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Financial Windfall From Lyrica

Royalty payouts from university-held patents have power to transform chemistry departments

by Mitch Jacoby
March 10, 2008 | A version of this story appeared in Volume 86, Issue 10

Taking Shape
Credit: Mitch Jacoby/C&EN
Northwestern's new chemistry building is being financed, in large part, with royalty income from Lyrica.
Credit: Mitch Jacoby/C&EN
Northwestern's new chemistry building is being financed, in large part, with royalty income from Lyrica.

OF ALL THE would-be pharmaceutical agents that academic researchers study, very few turn into commercial medications. Even fewer still generate millions of dollars for the drugs' discoverers and their universities. And for a university to land a drug-related windfall at the next level up—in the billion-dollar blockbuster range—is all but unheard of. Yet Northwestern University stands to bring in that kind of wealth from its royalties on Lyrica, a pain and epilepsy medication recently commercialized by drug giant Pfizer.

Although Lyrica only became available on the U.S. market at the end of 2005, Northwestern has already drawn hundreds of millions of dollars from the drug. For example, the university collected more than $70 million from Lyrica sales in 2006, and this past December, Northwestern announced it had sold rights to a portion of its Lyrica royalties to New York City-based Royalty Pharma for $700 million. "Essentially, we are converting a potential stream of future royalty revenues from Lyrica into an immediate cash payment," says Eugene S. Sunshine, Northwestern's senior vice president for business and finance.

That kind of cash is sure to have a profound impact on a university. Depending on the way funds are divided and the types of programs to which they are applied, such money streams may have the power to invigorate and transform academic chemistry departments.

That's exactly the sort of thing on the minds of Northwestern's chemistry faculty these days. But they're not the only ones thinking that way. A number of universities, including New York University, Emory, Princeton, Florida State, and the University of Minnesota, are reaping or have already reaped huge payouts—to the tune of several hundreds of millions of dollars each—from royalties on drug-related discoveries made within their walls. On some of the campuses, chemistry departments are benefiting significantly from the influx of large sums of money.

"The good news is that Lyrica royalties have already brought in well over $700 million," says Joseph T. Hupp, chemistry department chairman. "Even better news," Hupp says, "is that Northwestern still retains a substantial portion of the royalty rights." He adds that the funds are providing the university and its chemistry department a unique opportunity to do great things.

According to Sunshine, Northwestern elected to put the net proceeds of the deal with Royalty Pharma into the university's endowment. The idea is to invest the payment and provide income for the university from the profits. "Doing so permanently undergirds several major university activities that are critical to Northwestern's long-term success," Sunshine remarks.

Profitable Discovery
Credit: Mitch Jacoby/C&EN
Pregabalin became the key component of the blockbuster drug Lyrica nearly 20 years after it was first synthesized by Silverman (shown) and his group.
Credit: Mitch Jacoby/C&EN
Pregabalin became the key component of the blockbuster drug Lyrica nearly 20 years after it was first synthesized by Silverman (shown) and his group.

In general, the funds are helping to build new institutes and facilities and to attract talented researchers. In addition, the windfall is focusing beneficial media attention on the school and its chemistry department. That's where the drug's active ingredient, pregabalin, was first synthesized and studied nearly 20 years ago by chemistry professor Richard B. (Rick) Silverman and Ryszard Andruszkiewicz, a visiting scholar from Gdansk University of Technology, in Poland.

At the university level, proceeds from Lyrica will be used to support a variety of what Sunshine terms "infrastructure projects," only some of which are the kind that require hard hats and heavy machinery. The projects include updates and replacements of numerous buildings throughout the campus and related physical plant renovations. "It's not a very sexy use of the money," Sunshine acknowledges, "but it's vitally important to be able to sock away money for those kinds of ongoing expenses."

ROYALTY FUNDS are also being used to support a variety of other programs such as financial aid for undergraduate students. Also included are graduate fellowships, which Sunshine says are being "beefed up" to enable Northwestern to attract "top-flight graduate students" in all academic areas. Funds are also being earmarked for research start-up costs for newly appointed faculty members and for support of other academics during transitions between grants. "For us to have the money to do that sort of thing is huge," Sunshine comments. "It gives us the opportunity to really grow the research enterprise."

