The spin-off and win game

November 14, 1997

Scottish universities are profiting handsomely by commercialising their research. Olga Wojtas reports.

SCOTLAND'S higher education institutions earn more than Pounds 6.7 million a year from commercialising their research work. Scotland has 15 per cent of the country's academic science base, and its 10,000 scientists, technologists and engineers publish enough papers per head to make it the third most important country in the world in research terms for its size.

But Scottish Enterprise, the national development agency, is convinced Scotland can do even better in terms of money making, and last year joined the Royal Society of Edinburgh to set up the Technology Ventures strategy. It aims to generate more than Pounds 3 million annually for universities and colleges, creating jobs and increasing Scotland's industrial competitiveness.

A key plank is to bring together the academic, industrial and financial communities, and last week Technology Ventures held a major international congress bringing together hundreds of delegates ranging from venture capitalists to research assistants.

More than 20 innovative companies seeking about Pounds 30 million in funding support presented their case to international investors. One of the smallest was the Stirling University-based Safety Solutions Ltd, which is seeking Pounds 500,000 seedcorn funding for a home carbon monoxide detector.

One of the largest was PPL Therapeutics, formed a decade ago to commercialise technology developed by the Biotechnology and Biological Sciences Research Council's Roslin Institute, home of Dolly the sheep. The company has grown from two employees to 140 in Scotland, 25 in its American subsidiary and five in New Zealand, and raised Pounds 35 million when it floated on the London stock exchange last year.

Breda McMillan, head of the Technology Ventures team, said the number of spin-off companies had risen from 60 to 100 over the past two years. "That will keep us well on target for the 150 companies we expect to generate during the life of this strategy."

Some 42 per cent of the existing campus companies, which employ more than 2,000 people, have been set up in the past five years, 16 per cent of them from Edinburgh University, with Strathclyde University a close second with 15 per cent. The key sectors are software, biotechnology and technical and consultancy services.

Edinburgh's principal, Sir Stewart Sutherland, warned against concentrating on one type of campus company. He said the university's interest was sometimes in "buying a share of the action". However, there were other examples where no income came back, but links with the company could result in more contract work.

Stephen Paterson, Heriot-Watt University finance director, outlined the benefits from Edinburgh Petroleum Services, a spin-off with a Pounds 6 million turnover. "They provide joint courses with the university, joint research and consultancy, and pay us a dividend and rent."

Heriot-Watt recently set up an institute of technology management, with a team of economic advisers helping to assess whether particular research is best exploited through a spin-off company, a joint venture, or licensing to another body.

Principal John Archer said the institute helped academics understand the commercialisation process. "We have to recognise the tensions within the community. It is an uphill struggle to find intellectual respectability for academics in commercialisation," he said.

There was an attitude that the purity of research was tainted by being associated with commercial activities, reinforced by the research assessment exercise that did not reward anything to do with commercialisation, Professor Archer said.

But Sir Stewart said the universities' funding base was affected by the state of the economy, and Scotland's knowledge-based economy depended on commercialisation.

Drummond Bone, Glasgow University vice principal, said businesses must realise that universities were not a free service. "All too frequently what is meant when someone says a university is not behaving commercially is the exact opposite. 'You don't seize opportunities' can easily be negotiating-speak for 'you're not prepared to take a loss so I can make a bigger profit'," he said.

Parochialism must also be avoided, Professor Bone warned. Glasgow University was the market leader in commercial income in Scotland, but the vast majority of that came from outside Scotland.

"I do not think it should be dispiriting for local businesses that universities have to make a choice between licensing intellectual property to a multinational, starting up a joint venture with a Japanese company, or spinning off a company in partnership with a local team," he said. "On the contrary, that is the guarantee of a healthy high-tech industry in Scotland."

Case one:firm seeking cancer cure enjoys rapid growth

David Lane, a leading cancer researcher at Dundee University who discovered cancer suppressor gene P53, has co-founded a company with Glasgow University cancer specialist Allan Balmain in a bid to pioneer a cure for the disease using gene therapy.

"In around 60 per cent of tumours, cells have an abnormal form of P53. We are looking for a way to treat only cells with faulty P53, leaving healthy cells untouched," Professor Lane said.

Therapeutics firm Cyclacel, set up at the end of 1996, already has 16 medical researchers. Housed at Dundee University, it plans to set up its own laboratory, having won Pounds 2.5 million from the Merlin Fund as well as support from Scottish Enterprise Tayside and Dundee City Council.

Merlin Ventures is a new investment company founded by Chris Evans, biotechnology entrepreneur and a member of the government's technology foresight panel, who is also chair of Cyclacel.

"Cyclacel has made significant progress since its inception," he said. "Our investment will allow more rapid progress. The fund has invested at an earlier stage than normal, which entails a higher degree of risk. Of course, Cyclacel's success will eventually lead to higher returns for the fund's investors."

Case two:campus links benefit 3-D software company

Andrew Bissell, a former Edinburgh University computer science student, still maintains close contact with the university as chief executive of software company Voxar Ltd. It has developed software that can manipulate three-dimensional images on PCs, whereas traditional 3-D imaging requires a workstation costing tens of thousands of pounds.

There is a huge range of potential applications, but the company has initially been focusing on the medical market, with the prospect of individual doctors and radiologists being able to carry out patient scans.

"Although we're not a campus company, we have strong links with computing sciences, the centre for neuroscience, and the teaching hospitals. We were able to target users and find out what they needed," Mr Bissell said.

Voxar is housed in the university's technology transfer centre. "In the early stages, when the company had no money except what I was investing personally, we had access to facilities for a nominal fee, libraries, and other research-ers for exchanging ideas."

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