Technology Transfer Models Between Industrial Biotechnology Companies and Academic Spin-Offs

Abstract

Industrial BiotechnologyVol. 9, No. 5 Catalyzing InnovationFree AccessTechnology Transfer Models Between Industrial Biotechnology Companies and Academic Spin-OffsGunter FestelGunter FestelSearch for more papers by this authorPublished Online:16 Oct 2013https://doi.org/10.1089/ind.2013.1590AboutSectionsPDF/EPUB Permissions & CitationsPermissionsDownload CitationsTrack CitationsAdd to favorites Back To Publication ShareShare onFacebookTwitterLinked InRedditEmail IntroductionDifferent types of established companies play specific roles in the development of commercial industrial biotechnology entities. Whereas the industry's economic exploitation is often realized by multinational enterprises (MNEs), small and medium-sized entities (SMEs) primarily enhance technological development. An important challenge, as in other industries, is to overcome the technology transfer gap between innovation in basic academic research and development (R&D) and its commercialization by established companies. This article examines the role of academic spin-offs and the potential for technology transfer to close this gap. Most MNEs pursue an active strategy that includes the acquisition of spin-offs and contracting them as service providers to access new technologies. In contrast, due to limited financial resources, SMEs put a strong focus on the latter option, especially through the implementation of research-based cooperative agreements with academic spin-offs.Innovation in Industrial BiotechnologyIn recent years, the production of chemicals and materials, such as base chemicals and polymers, as well as high value products, like consumer chemicals and specialty chemicals, has followed a continuous trend toward the use of biotechnology instead of chemistry in one or more of the process steps.1 In contrast to conventional chemical production methods using energy intensive processes with high temperatures, industrial biotechnology utilizes enzymes and microorganisms that enable operations at lower temperatures.2 In addition, industrial biotechnology offers methods for new products that are not accessible using traditional chemical processes.Industrial biotechnology is often considered as a key technology that enhances the global economy and promises dynamic growth opportunities.3,4 Policymakers in the United States, Europe, and other regions have recognized the significance of industrial biotechnology and launched numerous governmental programs offering financial incentives to foster investments in R&D as well as production in this sector.5–7 Even though genetically modified organisms are sometimes viewed critically, industrial biotechnology is commonly accepted as a promising approach to overcome the consequences of diminishing fossil energy sources, such as crude oil, coal, and natural gas, by progressively shifting toward renewable resources and less energy-intensive methods of production.8–10 Driven by dwindling fossil energy sources, the overall objective is to bridge the transition from a petro-based to a biobased economy.Energy production through biotechnological processes is, at least in the initial stages, more expensive than traditional chemical synthesis. The retrofitting of existing production facilities designed for chemical synthesis into plants for biotechnological production requires significant financial resources and corporate investments.11 Despite these up-front costs and investments, the prices that can be achieved from products manufactured through biotechnological processes are normally not higher compared to their chemically produced counterparts. Higher prices compared to conventionally produced goods may only be obtained in niche markets within specific segments, like in the food industry. To achieve this transition from chemical synthesis to biotechnological processes on a cost competitive level, state-of-the-art technologies have to be employed, which makes technological innovation so important for industrial biotechnology.12Technology transfer from the academic world to industrial applications is particularly important for emerging industries with fast technological progress, such as in industrial biotechnology, to provide cost-efficient, state-of-the-art technologies. Even though most academic institutions have established technology transfer capabilities in the last decade, there is still a technology transfer gap between academic R&D and the commercialization of this new knowledge within industrial applications. Various studies have shown that this gap can be effectively addressed through spin-offs created at academic institutions.13–16A review of the literature in both practitioner and more academic oriented journals as well as other publications of relevant institutions (eg, company presentations, annual reports, press clippings) included scanning for relevant key words such as technology transfer, spin-outs, spin-offs, new ventures, start-ups, cooperative agreements, joint development, acquisition, mergers & acquisitions (M&A), service provider, and technology provider. The primary result was a database