Meanwhile, in Northwestern's chemistry department, the feeling that exciting and positive changes are under way can hardly be concealed. "This place has been on a roll for a while," Hupp says, noting that the department has grown in recent years to have a total of some 400 graduate students and postdocs. With financial resources now available from Lyrica, the department expects to continue to grow, not just in size but also in stature. Hupp isn't subtle about the department's aspirations: "Our goal is to bring Northwestern to the very top echelons of chemistry in the world."

To help guide the department toward new levels of success, faculty and staff are developing a variety of far-reaching plans. One of those plans is set to revitalize Northwestern's aging Analytical Services Laboratory (ASL), a public user facility established in the 1960s to provide researchers access to special research tools.

As a result of several large-scale investments, the facility is moving to a brand new location with twice the space and twice the staff of the current facility. ASL Director Andrew W. Ott says the new facility is being designed with two main goals in mind: to educate students to become scientific leaders and to assist researchers in state-of-the-art analyses based on NMR spectroscopy, X-ray crystallography, mass spectrometry, and other analytical techniques. Not only will the lab's customers have access to cutting-edge research tools, they'll be able to use the instruments rather inexpensively because a portion of the Lyrica funds will be used to subsidize instrument usage fees.

Structure of Ziagen

THE CHEMISTRY DEPARTMENT is also investing in graduate fellowships, which can be viewed as a form of internal support meant to supplement conventional (government-sponsored) research grants. Hupp explains that the internal support is being provided to give professors the flexibility to work on potentially risky ideas and to give students some leeway to explore research avenues that may not necessarily lead to publishable results. "If you're not always in fear of making a mistake that can cost you a grant renewal, you have the potential to be creative," he says.

Another boon to Northwestern stemming from Lyrica royalties has been the accelerated pace at which it secured funding to launch the school's new Chemistry of Life Processes (CLP) Institute. The institute brings together researchers with expertise in chemistry, biology, engineering, and computational science to solve problems in molecular science relevant to human health.

Chemistry professor Thomas V. O'Halloran, who directs the new institute, says planning for it began a few years ago. But last year, the project was put on the fast track when Lyrica's discoverer, Silverman, announced that together with his wife, Barbara, and their children, he was making a substantial donation to help pay for construction of the new building that will house the CLP Institute.

"Rick's generous decision to apply some of the first income he would have received from Lyrica sales to the construction of the building was the turning point," O'Halloran says. "That donation moved the project into high gear."

Ground breaking for the new building, the Silverman Hall for Molecular Therapeutics & Diagnostics, took place last March. The schedule calls for research groups to move in sometime next year.

Structure of Emtriva

STATE-OF-THE-ART science buildings equipped with top-notch research equipment have the power to draw highly successful researchers to a university. But for Northwestern's newest recruit, organic chemistry and nanoscience pioneer Sir Fraser Stoddart, the offer of future office and lab space in Silverman Hall and access to newly improved facilities all over campus was only part of the motivation to move his 25-person research group from the University of California, Los Angeles, this winter. The main impetus was less tangible.

"The largess that comes with Lyrica puts Northwestern in an incredibly powerful position to enhance the academic and intellectual life of the chemistry department and related science departments," Stoddart says. "It's a massive piece of good fortune," he adds, noting that he values the opportunities the funds are providing to tackle important scientific problems in a highly collaborative environment.

Lyrica's potential to earn more than $1 billion in royalties for Northwestern makes the drug an attention magnet. But it's not the only drug to have garnered huge sums of money for a university. Remicade, an anti-inflammatory agent used in the treatment of rheumatoid arthritis, brought New York University $650 million in 2007.

According to NYU chemistry department Chair Nicholas Geacintov, his department has not received any of the Remicade royalties. The drug was discovered by researchers in the department of microbiology, which is part of the NYU School of Medicine, and that's where a lot of the funds have been invested.

