Rush University Medical Center in Chicago, IL, recently inked a $42 million dollar deal for the sale of worldwide royalties stemming from Ampyra, an FDA-approved drug that helps to improve walking in people with multiple sclerosis. It’s a nice lump sum that Rush can now immediately put toward new research and development, but it was not what you would call a quick or easy transaction. In fact, the buyer in this case, Toronto-based DRI Capital, had been calling on Rush for seven years before the deal finally went down, according to Craig Shepherd, DRI Capital’s managing director. But such foot-dragging is hardly unusual or ill-advised.
“Given the complexity of university governance, it takes time to coalesce not only the inventors in an institution, but the various players in the institution as well because departments and faculties and boards and others rightly want to have a say in how an asset is monetized,” explains Shepherd.
Also, Shepherd notes that research institutions often want to see how the market develops before pulling the trigger on any deals. “In this case Ampyra had been approved by the FDA in the beginning of 2010, so by the time we announced this deal there was more than four years of commercial history in the U.S., and more than three years of commercial history in Europe [where the drug is marketed as Fampyra] because the product was approved there in 2011. So it was mature enough for them to understand the trajectory and for them to conduct their own internal forecast as to how the asset would perform,” he explains. “Historically, almost all of the royalty monetization transactions have been post-regulatory approval and then within the first four years of sale, so that kind of commercial history removes the risk for both the royalty investor and the institution.”
John Mordach, senior vice president of finance and chief financial officer at Rush, explains that while the institution had been looking at potentially monetizing this asset for some time, the market conditions did not seem compelling enough to make the move until 2013. “We had our valuation firm come up with a range of what [the royalty stream] might be worth, and then paired up with that we went through an RFP process — an actual auction process,” he explains. “We sent letters to six firms to see if they would express an interest in possibly bidding on it, and we received three bids back.”
At this point, Rush matched up those bids with its own valuation, concluding that DRI Capital’s bid was within the range of what it was looking for. Negotiations then ensued, resulting in an eventual deal.
While royalty monetization transactions like the Rush/DRI Capital deal are not always in an institution’s best interests, they are evidence of a further evolution in the market for IP, observes Brian O’Shaughnessy, an IP attorney at RatnerPrestia in Washington, DC. “They demonstrate how IP can fuel the economy, fuel greater research, improve the lot of society and improve the public as a whole,” he says. “Rush now has a whole lot of money that they can turn around and invest in research and development, whereas under their agreement with Acorda [Therapeutics, the licensee], for example, they might have had to wait for 10 or 15 years to get that full sum of money.” A detailed article on the Rush monetization deal, including advice for other institutions considering a royalty stream sale, appears in the October issue of Technology Transfer Tactics. To access the full article, as well as gain access to the publication’s rich eight-year archive of success strategies and case studies for TTOs, CLICK HERE.