containing systematic information on related institutions–academic institutions including technology transfer offices, academic spin-offs, and venture capital investors including corporate venture capitalists and industrial companies–and examples of technology transfer that included the involved parties, background, relevant activities, and results. The examples describe the transfer of new technologies that were originally invented at an academic institution and further developed by a spin-off from this institution before being applied within an established company. Table 1 shows a selection of these examples.Table 1. Examples of Technology Transfer Models Between Established Companies and Academic Spin-OffsESTABLISHED COMPANYACADEMIC SPIN-Off NAMETYPECOUNTRYNAMEFOUNDEDCOUNTRYTECHNOLOGY TRANSFER MODELBASFDiversified MNEGermanyC-Lecta2004GermanyDevelopment of new products with the academic spin-off as service providerBASFDiversified MNEGermanyDirevo IB2008GermanyAcquisition of a product developed by the spin-off through the MNEBayerDiversified MNEGermanyEvocatal2006GermanyDevelopment of new products with the academic spin-off as service providerBrainSMEGermanyAutodisplay Biotech2008GermanyDevelopment of new products with the academic spin-off as service providerBrainSMEGermanyEnzymicals2009GermanyPart acquisition of the spin-off by the MNECambrexDiversified MNEUnited StatesIEP1999GermanyAcquisition of the spin-off by the MNECodexisSMEUnited StatesJülich Fine Chemicals1999GermanyAcquisition of the spin-off by the MNEDuPontDiversified MNEUnited StatesVerdezyme2005United StatesAcquisition of a technology of the spin-off by the MNEHerbrand PharmaChemicalsSMEGermanyEnzymicals2009GermanyDevelopment of new products with the academic spin-off as service providerIRIS BiotechSMEGermanySprin2007ItalyDevelopment of new products with the academic spin-off as service providerJohnson MattheyDiversified MNEUnited KingdomX-Zyme2001GermanyAcquisition of the spin-off by the MNEKemiraSMEFinlandMetgen2006FinlandDevelopment of new products with the academic spin-off as service providerLanxessDiversified MNEGermanyGevo2005United StatesPart acquisition of the spin-off by the MNELesaffreDedicated MNEFranceButalco2007SwitzerlandAcquisition of a technology of the spin-off by the MNERohner ChemSMESwitzerlandEvocatal2006GermanyDevelopment of new products with the academic spin-off as service providerDifferences in Company TypesAcademic spin-offs are highly significant for their technological development, as they are an engine for innovation based on their academic background. However, they have only little impact on the commercial development of the technology due to their limited resources and know-how for product development and small marketing and sales (M&S) resources, particularly during their early years. The need for further development of the technology is a common characteristic of all spin-offs. Normally, proof-of-concept only exists at laboratory scale, whereas technical proof-of-concept still has to be achieved before larger investments in production and M&S are made.Due to restricted resources, particularly in their initial years, academic spin-offs often follow a service-oriented business strategy in which they implement fee-for-service revenue models, offering their specific know-how to other companies. With this approach, the spin-offs avoid the time and money consuming development of their own products, while indirectly gaining market experiences through their customers and commonly transferring the spin-offs' technologies into new products. The intellectual property (IP) normally belongs to the customers and thus, for the spin-offs, the growth and value creation potential through the development and commercialization of their own IP is limited. On the other hand, risk is also limited, as the spin-offs are only faced with low capital requirements. To realize further growth opportunities with increasing maturity, the creation of own products and IP is essential to move away from a service model and towards an IP or product oriented business approach. Within research cooperations with established companies the spin-offs generate their own portfolio of products and technologies protected by their own IP. This approach is very relevant for the industrial biotech sector, as it is generally accepted that a significant portion of the IP generated within research cooperations belongs to the technology provider.Established companies can be differentiated based on their size and fields of activity. They may be small and medium enterprises or multinational enterprises. Regarding fields of activity, it is important to distinguish between those dedicated to industrial biotechnology versus those diversified over a broader range of business areas, as each type has its specific role regarding the further development of industrial biotechnology.17 All industrial biotech SMEs are dedicated, so that established companies can be one of three relevant types: SMEs, dedicated MNEs, or diversified MNEs.Based on the literature research, ten companies–including examples of all the different company types (SMEs, dedicated MNEs, and diversified