Emory's discovery of emtricitabine, an HIV medication marketed by Gilead Sciences as Emtriva, has earned some $540 million in royalties for the university, according to chemistry professor Dennis C. Liotta, one of the researchers who led the drug discovery team.

SIMILAR IN APPROACH to Northwestern, Emory is investing some of its royalties in the university's new Computational & Life Sciences (CLS) initiative, an interdisciplinary program focusing on complex problems at the interface of computation, synthetic biology and chemistry, and systems biology.

Structure of Alimta

Chemistry department Chair David Lynn says that the chemistry department elected to use a portion of its royalty proceeds to construct a new chemistry building that will house some of the CLS research activities. The building, for which ground breaking is scheduled in 2009, will be constructed in a campus complex known as the "Science Commons." According to Lynn, the complex deliberately locates researchers in chemistry, physics, math, computer science, and psychology close to one another.

Juxtaposing researchers with disparate types of expertise, for example in chemistry and psychology, "has the potential to tie together the natural and social sciences," Lynn says. He adds that such an interaction ultimately may lead to a molecular-level understanding of memory and other brain functions.

Other major pharmaceutical royalty earners include Alimta (pemetrexed), an antitumor medication discovered at Princeton; Ziagen (abacavir), an HIV drug that has earned nearly $400 million for the University of Minnesota; and Taxol (paclitaxel), an anticancer agent for which chemist Robert A. Holton's semisynthesis method brought some $350 million to Florida State University (FSU).

Policies stipulating the way patent royalties are distributed among university colleges, departments, and patent authors differ from university to university. Alimta was discovered by Princeton's Edward C. Taylor, now an emeritus chemistry professor. Yet according to chemistry Chair Robert J. Cava, "the university may use the funds as it chooses." He says Princeton does not require spending the money on the chemistry department. Nonetheless, Alimta royalties, at least in part, are being used to finance major chemistry department projects: constructing a new chemistry building, improving research facilities, and hiring new faculty.

"We have a benevolent administration that wants to see the chemistry department become highly successful," says David W. C. MacMillan, an organic chemist who moved to Princeton from California Institute of Technology in 2006. "There's no question that Alimta funds are stimulating the growth of chemistry at Princeton," MacMillan says. "And that includes my own hire."

Structure of Taxol

ROYALTY INCOME is also making a big impact on the chemistry department at FSU. Department Chair Joseph B. Schlenoff says that Taxol revenue financed graduate fellowships, research-facility improvements, and other department programs. And like other universities benefiting from drug discoveries, FSU is also investing in a new chemistry building.

Likewise, at Minnesota, royalties from chemist Robert Vince's seminal work on abacavir helped transform the department of medicinal chemistry, which is part of the college of pharmacy. Yusuf J. Abul-Hajj, who headed the department for 21 years, notes that the drug's financial success was instrumental in the department's growth over the past several years from 12 faculty members to a total of 28. Abul-Hajj says he is especially pleased that the department was able to recruit Gunda I. Georg, "a world-renowned researcher in drug discovery and development" to head the department.

Sometimes though, good fortunes go bad. A university and its chemistry department could appear to be riding the gravy train, "but there is always a potential for downsides," Liotta says. Expiring patents, for example, could leave a university in a lurch, unable to continue supporting expensive programs. Endowments or other forms of investments, however, generally sidestep those kinds of problems by providing the means to pay for programs.


And even large gifts sometimes end up causing disputes. That's what happened at FSU when Holton agreed to donate a large portion of his personal earnings from Taxol royalties to help pay for the new chemistry building. Eventually, the university claimed that Holton was trying to exert too much influence over details of the building design and ended up returning his gift as a result of a bitter lawsuit (C&EN, Sept. 11, 2006, page 13).

Despite that unfortunate episode, FSU's Schlenoff says, "the mood here is very positive these days." It's no surprise that Schlenoff and his chemistry colleagues feel that way. As he explains, "we start moving furniture into our new building next week."

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