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When Research Leads to Products
Yale president Rick Levin ’74PhD talks about the commercialization of Yale research
November/December 2006
by Kathrin Day Lassila ’81
Y: In 2004 universities collected more than $1 billion from licenses on
research for commercial use. Yale is part of this trend. In 1985 Yale held 10
patents. Now it has 311. Is it a policy goal of yours to increase the number of
commercial products coming out of Yale?
L: We don’t set targets. We’re not trying to drive university science
by commercial objectives. We want to do great science. Some of that will have
commercial potential; most of it won’t. But we want to make sure that there's
good opportunity for faculty who have ideas with commercial potential. This is
an important part of our strategy for strengthening science at Yale, and also
for strengthening the economic base of the New Haven community.
Y: How much revenue has Yale made?
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“Our technology transfer strategy is not to maximize
revenue.”
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L: Over the past ten years, our net revenue from patent royalties has
been approximately $210 million; all of these proceeds are directed to the
support of research. But our technology transfer strategy is not to maximize
revenue. Our primary goal is to get the findings of our laboratories out into
practice. The importance of this is most obvious when you think about drugs or
medical instruments—potentially life-saving or life-extending inventions.
Before the Bayh-Dole Act was passed in 1980, it was very difficult to get these
inventions commercialized, because the government owned the patents. The act
let universities seek patents on discoveries made with government funding in
their labs. The Bayh-Dole Act has been an immense success in terms of getting
more discoveries out into public use.
Y: Yale’s technology transfer office lists some 70 companies that
originated with Yale research and says many started in New Haven. Do they stay
here?
L: Most companies are still here. We inevitably lose some of the more
mature companies to the suburbs. It would be nice to have the tax revenue in
the city, but the region is one labor market. These companies add to the
regional strength of greater New Haven as an emerging biotechnology cluster.
Y: Yale is about 30th in total university patents since 1983. It doesn’t
make the annual top ten lists. Most of the top ten are the huge state systems,
like the University of California system, but Columbia, Stanford, and Cornell
do make those lists.
L: They have big engineering schools. The numbers are driven by schools
that combine strong life sciences and strong engineering. We have a bioscience
faculty that’s competitive in both scale and quality with any place in the
country, but a very small engineering faculty. There are sub-fields in
engineering and computer science where we have had a number of start-up
companies. But we only have 65 engineers, and many of the schools with the most
patents have three hundred or more.
Y: What are the major products from Yale research?
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“Zerit, one of
the main components of the AIDS cocktail, was
discovered at Yale.”
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L: There has been important patented work in micro-electronics and
notable work in signal processing algorithms and software. But most of our
patented inventions are drugs. We have had at least one very major drug that was
discovered at Yale and developed by Bristol-Myers Squibb—Zerit, one of
the main components of the AIDS cocktail for years. The university made
substantial amounts of money on the royalties. And many, many lives were
extended because of it.
Y: In 2000 you made a novel royalty arrangement.
L: For a number of years the university had been getting about $30
million a year from Zerit, and then we decided to sell off the remaining
royalty stream to investors for a lump sum in excess of $100 million. It was
one of the first securitized patent royalty transactions in the country. This
has now become a popular vehicle for financing.
Y: Then in February 2001, Yale came under pressure from its students
and Doctors Without Borders to make Zerit more available in Africa.
L: There was growing public concern about the availability of AIDS
drugs in Africa, and there was lobbying in South Africa to allow in generic
substitutes for patented drugs. When this issue came to our attention, we went
to our exclusive worldwide licensee, Bristol-Myers Squibb, and said, Look, you're
hardly selling any of these drugs in Africa because you’re charging ten dollars
for a daily dosage, and the cost of production is way less. So why not cut the
price to marginal cost?
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“Drug development costs are huge.”
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Drug development costs are huge. To make drug development possible,
prices in the U.S. and Europe must recover the cost not only of drugs on the
market, but also of all the failed experiments that never come to market. But
at ten dollars a dose this drug wasn’t selling in Africa, and hundreds of
thousands of people needed it. And after some discussion Bristol-Myers Squibb
agreed. It became the first U.S. company to cut the price of an AIDS drug in
developing countries.
The other companies with drugs in the standard AIDS cocktail followed.
Meanwhile, the Indian drug company Cipla also started exporting generic
substitutes, so you had competition. Soon there were generic drugs and
name-brand drugs available in Africa at about one-and-one-half percent of the
original prices. The following year the World Trade Organization modified its
rules so that drug companies would not see their home-market profits eroded by
the re-importation of discounted drugs from developing to developed countries.
I was very happy that Yale was able to participate in a constructive way in a
process that prolonged lives and set an important international precedent.  |