MNEs)–were chosen by selecting the most frequently mentioned companies per type from the database. After defining three criteria each on which to quantify the importance of these companies for their technological development (relative size of R&D, new R&D fields, and number of R&D cooperations) and commercial development (relative size of M&S, new products/markets, and number of M&S cooperations), each company was evaluated relative to the whole group of companies using a scoring system of 1 (low) to 5 (high). The total value for the two dimensions–technological development and commercial development—was plotted in a matrix to visualize the importance of the different company types for the technological and commercial development of the industrial biotechnology sector. Figure 1 illustrates the results, which are essential for understanding technology transfer by spin-off companies, as summarized below: Fig. 1. Importance of spin-offs and the different types of established companies for the technological and commercial development of the industrial biotechnology sector.• SMEs often arise from academic spin-offs. After passing through an intensive R&D phase, during which they act as service providers for larger companies throughout the initial years, they focus on the development and market introduction of their own products. Through this evolution, they have played a vital role in technology development, but are only of medium significance for commercial development of industrial biotechnology, as these SMEs are still in the build-up phase and have limited product development and M&S capabilities/resources.• Dedicated MNEs mainly arise from the area of natural products, particularly from the agricultural industry. Normally, they have used and continuously optimized biotechnological processes for traditional markets, such as starch or yeast products, for many years. Industrial biotechnology has increasingly been one cornerstone in their technology portfolio and they are moving toward new biotech-based processes and products. They have the technical as well as financial resources to commercialize biotechnologies and products worldwide. Together with their M&S capabilities, they have a medium-to-high significance for the technological and commercial development of industrial biotechnology.• Diversified MNEs are primarily located in established industrial sectors, such as the chemical or food industries. By serving developed markets with highly specialized products, these companies are introducing biotechnology products and processes step-by-step into the markets while simultaneously realizing growth opportunities. Due to their strong focus on already established products and processes they are of lower importance for technological progress and of medium importance for commercial development of industrial biotechnology.Characteristics of Technology TransferTechnology transfer is actively used by all types of established companies as it enables primary access to new technologies and, in special cases, additionally to new products. The question of whether technology transfer by academic spin-offs is part of their R&D strategy revealed considerable differences between SMEs and MNEs. SMEs in particular consider that approach as a significant part of their R&D strategy, which increases their own R&D capabilities and complements their internal R&D activities. In contrast, dedicated and diversified MNEs have a more opportunistic attitude toward the use of external technologies from academic spin-offs. This may be explained by the superior internal resources of MNEs compared to SMEs, the latter of which are always faced with limited resources.The most important topic regarding the transfer of technology developed by an academic spin-off is the value of the new technology. This includes several aspects such as the fit to existing technologies of an established company and synergies between existing and new technologies. Other related aspects are the maturity and the competitive advantage of a new technology as well as its innovation potential. Regardless of the company type, access to key technology experts, the quality of existing IP rights, and the competitive advantage of the new technology are all important factors. Generally, spin-offs estimate the value of their technologies to be higher than do established companies. This is due to their stronger focus on technology, whereas established companies have a more market and product oriented perspective. Furthermore, before the technologies from spin-offs can be implemented in established companies, they often need additional development.In particular, dedicated and diversified MNEs share many similarities. For both, the maturity and the innovation potential of a new technology must be high, whereas the fit to or synergies with existing technologies are not essential. Similarly, the financial costs of technology access and the ability to access the equipment and materials of the spin-off are of relatively minor significance. Due to the complex situation regarding project management and resulting IP rights, as well as limited product development capabilities of spin-offs, joint