A patent cliff doesn’t just affect pharma and biotech, tech transfer must plan for it as well

The University of Minnesota’s will see a huge reduction in royalty revenue as patents on their blockbuster HIV drug expire. Ziagen, which prevents the HIV virus from reproducing, has made the University and inventor Robert Vince a combined $524 million since 1999.

The first Ziagen patent expired in 2009, and they’ll continue to expire through 2013, when the related royalty stream will cease.

According to mndaily.com, as a result of the HIV drug discovery, university tech transfer revenue grew from $4.1M  in 1998,  to $95.2 million in 2009. For years a license with GlaxoSmithKline generated 90% or more of the university’s tech transfer revenue.  (Similar licenses are detailed in BVR’s Royalty Rates in Biotech guide.)

Here’s what’s instructive:  University of Minnesota Office of Technology Transfer knew the patent cliff was coming and planned for it. It’s impossible to predict a new blockbuster, but the ongoing revenues were predictable, as were the future needs of the office, so $3M went to a supercomputer, $7 million went toward a critical relocation of a magnet lab, $12M went into research infrastructure, the College of Pharmacy received an endowment that will support two new and ongoing positions, and start-up technology companies are being spun off at an increased rate.

Investments and expenditures once funded by Ziagen are winding down, in a systematic way. Still, it is likely annual royalty income after 2013 will approach $10M, 2.5 times what it was before the invention.