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Pipeline agreements are a common feature in the knowledge transfer industry. What’s a pipeline agreement, you may wonder? Basically, these agreements permit companies the right of first refusal to research that emerges from a certain laboratory or department, or even the whole of a University. In exchange, companies agree to fund research or provide some other form of financial contribution.
Companies like pipelines; it gives them contractual first access to downstream research (that’s emerging research yet to be completed). Investors like pipelines; it gives their investee companies contractual first access to downstream research. However universities generally dislike pipelines: it forward sells intellectual property, it has the perception of tainting technology that is passed by the organisation that has first rights and it has a tendency to stifle academic freedom (it’s harder to collaborate with somebody if your, or their, research outcomes already have a pre-determined route for commercialisation). This leads to a fair amount of tension when trying to negotiate research collaborations with industry, licences and spin-out company formation.
So who’s right?
Today’s announcement by DefiniGEN, a CE portfolio company that it has negotiated a licence to lung stem cell technology, perfectly demonstrates that companies can access downstream technology coming from a university without the need for a contractual obligation, without a pipeline.
DefiniGEN was founded in 2012 based on research by Ludovic Vallier, director of the Cambridge National Institute for Health Research (NIHR)/Biomedical Research Centre HiPSC core facility. Cambridge Enterprise licensed the technology to DefiniGEN and our Seed Funds team led the seed round and series A funding. No pipeline agreement was put in place. It was through continued, close involvement between the company, Cambridge Enterprise and the originating laboratory that DefiniGEN learned about the exciting work that was going on, such as stem cell research in different cell lines other than hepatocytes.
As new inventions from the laboratory were disclosed to Cambridge Enterprise, DefiniGEN was the natural choice to approach to take on additional licences. In fact, the lung stem cell technology was the third such technology taken on by DefiniGEN. The first being, as mentioned, hepatocyte technology and the second being pancreatic stem cell technology. Each of these licences were done on an arm’s length basis with the previous licence agreement being a guide for the next one, rather than being a template, which is the tendency for pipeline deals.
Also (without giving too much away) the financial terms were quite different. This suited DefiniGEN because, as a company progressing through the early stages of life, it needed different things from each licence. It also suited Cambridge Enterprise, as it was able to get a balance of equity, milestone payments and royalties from each of the three technologies.
Today DefiniGEN stands as an example that companies need not have contractual relationship with the university to access new and exciting technologies. All it takes is a little bit of effort to develop a trusting productive relationship with the university and of course its tech transfer office. That can’t be too difficult, can it?