technology or product development with a spin-off is generally not an option. Typically, MNEs have their own in-house capacities for product and technology development, and they have sufficient resources to realize intended product developments in-house. Additional R&D capacity and cost reduction by outsourcing (reducing fixed costs or people on the payroll) is not a reason to work together with spin-offs. But many companies are highly interested in accessing additional, external know-how that is not yet available in-house or would be too costly to build up internally. Extending in-house capabilities by including external expertise is the main advantage of adopting external technologies by contracting spin-offs as service providers.The situation is, however, quite different for SMEs. As they have limited management and financial resources compared to MNEs they are highly dependent on the transfer of new technologies from academic research institutions to develop new products internally or together with external partners. For SMEs specifically, synergies and fitting new to existing technologies is of greater importance compared to both types of MNEs. A lower innovation potential of a new technology and less maturity is acceptable for SMEs. Their limited financial resources are also the reason why exclusive access to the new technology is not essential; however, SMEs place a great emphasis on access to equipment and materials of the spin-off. Joint technology and product development plays a more central role for SMEs due to commonly used cost/profit sharing models. Whereas exclusive ownership of existing and new IP rights is not essential for SMEs, the opportunity to create new IP rights is of importance. Generally, SMEs regard technology transfer from the academic world as an effective method to capture both expertise and capacity with little investment in in-house resources.The literature research did not identify any significant similarities between SMEs and diversified MNEs, but the opposite is true for SMEs and dedicated MNEs. For both company types the need for further technology development is intended and the financial costs are managed through cost/profit sharing models together with the spin-off company. As dedicated MNEs are characterized by a stronger technology focus compared to diversified MNEs, cannibalization of existing technologies is not accepted either by dedicated MNEs or by SMEs. For both, the potential for product development is of greater significance than are acquisitions, due to their limited financial resources. A specific characteristic of dedicated MNEs is that exclusive ownership of new IP rights and exclusivity of technology access is preferred but not imperative and, unlike SMEs, diversified MNEs claim exclusivity for technology access.Technology Transfer ModelsAnalysis of the examples in the database shows that spin-offs are systematically used for technology transfer from academic institutions towards industrial applications based on different technology transfer models (Figure 2). Technology transfer is realized through the acquisition of spin-offs by MNEs and SMEs subsequent to build-up of a promising technology/product portfolio by the spin-off associated with appropriate IP protection. Before an acquisition takes place, R&D companies and spin-offs often engage in a cooperative agreement, which provides the established company an opportunity to evaluate the technologies/products of the spin-off and their fit with its own technology/product portfolio. Examples of this technology transfer model are the acquisitions of X-Zyme (Düsseldorf, Germany) by Johnson Matthey (Devens, MA) or of IEP (Wiesbaden, Germany) by Cambrex (East Rutherford, NJ). In both cases, the biocatalytic expertise of X-Zyme and IEP extended the chemical synthesis expertise of the diversified MNE in the field of custom synthesis primarily for customers from the pharmaceutical industry.Fig. 2. Technology transfer models between established companies and academic spin-offs.The acquisition of specific technologies or products instead of the whole company is another option. These types of acquisitions are typically executed due to aspirations to bring new technologies or products onto the market efficiently, thereby leveraging the production and M&S resources as well as the existing customer base of established companies. In many cases, a joint development of a new technology or product preceded the acquisition. Verdezyne (Carlsbad, CA), for example, sold its xylose technology to DuPont Industrial Biosciences (Wilmington, DE). An example of a product oriented acquisition is the sale of a novel feed enzyme from Direvo Industrial Biotechnology (Cologne, Germany) to BASF (Ludwigshafen, Germany), which enabled the diversified MNE to extend its product portfolio through the acquisition.Another model for technology transfer is when an established company engages the spin-off as a service provider. The selection can be done on a project-by-project basis from a list of pre-selected service providers based on the fit of the individual spin-off's core competencies to the specific project requirements. If the service is