Universities aren’t making a lot of money from university research – The Hechinger Report

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Stanford Medical School Professor Daria Mochly-Rosen delivers a TEDMED talk about how, frustrated by the slow process of bringing to market a drug that she discovered, she founded an international organization to help speed up the transformation of academic research into usable products. Photo: TEDMED/YouTube

When Daria Mochly-Rosen discovered a compound in her lab that promised to lessen the effects of heart attacks, she set out to convince pharmaceutical companies to develop it.

She couldnt.

So the professor of chemistry and systems biology at Stanford Universitys School of Medicine took a leave of absence and started her own company to further test and potentially commercialize the drug.

It seemed the obvious next step. After all, universities often speak of their success in turning research into products that make life better, with the added bonus of contributing to the economy. There are seemingly countless examples, from Gatorade, invented at the University of Florida, to Google, which began at Stanford; and from web browsers and plasma screens, both created at the University of Illinois, to the drug that became the allergy medicine Allegra, developed at Georgetown University.

But Mochly-Rosen quickly learned that there were myriad obstacles standing in the way of those kinds of payoffs, which turned out to be more exceptions than rules.

Other universities look at those very few rare cases and imagine they can also hit the invention jackpot, she said. But academicians are absolutely clueless about what needs to be done to make a project attractive to industry.

For those and other reasons, and at a time when they would seem to be searching for new sources of revenue, U.S. colleges and universities are producing a surprisingly small proportion of the nations patents and startups and making so little money from licensing inventions that, at many schools, it doesnt even cover the cost of managing them.

Most of the $75.3 billion a year from the federal government and other sources that the National Science Foundation calculates is spent by academia on research is not intended to immediately result in commercial applications. Its about fundamental knowledge. The basic research performed in university laboratories underpins discoveries that may take years to end up in the market, if they ever do.

But higher education itself often draws a connection between its research and financial returns, as it did in December after Congress increased annual research funding by $2.6 billion. The money will enhance U.S. global competitiveness [and] national security and lead to innovations that grow our economy while improving quality of life, the Association of Public and Land-grant Universities proclaimed.

Trying to prod more commercialization of discoveries from federally sponsored research is also why, 40 years ago this year, Congress passed the Bayh-Dole Act, which gave universities the rights to the licensing revenue resulting from their research.

In fact, academic institutions accounted for only 6,639 of the 304,126 patents granted in 2016, the last year for which the figure is available, or 2 percent of the total, according to the National Science Board, which described patenting by academic inventors as being relatively limited.

When you look at university PR offices, they always talk about how theres this new research coming out of some department, and its going to revolutionize the economy, said Lee Vinsel, an assistant professor of science, technology and society at Virginia Tech who is co-authoring a forthcoming book called The Innovators Delusion. But, he said, weve been overestimating the role were playing.

Marc Levine, emeritus professor of history, University of Wisconsin-Milwaukee

Universities and colleges spun off 11,000 startups between 1996 and 2015 an average of 550 per year according to the Association of University Technology Managers, or AUTM, whose members oversee what is known as technology transfer. Thats one-tenth of 1 percent of the roughly 400,000 annual startups reported by the Bureau of Labor Statistics.

It has almost become de rigueur among chancellors and presidents in selling the value of their universities to the larger community to say that we are engines of economic development, and theres scant evidence to support that, said Marc Levine, an emeritus professor of history at the University of Wisconsin-Milwaukee who has studied this subject.

The economic development argument is tenuous at best and probably even less than tenuous, Levine said.

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Now some institutions are redoubling their efforts to smooth the way for their discoveries to be shared and sold.

Thats increasingly important, and not only because universities and colleges are facing state budget cuts, enrollment declines and other financial challenges. The federal portion of funding for university research has also been steadily declining, forcing institutions to look for other sources of support. And money that comes from licensing typically goes back into the research budget.

There is a real sense of urgency generally to find new ways of underwriting university research, said Joseph Allen, who as a staffer to Senator Birch Bayh helped steer the Bayh-Dole Act and later served as director of technology commercialization in the Commerce Department. The public is expecting, Youve been entrusted with billions of dollars in government research. We want to see results.

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But moving research from a lab to the market is complex. First, researchers have to be willing to invest time in translating abstract concepts into tangible products. Many arent, technology-transfer directors said. One called it the unbaked cake phenomenon: Academic researchers show up in her office with a metaphorical bag of flour and a cup of sugar, she said, when what investors and potential partners want is a fully baked cake.

