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Oxford's Knack For Spinning Gold

Offshoots from university's chemistry department make their mark in the world of commerce

by Patricia L. Short
September 24, 2007 | APPEARED IN VOLUME 85, ISSUE 39

Grand Opening
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Credit: Rob Judges
Queen Elizabeth II attended the opening ceremony for Oxford's new chemistry lab in 2004.
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Credit: Rob Judges
Queen Elizabeth II attended the opening ceremony for Oxford's new chemistry lab in 2004.

Blame it all on a chemistry research laboratory. The decision in the 1990s by the University of Oxford's chemistry department to build a $130 million laboratory concentrated minds on the need to raise money. Part of the department's solution involved a pioneering agreement with the intellectual property commercialization company IP2IPO, now known as IP Group.

The gist of the agreement was that IP Group would receive the rights to 50% of the university's shareholdings from any chemistry-related corporate spin-off over the next 15 years. In return, IP Group invested roughly $40 million in the chemistry department, by far the largest investment that the department had ever received from any of its corporate investors.

It was the first such agreement by a U.K. university seeking to commercialize its intellectual property. It was also the first such partnership for IP Group, which earlier had proposed an even larger infusion of funds in exchange for the right to be the sole investor in chemical spin-offs, an exclusive arrangement that Oxford declined (C&EN, Sept. 20, 2004, page 20).

IP Group couldn't have picked a better partner. Oxford's chemistry department bills itself as the largest in the Western world, every year turning out 80 doctoral graduates and 180 chemists with the equivalent of a master's degree.

Richards
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The IP Group investment put the department over the top in its laboratory fund-raising drive, without any financial input from the university, points out Graham Richards, who at the time was the chairman of the department and now is a professor of physical and theoretical chemistry. The new laboratory building officially opened in February 2004 with a gala ceremony attended by Queen Elizabeth II.

Davies
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Credit: Patricia Short/C&EN
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Credit: Patricia Short/C&EN

The result, adds Steve Davies, Waynflete Professor of Chemistry and Richards' successor as department chairman, was "the best building in the world to do chemistry. This building worked the minute we turned it on."

Even before IP Group became involved, the department was spinning off companies, the first four in the 1980s and 1990s. But by 2000, the pace had quickened, and by the end of 2006, Richards says, the chemistry department had contributed about $160 million to the university as a result of creating spin-off companies. "This has been achieved," he stresses, "without any interference with the normal curiosity-driven research activities of individual academics."

Through it all, the University of Oxford has controlled all intellectual property generated by its labs via its technology-transfer arm, Isis Innovation, named for "the Isis"—what the Thames River is called as it runs through Oxford. Isis Innovation pays patent and legal costs to establish and protect intellectual property rights on behalf of the university. If justified, Isis will then encourage licensing or spinning off the technology.

In the early 1990s, Davies recalls, Isis was a sleepy little organization, in part reflecting the fact that few academics were trying to commercialize their research. "There was essentially no help???we had to find our own investors," he says, recalling his first launch, in 1992, of Oxford Asymmetry, a contract chemistry spin-off. "But then a small number of people like us encouraged the university to revamp Isis into a much more efficient machine." Isis hired Tim Cook, Oxford Asymmetry's first chief executive officer, to develop a better mechanism for commercialization.

Richards adds that the combined experiences of Davies' Oxford Asymmetry and his company, Oxford Molecular, helped convince the university that spin-offs are a good thing. Supported by Oxford's improved attitude and the need to fund the new chemistry research lab, Richards was able to negotiate the deal with IP2IPO.

"In my view," Davies says, "it was the best deal the chemistry department ever did." With the group's arrival, any chemist with a commercial idea could use its market experts as a sounding board. Researchers don't have to go with IP Group, he points out, but the investment firm is a steady and available presence.

One key to the chemistry department's commercialization success, Davies says, is that IP Group encourages its academic partners to bring in professional management early in the process. "Academic scientists are academic scientists, not professional managers," he says. "The quick failures tend to be in companies with the academic scientists trying to run the company."

IP Group also helps companies launch on the stock market much earlier than they normally would have been prepared for, he adds. Initial public offerings (IPOs) enable the newly fledged companies to be less dependent on venture capital, which usually comes with strings attached, and more able to control their future than they otherwise would have been.