rather unique, another model is a strategic partnership. As an example in the area of biocatalysis is the cooperation agreement between the spin-off Autodisplay Biotech (Düsseldorf, Germany), which develops screening systems to find new cosmetic compounds, with Brain (Zwingenberg, Germany). Brain owns these compounds together with all related IP, whereas new IP regarding the screening system itself and further development of the technology belongs to Autodisplay Biotech. Another example is the cooperation of Enzymicals (Greifswald, Germany) and Brain, in which the strategic partnership was intensified through the acquisition of shares of Enzymicals by Brain. To strengthen this strategy of combining a strategic partnership together with an equity investment in the spin-off, established companies such as BASF and DSM have built up corporate venture capital activities.For the companies covered in Figure 1 the importance of technology transfer from academic spin-offs by engaging them as service providers or by acquisition was rated using a score between 1 for low to 5 for high, and the results were visualised in a 2-dimensional matrix. Figure 3 shows that there is a preference of SMEs for contracting spin-offs as service providers, In contrast, MNEs frequently realize both options with no distinct differences between diversified MNEs and dedicated MNEs.Fig. 3. Technology transfer from academic spin-offs to established companies through a service provider model or by acquisition of the spin-off.Conclusions and Future OutlookThe roles of the different types of established companies for the further development of the industrial biotechnology sector are clearly defined: whereas dedicated MNEs are the most important type for commercial development, SMEs (as well as academic spin-offs) are especially enhancing technological development. None of the different company types carries out all further technological development internally, so technology transfer from academic institutions to established companies is important. Academic spin-offs enhance the transition of state-of-the-art technological expertise from academic research to established companies.The different company types have similar views on the technology transfer process itself and similar expectations concerning enhancements in efficiency and effectiveness of their own R&D. Cooperation with external partners, such as spin-offs, and thus the allying of internal and external know-how strengthens internal competencies. Optimal integration of internal and external knowledge along the innovation process is essential to exploit the positive interdependencies among the activities. Technology transfer from academic institutions to industry creates a win-win situation for all related parties and leads to a faster translation of academic innovation into practical applications in emerging industries such as industrial biotechnology.An important technology transfer model is the acquisition of the whole spin-off, which can be technology driven or product driven. Spin-offs can also engage as a more or less independent service provider for established companies. In particular, the differences in the comparison between MNEs and SMEs highlighted that the preferred approach of technology transfer strongly depends on the type of company. Whereas MNEs take great efforts to make new technologies available both by engaging them as service providers or acquiring spin-offs, SMEs are instead focusing on partnerships with spin-offs, as they have limited financial and management resources compared to MNEs. Overall, academic spin-offs have the potential to bridge the gap in technology transfer in industrial biotechnology.References1 Coons RIndustrial biotechnologyChemical Week2010172272226.1. Coons R. Industrial biotechnology. Chemical Week 2010;172(27):22–26. Google Scholar2 Hermann BGBlok KPatel MKProducing bio-based bulk chemicals using industrial biotechnology saves energy and combats climate changeEnviron Sci Techn2007412279157921.2. Hermann BG, Blok K, Patel MK. Producing bio-based bulk chemicals using industrial biotechnology saves energy and combats climate change. Environ Sci Techn 2007;41(22):7915–7921. 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Google ScholarFiguresReferencesRelatedDetailsCited byWhite biotechnology and the production of bio-products17 January 2022 | Systems Microbiology and Biomanufacturing, Vol. 2, No. 3Key factors in university-to-university knowledge and technology transfer on international student mobility21 October 2019 | Knowledge Management Research & Practice, Vol. 18, No. 4Economic Aspects of Industrial Biotechnology26 July 2018SIMILARITIES OF SUCCESSFUL TECHNOLOGY TRANSFER THROUGH NEW VENTURES17 April 2015 | International Journal of Innovation Management, Vol. 19, No. 02 Volume 9Issue 5Oct 2013 InformationCopyright 2013, Mary Ann Liebert, Inc.To cite this article:Gunter Festel.Technology Transfer Models Between Industrial Biotechnology Companies and Academic Spin-Offs.Industrial Biotechnology.Oct 2013.252-257.http://doi.org/10.1089/ind.2013.1590Published in Volume: 9 Issue 5: October 16, 2013Online Ahead of Print:August 30, 2013PDF download