UAA RESEARCH COMMERCIAL IZAT ION FRAMEWORK

PRESENTATION TO THE UNIVERSITY OF ALASKA

BOARD OF REGENTS

DR. HELENA S. WISNIEWSKIVICE PROVOST FOR RESEARCHDEAN OF THE GRADUATE SCHOOL

June2012

INTRODUCTION

• Critical to maintaining the US lead in innovation, the successful 21st Century University will need to be a driving force behind new technologies for new jobs and new hope for the future.

• To benefit the state and the community, UAA will commercialize technology based on faculty and student research.

• UAA proposes a framework that will leverage the university’s Intellectual Property ( IP) into commercial successes by:

• Monetizing its IP through licensing and startups.• Ensuring that its startup companies provide a positive outcome for

Inventors, the University, Investors, and the greater community.

INNOVATION SUCCESS

BENEFITS OF TECHNOLOGY COMMERCIALIZATION

• Revenue Generation.• $2.42 Billion from licensing of US University IP in 2010.

• Job creation.• In 2010 Jobs created from university IP was up 10% from 2009.

• Attract and retain faculty and students.

• Keep graduates in the state. • University startup companies often hire graduates.

• Contribute to Economic Development.• 498 of the startups formed in 2010 had their primary place of business in the licensing institution’s home

state – up 10%.

• Contribute to innovation. • In 2010 there were: 20,642 disclosures; 12,281 new US patent applications, and

4,469 new US patents issued.

(*) This data is based on a 2010 AUTM survey of about183 universities.

SUCCESSFUL INVENTION AND COMMERCIALIZATION REQUIRES

• An infrastructure that is agile, and responsive to business opportunities.

• A process to easily transition emerging technologies based on faculty research to applications to customers/ markets.

• A plan for commercializing Intellectual Property.

• Advances in Research that result in Disruptive Technology.

• Quality patent portfolio.

• Incentives for faculty and students.

PROPOSED INFRASTRUCTURENEWCO HOLDINGS

• NewCo Holdings, Inc., would be a wholly owned subsidiary of UAA.

• Its Purpose is to be flexible and responsive to business opportunities. • It will provide a corporate interface between UAA and its enterprise

companies and other entities interested in licensing UAA IP.

• The functions are: • To license UAA IP to the start-up companies and to other interested

parties.• Receive equity shares for UAA in return for assignment of intellectual

property rights to start up companies.• Provide dividends to UAA from this equity.

PROPOSED INFRASTRUCTURENEWCO HOLDINGS

• The NewCo Board of Directors will be chosen for their comprehensive expertise in startup companies, IP and licensing, and senior executive experience, and technology expertise aligned with the IP portfolio, to provide proper guidance for UAA’s commercialization efforts.

• The independent Directors will be a mix of Corporate CEOs, Venture Capital Firm Partners, technology experts, and investors in NewCo Fund.

• They will provide direction on business issues and to assist the UAA patent committee and the VPRGS on matters such as which research is “commercializable” and whether to license the invention or create a startup.

• NewCo Fund – will be a private equity investment fund and affiliated with New Co Holdings.

• The purpose of NewCo fund is to provide seed funding, to select start-up companies in the current and future UAA portfolio. • It may also consider select start-ups from the community that

assign IP to UAA or provide equity shares.

• Investors will include individuals, angel investor groups and institutional investors. UAA will participate in the the fund through NewCo Holdings.

• Investors will be provided a term sheet - the terms and conditions for investment.

PROPOSED INFRASTRUCTURENEWCO FUND

PROPOSED INFRASTRUCTURENEWCO FUND

• NewCo Fund will have a fund manager and and advisory board experienced in managing funds. • The fund manager will be supported by 2% of the raise, which is

a customary amount.

• The fund will have a first look at new UAA startups.

• Initial raise is for $10 to $15 million.

NEWCO HOLDINGS AND NEWCO FUND

SOME CURRENT PROSPECTS FOR NEWCO HOLDINGS AND NEWCO FUND

• 49th State Angel Fund – Anchorage, Alaska – • Met with fund managers - Lucinda Mahoney

and Joe Morrison. • VPRGS was speaker at their May 17 event.• Expressed interest to invest in NewCo

Fund for $1.5M – application period - May 17 until August 5.

• Landmark Ventures - leading global strategic and financial advisory firm offering venture investment – focus on technology companies. Headquartered in New York City with offices in Tel Aviv and San Francisco. • VPRGS - serves on their advisory board for

Life Sciences• A partner from the firm willing to serve on

the Board of Directors of NewCo Holdings• Interested in investing in NewCo Fund,

about $1M .