Company-Making Machine

Oxford University Has A Long History Of Chemistry-Related Spin-offs

2006

OxTox: Features handheld electrochemical drug detection devices similar to those used to test for alcohol. The company's technology is based on the research of Richard Compton.

Oxford Advanced Surfaces: Seeks to exploit coatings that use chemistry developed by Mark Moloney.

2005

Oxford Catalysts: Offers technology for clean energy from the research of Malcolm Green and Tiancun Xiao. Made an initial public offering (IPO) in 2006.

Oxford Nanolabs: Develops single-molecule detection methods based on research of Hagan Bayley.

2004

Oxford Medical Diagnostics: Features laser-based analytical techniques from Gus Hancock.

2003

ReOx: Drug discovery firm based on controlling the activity of hypoxia-inducible factor. It incorporates the work of Christopher Schofield.

Vastox: Drug discovery company that uses chemical genomics; founded by Steve Davies. Went public in 2004; renamed Summit this year.

2002

Glycoform: Based on glycochemistry from the research of Ben Davis and Anthony Fairbanks.

Zyentia: Specializes in structural modification of proteins derived from Chris Dobson's research.

Pharminox: Focuses on small-molecule oncology and originated from work by Gordon Lowe.

2001

Inhibox: Based on the screen-saver project of Graham Richards for drug-lead discovery.

2000

Oxford BioSensors: Built upon work of Allen Hill, Luet Wong, and Jason Davies.

1997

Opsys: Based on light-emitting molecules work of Paul Burn. Merged with Cambridge Display Technology in 2002.

1993

PowderJect Pharmaceuticals: Drugdelivery company now part of Novartis.

1992

Oxford Asymmetry: Based on the chiral chemistry work of Steve Davies. Had IPO in 1997; now part of Evotec.

1989

Oxford Molecular: Features computer-aided molecular design software from Graham Richards' group. Had IPO in 1994; now part of Accelrys.

1987

Medisense: Now part of Abbott Laboratories, the company was founded on Allen Hill's work using electrochemical methods to measure glucose.

It is to IP Group's advantage to create spin-offs, Richards notes. Hence the investment firm works to monitor what is going on in the chemistry department. Young researchers are invited to frequent coffee outings, where they can discuss what needs to be done to exploit their technology. In all cases, Richards and Davies emphasize, the academics have remained in their academic posts while some of their postdocs join the companies to take the technology forward.

IP Group also helps the young companies find management. "That's the bottleneck now," Davies says. "At one time, it was finding the money, but now that is not difficult. Probably the hardest thing now is finding the managers."

Three of Oxford's offspring show the range of companies that have spun off from the chemistry department. Summit has grown large enough that it is making acquisitions of its own. In contrast, younger company Oxford Catalysts was launched on the stock market last year. Another, Oxford Advanced Surfaces, is a privately held company.

Davies, the founder of Summit, which until July had the name Vastox, says his spin-offs reflected a desire to subsidize his group's research. "The university didn't take any risk; I took it all" in setting up the chiral chemistry specialist Oxford Asymmetry, he says. That company began to grow, he recalls, and then in 1995 he set up a combinatorial chemical company, Oxford Diversity.

Within four years, he and his colleagues had combined the two companies into Oxford Asymmetric International (OAI) and floated it on the London Stock Exchange. By 2000, Davies says, the company was faced with a choice: merge, acquire, or sell. OAI merged with Germany's Evotec, which valued it at about $650 million at the current exchange rate.

"We put a certain percentage of the profits into a fund for my research," Davies says. "I was happy to do that, because I had another idea in mind: Vastox."

The idea behind Vastox, Davies explains, was to address skyrocketing pharmaceutical research costs. Although companies spend millions to prepare a potential drug for human clinical trials, they are relying on safety data based on testing in only a small number of animals. "That's statistically irrelevant to the large number of people you're going to put a drug into," Davies says. Instead, what pharmaceutical researchers really need is a statistically relevant number of animals that provide lots of data at the very beginning.

A good number, he points out, is "a million." But that has a clear implication: "It has to be a pretty small animal."

