In June, Milestone Medica, University Medical Discoveries Inc., and the University of British Columbia helped fund UBC spin-off Neuro Therapeutics' program for initial commercial development and preclinical studies of a nerve regeneration technology. Overseas, RCT created BioVentures Australia in March 1999 as a joint venture with venture-capital firm Start-up Australia. RCT initially allocated up to nearly $6 million to the venture. This year, RCT formed a cooperative venture in Ireland with Cambridge-based Emerging Technology Services. Together, they formed a more than $5 million venture called Cambridge Research BioVentures, based in Dublin. In addition to finding technologies, these worldwide ventures will seek to move promising innovations closer to commercialization either by supporting further development, providing management assistance, or creating new start-ups. "Commercialization is obviously the goal," Munsinger explains. "It's important to very carefully monitor the development process and assess whether or not milestones that have been designated have indeed been met. And if not, why not? One of the most important things in this business is to know when to stop--I suppose that is always the case when you are developing products at an early stage." RCT has had good overall success with the choices it has made, Munsinger says. "The game certainly isn't over in any of the cases, and we can strike out on probably any one of them yet," he admits. "But we've got a talented group of people, and we look at a lot of opportunities. We try to be smart about the ones that we move forward with, those in which we invest, and thus far we have a reasonable batting average." RCT has its competitors, but it's hard to find ones with revenues that have been as consistently high or stable. A new breed is emerging on the Internet (C&EN, July 10, page 19). Some of the new dot-coms, such as the Patent & License Exchange and Yet2.com, bring together industry subscribers. Others--such as TechEx, with a biomedical emphasis; University Ventures Inc., which works with university discoveries; or Technology Ventures, serving government labs--are trying to bring together sellers and buyers of technology. ChemicalPartners, which works across many areas and with many different parties, will provide technology development and business management for commercialization as well. Munsinger, however, sees the job as much more than matching up potential interests and brokering deals, especially when trying to bridge the venture gap. "Intellectual property is a long way from being a commodity," Munsinger points out. "Each discovery is a little bit different and requires a good deal of work and interaction to ascertain its value." -------------------------------------------------------------------------------- Benevolence breeds a research legacy Frederick Gardner Cottrell had a unique vision. In 1912, with the help of Charles Doolittle Walcott, then secretary of the Smithsonian Institution, he created Research Corporation and endowed it with the rights to his invention--the electrostatic precipitator for controlling industrial air pollution. As one of the first philanthropic foundations in the U.S., and wholly dedicated to the advancement of science and technology, it was chartered "to make inventions and patent rights more available and effective in the useful arts and manufactures," and to use its earnings "to provide means for scientific research and experimentation." Schaefer Today, Tucson-based Research Corporation has an endowment of about $170 million and awards between 200 and 300 grants per year, worth a combined $5 million to $7 million. "We're not an extremely large organization in terms of our endowment," says John P. Schaefer, Research Corporation's president. "Because we're more restricted in resources, we have tried to be smarter in how we disperse those and have targeted areas where we feel we can make a difference." The foundation funds research only in chemistry, physics, and astronomy. The organization has several different award programs, Schaefer explains. Some target young researchers in the first three to four years of their academic careers. The organization also supports faculty at many undergraduate and liberal arts colleges, as well as at larger universities. Another program helps midcareer and senior scientists looking to reestablish or initiate research programs. Its Partners in Science program, which gives high school teachers stipends to participate in university research during the summer, has just been transferred to the M. J. Murdock Charitable Trust. "We try to emphasize both the importance of teaching and research," he adds. A chemist by training, Schaefer has been with Research Corporation since 1982 and is former president of the University of Arizona, Tucson. "We also have a very active effort to go into the field and visit colleges and universities so that we really have the flavor of the institutions as well as the individuals." Grants are made to schools in both the U.S. and Canada. Research Corporation receives close to 500 applications per year, Schaefer says, and these are reviewed externally and then evaluated by a committee twice per year. "I think we've been able to identify the best and the brightest," he notes. The foundation's programs have aided about 15,000 scientists, nearly 30 of whom have won Nobel Prizes. Among notable scientists who have received grants are Ernest O. Lawrence, Robert J. Van de Graaff, Edward C. Kendall, Robert B. Woodward, Robert H. Goddard, and Edward M. Purcell. Research Corporation at a glance Headquarters: Tucson, Ariz. Founded: 1912 Endowment: $170 million Employees: 14 Grants awarded: $5.89 million in total to 199 U.S. and Canadian college and university faculty in departments of physics, chemistry, and astronomy Note: All figures are for 1999. Scientists also have contributed rights to important inventions to help fund Research Corporation grants. These include the synthesis of vitamin B-1, contributed by Robert R. Williams and Robert E. Waterman (1935); the process for growing hybrid seed corn, from Donald F. Jones and Paul C. Mangelsdorf (1949); the first antifungal antibiotic, donated by Elizabeth Hazen and Rachel Brown (1951); and the maser-laser concept, given by Charles H. Townes (1951). Although Research Corporation was established with Cottrell's patent rights, it had to first build a business to design and install precipitators. Its first 20 years were spent creating this business, which was later sold to establish a more conventional endowment. Although its grants primarily support research and training in the physical sciences, it does encourage efforts that further the development and application of useful discoveries. However, Research Corporation's original charter--which for many years manifested a program to evaluate, patent, and license university-based discoveries--has spawned another organization. In 1987, Research Corporation Technologies (RCT) was created as an independent entity to handle the technology transfer efforts in a manner consistent with federal tax law. Research Corporation is still allowed to hold a program-related investment in RCT, which is responsive to the foundation's original technology transfer mission |
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