• New Venture Partners - commercializes innovations through spin-out ventures from large global corporations. Headquartered in New Jersey with offices in Silicon Valley and the UK.

• A Managing Partner of the firm willing to serve on the NewCo Board of Directors.

• Potential investor in the fund about $1M.

• Total potential funding to date: $3.5M.

• HSARPA – Interested in funding start-ups. Viewed NewCo Fund as good way to do so. Under discussion.

• In discussions with CEOs of GCI and Greatbatch, Inc. to serve on the Board.

STRATEGY FOR FUTURE INVESTMENT & JOINT VENTURE PROSPECTS

• Pursue investment funding from a mix of:• Venture funds – start with list of 20 firms that VPRGS has worked

with previously on East and West coast.

• Corporations - aligned with areas of UAA technology. Start with:• Medical devices – Greatbatch, Stryker, Johnson & Johnson,

Medtronic.• Sensors – Lockheed Martin, L3, Telcordia.• Potential future drug therapy – Johnson & Johnson

• Government:• HSARPA – follow up regarding their start-up strategy.• SBIRs, STTRs

• NOTE: many of these can also serve for licensing of IP.

OFTEN ENCOUNTERED ROADBLOCKS

• Deal flow.

• Raising funds.

• Finding experienced business people to work with the inventors.

• And the following questions.• Is the IP commercializable? • Pursue a license or do a start-up?

OFTEN ENCOUNTERED ROADBLOCKS AND RESOLUTION

Roadblock1. Deal flow.

2.Raising Funds.

3. Finding experienced business people to work with inventors.

4. And the following questions.• Is the IP commercializable? • License or do a start-up?

Resolution

1. Quality UAA patent portfolio. Increase UAA IP annually.

Possible inclusion of IP from other sources.

2. NewCo Fund – seed money for start-ups.

3. The Board of Directors of NewCo and the Office of the VPRGS and UAA administration has this expertise. Their network of colleagues and associates provides an additional source.

4. Chart 1 provides commonly used guidelines for this purpose.

ENSURING UAA IP FOR DEAL FLOW

• Increase # invention disclosures by 10% starting in FY 14 (use 2012 as baseline). • 10 to 13 in FY 13• 15 in FY 14• 16 in FY 15

• Increase Number of Provisional Patents to about 8 per year.

• Increase number of patent submissions to at least 7 per year.

• License IP – 2 to 3 new licenses each year.• Goal to achieve and maintain 50% of IP portfolio licensed.

• Create start-up companies:• At least one by end of FY13. • 2 in FY 14.• 3 in FY 15.

COMPARISON TO NATIONWIDE UNIVERSITY SURVEY

0-10 11-25 26-50 51-75 76-100 101-200

201-300

301-400

401-500

>50005

10152025303540

AUTM 2010 SURVEY

Number of In-stitutions

Number of Invention Disclosures

COMPARISON TO NATIONWIDE UNIVERSITY SURVEY

0-10 11-25 26-50 51-75 76-100

101-200

201-300

301-400

401-500

>5000

10

20

30

40

50

AUTM 2010 SURVEY

Number of In-stitutions

Number of Patent Applications

COMPARISON TO NATIONWIDE UNIVERSITY SURVEY

0-2 3-4 5-6 7-8 9-10 >100

10

20

30

40

50

60

70

80

90

100

Number of Institutions

Number of Start-Ups

AUTM 2010 SURVEY

INTERNAL PROCESS FOR IP AND INVENTION

Achieve Exit Strategy

Launch Start Up

Based on Technologies

Identify Technology Ready

for Commercialization

Develop Prototypes

Develop Business Strategies

Acquire Investors

Establish Fund

Faculty and Students

Research Invention Disclosure

Provisional Patent or

Patent Filing

License

Protect Invention

Existing Companies

Produce Revenue

LICENSE OR START-UP?CHART 1

LICENSE• Technology represents an

incremental improvement to existing technology used by established companies.

• Crowded field, potential infringement risk.

• Customer loyalties exist towards particular companies.

• Well-established distribution channels have been created by existing companies.

• Regulatory approvals – such as FDA approvals needed – for example, high cost clinical trials.

• UAA example - license spinal rod bender; student success model.