Hence the company's selection of Drosophila larvae and zebrafish embryos, two "animal" alternatives to mammals that have been shown to be good indicators of toxicity in humans (see page 103). "We use those to develop a large number of assays—very quickly, very accurately—to generate a large amount of biological data," Davies says.

Since the company was launched, it has developed two further areas of focus. One is discovery of drugs for orphan diseases—those that affect a relatively small number of individuals. And more recently, it has embarked on a program of medicinal chemistry services, especially in the area of carbohydrate chemistry.

Oxford Advanced Surfaces, one of the chemistry department's newest spin-offs, was founded by Mark Moloney and Jon-Paul Griffiths to exploit research that began about 10 years ago on the permanent modification of polymers.

The chemists' technology, called Onto, is based on a reactive molecule, such as a carbene, that is coated onto a normally inert surface. Applying ultraviolet light or heat activates the molecule, and it forms a permanent covalent bond to the desired surface, which can be a film, a fiber, or even a particle. Although the coating is only a few molecules thick, it dramatically changes the properties of the surface.

Griffiths, who is now the company's chief technical officer, says it became clear quite quickly "that we could go a really long way with this. The more things we looked at, the wider the applications appeared." Possibilities include imparting biocidal properties to surfaces, rendering surfaces biocompatible, making hydrophobic surfaces wettable, and aiding the bonding of plastics to metal.

Conversations with potential funders and investors provided the researchers with the welcome pressure to form a company. At that point, Griffiths says, they needed a CEO. Through Isis, they found Marcelo Bravo, an entrepreneur with a background in chemistry. By 2006, Bravo's new team had completed funding from IP Group, and Oxford Advanced Surfaces was spun off as a private company.

Oxford Catalysts, publicly traded since April 2006, was spun off from the department of chemistry to develop two technology platforms. The first is for a novel class of catalysts incorporating metal carbides that, for some reactions, can match or exceed the benefits of traditional precious-metal catalysts at a lower cost. The second platform relates to chemical reactions involving a liquid fuel that contains an alcohol such as methanol, hydrogen peroxide, and water. These reactions can be used to generate hydrogen gas or high-temperature steam from this fuel instantaneously and at room temperature. The instant-hydrogen technology, the company says, has the potential to accelerate the adoption of fuel cells in mobile markets by providing a source of cheap, safe, transportable hydrogen.

Chief Operating Officer Will Barton joined the company from a career in "big chemistry" with industry giants such as ICI. Taking a management reorganization as an opportunity to make a change from that career, he contacted Isis and eventually joined Oxford Catalysts.

He started to work with its two founders, Malcolm Green and Tiancun Xiao to develop a business plan and begin presentations to investors. Within a year, the team had an investment from IP Group.

Barton says IP Group isn't always in a hurry to take a new company to the stock market. "But it became clear in our case that there was a lot of money going into clean fuels," especially on London's Alternative Investment Market. "We raised the idea of an IPO with potential investors and got good feedback." The IPO, he adds, gave the new company money in the bank and confidence to hire people and set up its own facilities outside the university. Its payroll now includes 18 staff members and a couple of part-time consultants.

Oxford Catalysts is already working out markets for its technology. For example, applications of the metal-carbide-based catalysts include the removal of sulfur from natural gas and coal through hydrodesulfurization. In this process, the natural gas or coal is converted into virtually sulfur-free liquid fuels via Fischer-Tropsch reaction, and methane is transformed into synthesis gas.

For Barton, the switch to a small company has been rewarding. "The last 15 years of my career have been spent in jobs such as vice president of manufacturing and technology for $400 million to $600 million businesses," he explains. "The main reason I wanted to switch was that in all those previous jobs, I had to do a lot of downsizing. It's not satisfying to be known as someone who is good at that. I wanted to go try to create something."

For Oxford's chemistry department spin-off companies, the entrepreneurial atmosphere has been exhilarating and something of a change for Britain.

"The U.K. had been doing catch-up," Bravo says, "but there's nothing for it to be envious about lately. I don't know if any other chemical departments can match what is happening here or not; this is as dynamic as it is anywhere."

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"We're still a long way behind Silicon Valley and Boston's Route 128," Richards concedes. "But there is starting to be a pool of people who have done this before."

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