Tech Transfer Central
TTOs call them ‘win-win’ deals

Universities use third parties to invest in and de-risk their technologies

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Two universities — one in the U.S. and one in Canada — are taking an approach to commercialization that few of their colleagues are employing: they are making deals with third-party organizations to market and/or invest in their inventions.

Of the two, the University of Montreal dipped its toes in the water first and is already reaping the rewards. Their agreement with MENODYS Inc., forged in June 2010, has resulted in MENODYS signing a distribution agreement for one invention with DeRoyal, a health care products company, for which it has received $1 million.

The University of New Mexico, by contrast, has just announced its agreement with Nevada-based venture investment firm Sunbelt Technologies Management LLC, which now has an option to license up to 21 potential pharmaceuticals developed at UNM’s Center for Molecular Discovery.

The idea behind both agreements is that the third party uses its money and resources to bring the technologies forward, providing the TTOs with guaranteed revenue while de-risking the innovations and, ultimately, gaining commercialization partners with even deeper pockets.

In the case of the Canadian deal, one of the participants believes their arrangement is unique to that country. “To the best of my knowledge we are the only company like this in Canada,” says Richard Côté, executive vice president of MENODYS Inc. He says there are “a couple of firms” like his in the U.S.

But UNM Science and Technology Corp. President and CEO Lisa Kuuttila says, “I don’t think this is unique to us; I just think other universities may be doing it but we’re publicizing it a bit more.” As for her organization, she would not necessarily limit the number of these arrangements she would entertain. “We would surely look at other similar deals,” Kuuttilla says.

What is the attraction?

Kuuttilla sees quite a bit of upside and little or no downside in such deals. “We have a lot of these potential drug candidates, and we have a wonderful screening center (UNM’s Center for Molecular Discovery) for new and potential repurposed drugs, and this might be a way to speed up the process,” she says. Sunbelt, she adds, will ultimately partner with larger pharma companies on a case-by-case basis. “That’s not the kind of work we could do at the university,” she explains. “We do not have the funding mechanism to go to NIH and say ‘We want to take the next step and see which ones to pursue further.’ That’s the gap we all talk about, and there are a lot ways universities are trying to bridge that gap.”

Kuuttila also sees an advantage in working specifically with Sunbelt. “They are interesting; in addition to being an angel group they are also a group of physicians, so they see the potential from their own unique perspective,” she notes.

When it comes to pharmaceuticals, she continues, the biggest challenge for a university is that it’s just so early for a lot of pharma companies to pick up compounds. “They want to see more data and we do not have the mechanics,” she explains.

Finally, says Kuuttila, the university is not giving anything up in this arrangement. “It’s absolutely a stronger way to go,” she asserts. “Ultimately our goal is to get as many technologies out to market as possible. I see this as a way to try to maximize that opportunity versus us trying to market them one by one.”

Univalor, the TTO for the University of Montreal, takes a hard look at each potential IP asset in its partnership with MENODYS, says CEO Jacques Simoneau. “They found this one, they had some knowledge of how to package it, and we decided it was worthwhile and signed an agreement with them,” he says. “They packaged it, manufactured it, and now it’s for sale.” MENODYS, he notes, was willing to invest its own money, to work grants, to sign consultants, to put a prototype together and try to sell it with added value. “In that case it made sense to us,” says Simoneau.

“It’s a win-win arrangement,” adds Clermont Beaulieu, Univalor’s business development manager in life sciences. “MENODYS took the technology at a very early stage, when what is needed is to interest a partner in a prototype — which we did not have. There was a need to invest some money — maybe $100,000. The difference here is they were willing to put in a lot of money to develop the prototype, and this is unusual in medical devices. Now they’re at the point where they are manufacturers and have sublicensed to a company to sell and distribute it worldwide.”

“There is a lot of innovation; researchers are very creative, but a lot of them think they have the best idea since sliced bread but are not actually equipped to assess the potential market, patentability, freedom to operate, and so on,” notes Côté, explaining why he saw the need for a company like MENODYS. Prior to launching the firm, he and his partner had managed an IP portfolio for eight years at the University of Montreal Hospital Centers.

“We quickly saw higher risk with pharma and bio given the cost of research and the extent of the process, while on medical devices you had the capability to bring them quickly to market at much less risk including investment, and large companies are now becoming more and more marketing companies looking for innovations to feed their pipelines,” he says. “Based on that, we called on the University of Montreal and asked them to open their pipeline of IP on medical devices.” They had 50 at the time; MENODYS now has a portfolio of four devices – three from that university and one from McGill.

“They are not business people; they are experts in the field of managing IP,” Côté says of TTOs. “We have contacts with the DeRoyals of this world. Univalor is an important collaborator; they are the port of entry for us, and we need to go through them. They hope to commercialize by pushing, but we are pulling.”

Now that the first deal has been a success, he continues, “they will think of us quickly when they see something new emerging in medical technology; they will quickly call us to evaluate if we would be interested.”

Structures not unique

While the agreements may be fairly unique, their structures mimic typical licensing deals. “It’s a pretty typical kind of deal as far as a tech transfer deal,” says Kuuttila. “It has all those normal royalties and upfront payments, and is fairly typical in terms of percentages.”

If Sunbelt passes on any IP, she adds, UNM is free to take it back. “They will certainly decide to pursue some and not others, and just like in any license agreement there are due diligence agreements,” Kuuttila notes. “We expect them to do some filtering process of their own, which could take years.”

As for Sunbelt, or firms like it, there is no limit to how much they can make from the deal. “It all depends on how they structure their agreements with their sublicensing partners,” she notes.

The same is true with the Univalor deal. “Our deal includes minimum annual payments to maintain the exclusive license on the technology,” notes Côté. “If we take too much time bringing the product to market and not getting sales, we take the risk for paying Univalor that amount of money.”

In other words, he continues, “when we license technology there is an upfront and minimum payment every year to maintain the license and if we do not reach our sales target in terms of royalties (typically between 4% and 6%) we pay the difference. So, if we sell the product for $100 we owe Univalor $4-$6 for every product sold in a given year. Typically they protect themselves and we agree to reach a minimum fee to maintain the license over the IP fee, depending on the country.”

“We are giving up the license and the expertise of the researcher in exchange for royalties every time they sell one unit,” adds Beaulieu.

Simoneau notes that a company like MENODYS “needs to take their own profit out so they sublicense at a higher rate and recoup the money invested and the risk they took.”

Looking forward, Kuuttila says she is open to variations on this theme, such as Univalor’s “one at a time” approach. “I’m not against the one-off,” she says. “Not by any stretch of the imagination is this the only kind of deal we know. Pharmaceuticals are very expensive to get off the ground.”

Not surprisingly, Simoneau is sold on the concept. “I have nothing against the fact that these kinds of people can come around, look at our technologies and if they think they have something to add to the technology and get it more prepared to market they tell us. In this case it made sense; so far so good.”

However, he doesn’t see this sweeping the tech transfer world. “I do not see this as being a trend yet,” says Simoneau. “Here we are talking about medical devices; in some other fields it could take a fair amount of money and time and the TTO may not be that well equipped to do it. We are a bit of a different type of organization; sometimes we can afford to [develop the IP] and sometimes not. I see this as one more tool we have to accomplish our mission — to get those innovations to market and make sure they are useful for society.”

Contact Beaulieu at 514-340-3243 or; Côté at 514-667-0108 x23 or; Kuuttila at 505-272-7905 or; and Simoneau at 514-340-3243 x 3280 or

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