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National Audit Office report: Reaping the Rewards of Agricultural Research

Reaping the Rewards of Agricultural Research

"The Department and its contractors have sought to transfer knowledge and disseminate results of agricultural research funded by the public sector. However, commercial exploitation has historically been limited and royalties have been low. The deals to commercialise the nuclear transfer technology are the exception. "Each new venture requires lessons to be learned and shared in the handling of commercialisation. However, the leadership and personal commitment shown in taking forward those cases where intellectual property has been exploited is to be commended."

"The Department and its contractors have sought to transfer knowledge and disseminate results of agricultural research funded by the public sector. However, commercial exploitation has historically been limited and royalties have been low. The deals to commercialise the nuclear transfer technology are the exception. "Each new venture requires lessons to be learned and shared in the handling of commercialisation. However, the leadership and personal commitment shown in taking forward those cases where intellectual property has been exploited is to be commended."

Sir John Bourn

 

The successful commercialisation of intellectual property in agricultural research requires identifying the best opportunities for commercial exploitation of publicly financed research; obtaining further funds to develop and protect ideas; and managing risks when making deals and establishing spin-out companies. These points are brought out in a National Audit Office report today on the performance of contractors working on agricultural research for the Department for Environment, Food and Rural Affairs

The Department for Environment, Food and Rural Affairs funds agricultural research of some £100 million per year, with the primary purpose of informing policy making or to provide information for the public good. Today’s report by the head of the National Audit Office, Sir John Bourn, points out that funding normally ceases before the stage at which something to sell emerges, and that income from the commercialisation of intellectual property arising from research work funded by the Department has generally been small – for example receipts by five of its research contractors from that source amounted to some £500,000 in 2001–02.

The licensing deals with the private sector arising from nuclear transfer technology, or “cloning”, are the exception, the licensing deal with Geron Corporation generating for example some £12.5 million of additional research funding, shares worth over £3 million at the time of the transaction and a share of royalty payments in the event of successful exploitation of the technology. But these are not representative of the size or significance of government sponsored research in this sector. The technology led to the birth of Dolly the Sheep at the Roslin Institute in Scotland.

The National Audit Office report recommends that agricultural research contractors need to respond to the challenges of commercialisation by providing regular expert training, sharing good practice and assessing commercialisation opportunities and exploitation strategies more systematically. Appropriate expert advice on individual projects may also be required, particularly when making commercial deals. Potential private sector partners should in principle be subject to competitive pressures to obtain the best deal for the taxpayer.

Inventing the nuclear transfer technology at Roslin had cost some £3 million, of which the Department’s predecessor, the Ministry of Agriculture, Fisheries and Food, had contributed £2 million. Dolly was commercialised in two main deals: the first a partnership with venture capitalists 3i Group to create a spin out company, Roslin Bio-Med; and the second, the sale of Roslin Bio-Med to the Geron Corporation, a US biotechnology firm.

Significant additional funding was needed to develop the nuclear transfer technology to a commercially useable level. The Dolly deals with the private sector avoided the risk that the technology would be overtaken before any benefit could accrue to the public sector, and enabled research on the technology to continue in the UK. The public sector received about 5 times the value of the investment in the initial research which had been £3 million. Two scientists and a spin-out company management team received 16 times their financial investment but their participation was essential to the deal.

In the deal with 3i Group there was an absence of competition in selecting the partner, but NAO’s independent advisors concluded that the funding of research for three years, and the equity given to the Institute, was higher than usual for a deal involving such an early stage of research into unproven technology. The National Audit Office says there was a lack of truly independent advice on the value of the technology, or about the potential market, at the time of the deal with Geron. Today’s report notes the difficulty in demonstrating whether the best returns overall have been achieved and in concluding whether the best sale value was obtained.

 

Publication details:

ISBN: 0102920303 [Buy a hard copy of this report from TSO]

HC: 300 2002-2003

Published date: January 23, 2003