Spin-out trends: Views from the PraxisAuril conference

Last month Adam Coughlin and Erik Müürsepp from Bristows’ Commercial IP team had the opportunity to attend the annual conference of PraxisAuril, the UK’s professional association of knowledge exchange professionals. Knowledge exchange exists at the exciting interface between academia and industry and works towards translating the world-class research being undertaken at UK’s universities and academic institutions to having a positive impact in society and the economy. Bristows has had the privilege of working with academic technology transfer organisations for many years to support the commercialisation of the best of British science (and beyond).

The conference was a great opportunity to catch up with contacts and hear about current topics of interest in the field of knowledge exchange within the UK. Some of the key themes that emerged over the three-day event:

1. The Independent Review of University Spin-Outs. Universities and the knowledge exchange sector are understandably alert to the ongoing review into university spin-outs commissioned by the UK Government. The review, conducted by Prof Irene Tracey (Vice Chancellor of the University of Oxford) and Dr Andrew Williamson (Managing Partner of Cambridge Innovation Capital), forms part of the Government’s plan to develop the UK into a science superpower. This independent review will try to identify best practice in university spin-outs and compare the approaches taken in the UK with those in other leading countries for spin-outs such as the US.

Andrew Williamson gave an update on the progress of the review which commenced in March. A key message for the academic community was that the aim of the review is not to admonish universities for seeking what some would deem to be a disproportionate equity share during spin-out formation – a position which has been put forward by some participants in the spin-out ecosystem. Instead the review would focus on issues such as accelerating the acquisition of necessary commercialisation skills for academics, management teams and investors. It was recognised that the UK system does not operate in the same well-oiled manner as Silicon Valley where talented management teams regularly move from one successful spin-out to another. Whether this is something to aspire towards would be considered by the review.

The review is reaching the end of the information gathering phase, with conversations having taken place with spin-outs, technology transfer offices, universities, investors and funding agencies. Far from the equity split question, the issue that appears to have been raised most to date, and indeed which the authors have seen raised many times over the years, has been the amount of time that it takes to successfully spin out a new venture.

The final report from the review is due to be delivered to the Chancellor and the Secretary of State for Science, Innovation and Technology by the autumn.

2. Funding opportunities at key stages. A number of talks touched upon the importance of ensuring access to funding opportunities (however large) at the key stages of development of a technology. It was acknowledged that the relatively modest proof-of-concept funding schemes (usually no more than £30,000) which some universities make available to their researchers can have a significant positive impact on helping promising projects reach more significant sources of funding. A great example of the latter which was highlighted was the unique academic-industry partnership of Apollo Therapeutics – Bristows had the pleasure of advising the academic partners on the $145 million restructuring of this venture in 2021.

Rick Fagan of UCL Business (UCLB), a long-standing client of Bristows, recognised the ability, for larger institutions at least, of university-associated investment vehicles such as the UCL Technology Fund (UCLTF) to add value at multiple stages of a spin-out’s life cycle. Fagan gave the example of UCL gene therapy spin-out Orchard Therapeutics and discussed how, in addition to participating in the Series A funding round, UCLTF provided additional direct funding to the founders’ academic laboratory at UCL for further development of earlier stage therapeutic programmes that had also been licensed to Orchard. Fagan explained that this enabled the spin-out to focus on development of the clinical stage assets, whilst ensuring that the pre-clinical assets were able to progress to the clinic as quickly as possible.

3. Broader view of spin-out success. Another theme that emerged during the conference was the benefit of taking a broader view of what constitutes a “successful” university spin-out. It was acknowledged that it can be easy to fixate on the financial impact of spin-outs and measure success purely based on criteria such as size of funding rounds or how quickly exit can be achieved – and often this analysis is conducted with one eye on our transatlantic neighbours in the US.  However, speakers highlighted that spin-outs by no means need to aspire for unicorn status, with smaller spin-outs in various fields of activity having a substantial positive societal impact (not least in terms of employment opportunities) in their local communities. Work is underway to develop a framework to gather data and measure the broader impact of spin-outs.
   
   
4. Regional investment opportunities. Although the ability of the leading universities based in the Golden Triangle of Oxford, Cambridge and London to attract significant investment for their spin-outs is well-established, several panellists recognised the benefits of recent efforts to develop substantial investment opportunities in other parts of the UK.

Northern Gritstone in particular was highlighted as a great example of focussing investors’ attention on the quality research being undertaken outside of the Golden Triangle. The investment business was established in 2021 by the Universities of Leeds, Manchester and Sheffield to accelerate the commercialisation of IP-rich businesses originating from these universities and the North of England more broadly. Following Northern Gritstone’s first close of £215 million in May 2022, the company has begun investing in early-stage businesses operating in its target sectors such as advanced materials, health technology and AI. It is hoped that regional initiatives such as this could create the necessary critical mass to replicate the success stories of areas such as Silicon Valley in the US.

We look forward to following these trends, and continuing to support our clients, in the vitally-important knowledge exchange sector in the future.