Bio pioneers vie for patent success

Picture this, a final, ultimate cure for cancer has been discovered in a cramped, underfunded university lab. Working on a shoestring, a genetically engineered human cell has been used to identify and then destroy cancers. Now the researcher wants to bring this discovery to market.

It will cost an initial £1,000 to register an Irish patent and perhaps £100,000 over five years to finance patent protection in key countries. But the researcher will not have the resources to battle piracy if a major international player steals the idea despite patenting.

Venture capital will be another problem. Then there is the danger that the discovery might have been made while the researcher was working under contract to a multinational. Who owns the intellectual property, the scientist or the contracting company? While an absolute cure for cancer clearly has not yet been developed, high quality Irish researchers regularly face the above problems when they seek to bring ideas to market. And biotechnology really does represent an enormously promising area where Ireland could make its mark internationally.

There are 55 Irish-owned biotechnology companies according to the body which promotes and oversees the technology here, BioResearch Ireland (BRI). These firms employ about 4,800 and include small private sometimes single-employee - companies but also substantial firms able to raise international finance and gain listings on Wall Street.

IdentiGEN Ltd is an example of the former. It is a campus company established in November 1996 and based at Trinity College, Dublin. Officially it has one employee, explained managing director, Mr Kieran Meghen, although it draws on research resources within TCD's department of genetics.

It employs the very latest genetic technologies which allow a consumer to trace a piece of steak in a butcher's window right back to the source animal by taking its genetic fingerprint. This young company is now knocking at the door of a massive potential market for its unique services. Ireland's beef sector processes millions of animals each year and it could provide a reliable history of each, no matter where the meat ended up. The company is unusual, Mr Meghen says, because it has developed the technology and is also now selling its own products and services. And while there are few high-tech innovations that could be applied to markets here, the beef tracing system is one. "We would envisage the growth of the company coming out of the Irish beef industry then moving out into Europe."

He acknowledges that if some other company made off with its technology his firm probably wouldn't hear about it, despite having filed with the Irish Patent Office in March this year.

"In the whole area of intellectual property and patent protection, there is little you can do if a big multinational takes your product, but if you take an international patent you command a degree of respect for your likely competition and customers."

It could take five years to nail down credible international patent protection, he says. "The cost increases as you go, but as you go along you can see if it is going to make you any money." The whole programme, which for IdentiGEN'a product would establish protection in all key industrialised countries and the Pacific rim, would cost about £100,000, he estimates.

And while the patent may be there he acknowledges: "It is a bit of a poker hand". An estimated 90 to 95 per cent of patent applications end up delivering no commercial result. Many are strategic or defensive patenting applications filed by larger firms. Even so, the patent "puts a marker down", he says. "It strengthens your hand as a small company." This creates an imperative within young companies to seek this protection, despite the fact that patent expenditure may come at the worst possible time in the life of a small firm, when sales may be at their leanest.

This can force many small firms into royalty or licensing arrangements with other companies which then commercialise the product. Ireland's universities are well versed in the complex procedures associated with research contracting, retention of a royalty stream and protecting their intellectual property. By default, so too, are the campus companies that spin off from potentially commercial innovations.

BRI has five university centres of research excellence covering various sectors of the biotechnology industry. These centres provide contracted research expertise for indigenous and multinational companies. For example, one of Ireland's largest home-grown biotech companies, Elan, which recorded second-quarter profits of £27 million this year, sponsors 50 scientists in Trinity College. The trick, explains Dr Barry Kiely, general manager of BRI's National Food Biotechnology Centre at University College, Cork, is to hang on to as much control of the innovation as possible. "What we would like to do is to retain as much of the intellectual property as we can."

Licensing off the rights to a firm that commercialises the research involves negotiating a return, which can range from 1 to 12 per cent on average, he says. The more complex the work, the greater the percentage retained, with the creation of a unique pharmaceutical worth a royalty of 6-9 per cent of profits. "That is where I see the next move, small campus companies spinning off intellectual property to commercial companies."

It is now much easier for small start-up companies with proven technology but no proven market to get financial backing. BRI's director, Dr Jim Ryan, puts the changed environment down to a threat three years ago by the then Minister for Finance and now Taoiseach, Mr Ahern, to increase pension company taxes unless they invested in the new technologies.

The result was £100 million in venture capital distributed amongst several firms which are now anxious to put cash into high technology. "We are not shy of technical investment," states Mr Aidan Byrnes, a director of ACT Venture Capital Ltd.

ACT, with a fund worth £50 million is one of the largest, he says. It has £30 million invested in 22 companies, six of which are involved in high-tech including biotechnology.

Delta Partners is another fund with £30 million under investment. "We have 14 investments in our portfolio, nine of which are in the software and biotechnology areas," states Mr Maurice Roche of Delta. It has £900,000 in Irish firm, Biotrin, which was invested during that company's second investment round worth £3.8 million completed early in 1996. "Our portfolio is geared towards technology."

Both companies believed there was a shortage of target companies for investment. "There are more investors than companies available," Mr Roche says. Mr Byrnes agrees. "There aren't that many companies out there. We would be receptive but (biotechnology) has not grown as expected or hoped."

This was a real turnabout to only a few years back, Mr Roche suggests. when banks were shy about technology investments, describing them as "vapour ware". The trend he believes now is to support the small company that might have no more than an idea and a commercial gleam in its eye.

The recent stock market successes scored by firms such as CBT and Iona have spurred interest all round. And the availability of fresh venture funding has also helped.

Dr Ryan says the new funds "are flushing a few more people out that wouldn't have ever thought of getting investment" for a company start-up. Venture companies "are also more willing to invest at a much earlier stage than five years ago", he adds.

On the cost of patents, "I think we just have to live with it," Dr Ryan says. Nor does he see any difficulty with the current research arrangements established between contracting companies and the university sector. "It isn't a problem for most people," he says.

Kieran Mr Meghen agrees. "I don't think there is a sense within the universities that they are under some heavy yoke or exploited by industry."

Forbairt is now trying to foster this synergy between industry and university researchers. It is also attempting to coax researchers into establishing start-ups based on the new technologies. Its Campus Company programme provides grants and cash for feasibility studies for those willing to have a go.