Joseph Allen, former director of technology commercialization in the Commerce Department

Mochly-Rosen said she has seen this among her colleagues and counterparts. Theyre saying, This is as far as I want to take it, and someone else can take it from there.

After all, faculty are awarded tenure and promotion based on measures such as how much research money they bring in and how many papers they publish, not their numbers of patents or startups or the licensing revenue they earn. Even the profits from commercialization, which most universities share with them, prove little motivation.

Thats because the process takes so long. Getting a patent can take five to seven years, said Allen, and testing a drug or developing a product even longer than that. Many fail, falling into what investors call the valley of death of abandoned ideas.

Its a high-risk, imprecise thing, he said.

People think inventions come pouring out of universities. But you have to find somebody willing to pay money for it, license it, develop it. Theres a lot of steps there that are out of your control, and we should be realistic about that. It doesnt mean we cant do better.

Some universities are trying. Theyre responding not only to the potential financial benefits, but to prodding from their own faculty, or from the government agencies that fund them. And that annual number of patents, while still low, has begun to rise.

After her rocky experience with the compound she developed that aids heart-attack recovery, Mochly-Rosen founded an organization called SPARK to speed up the transformation of academic discoveries into FDA-approved drugs and treatments.

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SPARK does this by bringing in volunteer experts from industry to help train faculty and students about how to bring the results of their research to market, and by giving them $50,000 a year for two years to create product proposals, also known as proofs of concept.

The Stanford University campus. Though a leader in converting discoveries from research into commercial products, Stanford is among several universities revamping this process to realize a higher return. Photo: Justin Sullivan/Getty Images

Sixty-two percent of SPARK projects are in clinical trials or have been licensed to new or existing companies or transferred to industry, a case study found, a much higher proportion than occurs with academic research discoveries in general. Now the model has spread to more than 60 universities and colleges in 22 countries.

To do good is first and foremost our agenda, said Mochly-Rosen, who has since established two more startups. Were benefitting from the taxpayers money to do research. Its our social responsibility. As for doing well, it is a very expensive business to develop drugs. So we have to recognize that you need money in order to make money, and its not incongruent with the agenda of social good.

Stanford also has reorganized its Office of Technology Licensing, under a new director who began in mid 2018, centralizing its functions and hiring new business development staff. The goal, it said, is to realize a higher return on our marketing efforts.

Its paying off. Already acknowledged to be a leader in this field, Stanford reported 560 invention disclosures and 150 licensing agreements in 2018, all up significantly over five years.

Theres a trend to push those numbers higher, said Brooke Beier, vice president for technology commercialization at the Purdue Research Foundation.

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At her university, said Beier, who was also appointed to her job in mid 2018, The leadership and faculty inventors are making a focused effort to convert more research findings into products.

The number of patent applications is up 42 percent at Purdue over the last five years, to more than 670 last year, while the number of licensing deals rose 13 percent and the number of invention disclosures formal determinations that a discovery may be worthy of a patent increased 32 percent, to 360.

We are a university that focuses on research. Were not a product development company. But at the same time we do a lot of applied research and want to translate that to the market, Beier said.

Even the university that receives the most research funding in the nation, Johns Hopkins, did some soul searching when faculty who were trying to commercialize their findings complained about a lack of institutional resources being made available to do that. Its $1.5 billion of research in 2012, a resulting investigation found, produced less than $16 million in licensing fees, about one-tenth as much as rivals including Columbia and MIT. There was no mentorship or funding to encourage licensing or startups, and technology transfer efforts were fragmented.

Johns Hopkins University. Despite conducting $1.5 billion worth of research at the time, an investigation in 2012 found that Hopkins was producing less than $16 million a year from licensing, about one-tenth as much as rivals Columbia and MIT. Photo: Carol M. Highsmith/Buyenlarge/Getty Images

There, too, the process has been revamped, with the creation of Johns Hopkins Technology Ventures, or JHTV. The university says it has now pulled ahead of Harvard, MIT, Columbia and Stanford in the number of new licenses its entered into and is tied for fourth in the number of startups.

There was a lot of untapped commercial potential, said Christy Wyskiel, JHTVs executive director, who was brought in from the private sector to run the effort. The type of research that happens here is really second to none. The question became, Why, from a job-creation or a licensing-revenue perspective, were we also not at the top? This ought to be a major part of our mission.