Start-UP• Technology is usually disruptive.• Platform technology. • Broad range of applications for

technology.• Potential to mitigate risk (exit

strategy).• New market with high demand.• Clearly defined need.• Can overcome barriers to entry.• Short time to market.• Large market with significant

growth.• Significant profit margins.

• UAA example, potential start up – ultra life long sensors.

GUIDELINES FOR STARTUPS

• Once it is decided to launch a start up, the following criteria or rules are useful in their creation:

• Rule 1: Know What Business You Are In.• Rule 2: Understand Who/What Your Competition Is.• Rule 3: Know if Your Product Fulfills a Critical Need - Or is it

a ‘nice to have’.• Rule 4: Understand Who You Are Selling To.• Rule 5: Have A Good Business Plan.• Rule 6: Strong Management Team.• Rule 7: Flexibility – do not be tied to your technical concept.• Rule 8: Protect your intellectual property.• Rule 9: Have an Exit Strategy.• Rule 10: If you cannot walk away from the deal, it is not a good

deal.

FOSTERING A CLIMATE OF INNOVATION INCENTIVES

Incentives:• Innovate Awards – established in December 2011 – internal seed

money for research and invention.•Since January 2012 already achieving successes – invention

disclosures; Scholar in Residence; received external funding from NIH.

• Patent Wall of Fame - established in December 2011•First inductees December 2011.•Other incentives-$500 patent filing; $1,000 for patent awarded.

COST OF IP

• Cost of IP to the university• Provisional Patents - $2,000 to $5,000• Patent - $15,000 to $25,000• Maintenance costs after patent is issued

• So if UAA has • 8 provisional patents a year @ $3,000 = $24,000• 7 patent filings @ $15,000 = $105,000

Approximate Total annual costs for patents: $129,000.

Plus maintenance fees, once issued.

EXAMPLES OF POTENTIAL ROI

• From the sale of a startup • 250% return, after 5 years, possible based on proceeds from the sale,

and net after direct costs (attorney fees, patent costs, royalties back to faculty). (*)

• Another metric used by AUTM and others is ROI on research investment• Based on total research expenditures and revenue from licensing and

startup sales. • Can receive as much as 18%.

(*) Actual example from sale of Plasmasol – a Stevens startup – to Stryker.

EXAMPLE OF LICENSE REVENUE – EMORY NIVERSITY

EXAMPLES OF POTENTIAL LICENSE REVENUE EMORY UNIVERSITY

• Emory’s spike in 2005 was the result of a one time license from Gilead Sciences Inc. for their drug invention for HIV/AIDS.

• The story illustrates research to invention to startup to acquisition.

• It started with a drug developed by professors in its chemistry department in collaboration with professors in the pediatrics department at Emory.

• The drug invention, emtricitabine, was licensed to a startup – Triangle Pharmaceuticals – in 1996, which was co-founded by two of the inventors, who were professors at Emory. The drug received approval from the FDA in July of 2003. It was acquired by Gilead in 2003.

• Quote from Professor Liotta, one of the inventors and co-founder of Triangle summarizes the university’s role nicely: “Federal funding from NIH together with institutional support for the technology transfer process from Emory University allowed the professors to carry out critical early stage research, and transfer those discoveries into the startup company Triangle.”

NEAR-TERM LICENSING

• Student Success Model • License agreements with Beta Universities have been

initiated.• Starting to receive signed agreements.• Patent pending.

• Ergonomic Rod Bender for Spinal Surgery • Licensing deal under discussion with L5 Partners.• Interest from Greatbatch, and will pursue additional

medical device companies – Stryker, Medtronic.• Patent pending.

• Multiple Factor Authentication Using Gaze Tracking and Iris Scanning

• US patent # 7,986,816

POTENTIAL NEAR TERMSTART-UP CANDIDATES

• Ultra long lifespan wireless sensor device for remote monitoring, asset management, surveillance and security.

• Eye gazing for learning tools• Currently being used in UAA’s Music Department

to assess skills. Next application reading.

• Wireless Head Impact Mouthguard combined with sensing additional biological indicators.

 

SUMMARYTHIS PRESENTATION HAS PROVIDED

• An overview of a proposed framework for commercialization that is responsive to business opportunities.

• A process and plan to transition emerging technologies based on faculty research to customers/ markets.

• Candidates at UAA for near term licensing and near term startups.

• These candidates can contribute to providing a revenue stream for the university, retain students after graduation, attract faculty and students, and contribute to economic development. • They can also have an impact on solving problems of importance to the community,

the state and the nation.