The University of California, Riverside, has also streamlined its technology-transfer functions, receiving 42 patents last year its most ever and attracting a 10 percent increase in direct corporate research funding: $16 million.

One way its done this is by spending money to make money, giving $1.4 million so far to researchers who want to show proof of concept, which technology transfer administrators say government grants typically dont cover. Other universities, including the University of Chicago, have created their own multimillion-dollar funds to invest in early stage faculty startups.

Our main objective is, yes, we want to get a return, said Brian Suh, director of Riversides Office of Technology Partnerships. But first we want to know, are they really going to be able to take this technology and bring it to market, which is a win-win for both sides.

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The National Science Foundation is trying to further speed up this process with a program called Innovation Corps, which trains researchers in how to commercialize work that was funded by the NSF. Its so far resulted in 644 startup companies, the agency says.

Stephen Susalka, CEO of AUTM, likened the need for this extra effort to the shift from employers once being willing to hire workers with only high school diplomas. Now more jobs require a degree, he said.

A researcher uses a microscope to look at stem cells at the Lokey Stem Cell Research Building at Stanford University. Stanford reported 560 invention disclosures and 150 licensing agreements in 2018, all up significantly over five years. Photo: John Green/Bay Area News Group/MediaNews Group/Bay Area News via Getty Images

Its kind of the same with technology transfer, said Susalka, former associate director for commercialization at Wake Forest University. Back when I started we could identify a device that might be useful, file a patent application and license that intellectual property. Now you need to develop that invention further than a purely academic researcher might do, so youre starting to see more tech transfer offices have a prototyping fund. Youre seeing more universities have venture funds to support those early stage startups.

Even the institutions where this work is getting more attention serve as examples of how long it takes to see returns, and how small they seem in comparison to the dollar value of the research they do.

Purdue conducted $645 million in research last year, from which it earned $6.7 million after costs were deducted.

Powerhouse Stanford earned $41 million in 2018 in royalties from licenses that emerged from university research. Legal expenses and administrative costs consumed more than a third of that, leaving $25.6 million to be divided among researchers and their departments. This at an institution with an $11.6 billion annual budget, including $1.7 billion a year in sponsored research.

Lee Vinsel, assistant professor of science, technology and society, Virginia Tech

One of the technologies licensed by Stanford earned just $11 in 2018, and 760 made less than $100,000 each. Only seven cleared $1 million or more.

Most universities make even less.

Twenty-nine of the 187 research institutions that reported their activity to AUTM collected less than $100,000 apiece in licensing revenue in 2017, the last year for which the figures are available, according to an analysis of the data by The Hechinger Report. Just 15 accounted for 72 percent of all the money. And the top five alone earned more than half. The list includes some academic medical centers and university-affiliated research hospitals.

Its a bit like college football, Levine said: There are some big-time programs that make a lot of money. There are some winners in the tech transfer, commercialization-of-research game, but those tend to be fairly few and far between.

Another way a few universities are trying to maximize their income is by becoming more aggressive in protecting their existing patents, something theyve previously been reluctant to do because there wasnt any money in their budgets for it. The University of California system in July sued Walmart, Ikea, Target and other retailers for the unauthorized sale of light bulbs with LED filament technology developed at UC Santa Barbara. The suit is being underwritten by a litigation financing fund in exchange for a portion of any award that results.

The enforcement work is part of that broader evolution of technology transfer, said Seth Levy, lead attorney in the case, which is pending. The trick is in making sure that the university gets some reasonable share of the proceeds when this technology is brought to market.

In one of the more unusual enforcement attempts, the University of Florida pursued the $2 million won in an artificial intelligence competition by two of its professors and four students. Unless the winners turned over the money, a university lawyer wrote, they would be subject to personnel action and possibly other more serious consequences. That move was reversed after the faculty union filed unfair labor practices complaints.

At most universities, despite all of this effort, said Virginia Techs Vinsel, the flow of money from discoveries remains a comparative trickle.

Theres always reform around this stuff. Theres always, Heres the new way were going to do it, he said.

I dont want to be overly skeptical. But theres a long track record of trying different things and not succeeding as much as the boosters have hyped it.

This story about university research was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for our higher education newsletter.

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Universities aren't making a lot of money from university research - The Hechinger Report