Research outside the University environment

1. Research outside the University environment just ^ • Dr Curtis Dobson • Ai2 Ltd

2. Options for taking technology to market • University issues license direct to industry • Start up a company, which pays University for IP (via a long term loan and equity position), and develops, markets and licenses the technology to third parties • Depends on: • Nature of technology + how well developed it is • Market size, hurdles and competitors • Career goals of inventor

3. UNIVERSITY INDUSTRY CONSUMER License License My focus this morning Spin Out Company Spin Out Company

4. How to start a Start Up

5. Intellectual Property which is: Secret Novel Inventive Offers a potential solution to a problem for which there currently is no solution Problem is sufficiently widespread / serious that substantial income (> $50m pa) could be made by providing a solution Many such problems can be tackled by same technology (technology platform) Start Up Check List i.e. patentable Out-license Start Up

6. In phase 1 (approx 6-9 months) you should aim to raise sufficient funding to: Incorporate company, devise financial procedures, open bank account, draw up Articles of Association, appoint directors Generate proof of principle data Where appropriate build a prototype Investigate the markets and aim to develop links with major companies operating in that area File provisional patent applications Start Up Check List – Phase 1

7. In phase 2 (18 months) you should aim to raise sufficient funding to: Find premises Devise detailed business plan Maintain and expand patent portfolio Assemble world-class management team, and (if appropriate) scientific advisory board Carry out research and development work Start Up Check List – Phase 2

8. What to expect…. Ai2 incorp. (Apr 05) Ai2 (Jul 05) X X Dedicated Professional Management (Building Value) Research Institution and Associated Involvement (Reducing Risk) Ai2 (Apr 06) X Timing Phase 1 Phase 2 Phase 3 Phase 4 Founders and Early Investors Exit Goal (5/7 yrs from start) via eg. a trade sale, IPO (6-9 months) (+ 18 months) (+ 12 months) Volume sales and profits Independent business premises. More financing (VCs, investment banks, Private Equity Firms) Proof of Principle Prototyping Patenting Incorporation Shareholders agreement Business Planning Forming Partnerships Finance from Business Angels/ VCs / University Challenge Consultancy Incubation Premises Early Trading Financing from Business Angels, consortia and funds. Board reconstruction Service contracts

9. Chairman Chief Executive Officer (CEO) Board of Directors Chief Scientific / Technical Officer (CSO / CTO) Panel of Scientific Advisors Company Secretary Senior Management

10. How does the company keep operating until it is profitable? • Government / Charity: Wellcome UTA, SBRI, FRAMEWORK 6 etc. • Investment, including Venture Capital Funds • Will provide funding in return for shares in the company • Investment provided in rounds – different VCs specialise in different levels of funding / risk • Investment increases as company grows / nears market (e.g. £100-250k for “seed” funding, through to many tens of millions in some series C / Series D • VC’s initially salesmen… …but ultimately buyers

11. Why start a Start Up ?

12. Benefits for the technology / research: • Access to venture capital investment • Access to cutting-edge incubator laboratories (for a fee) • All aspects of business development handled by small specialist team, rather than large generalist University IP department • Longer term access to investment capital via stock market flotation • Possibility of trade sale of company

13. Benefits to industry / society: • Research areas which are too commercially focused for academia, though too risky / early stage for large companies to explore are not “frozen” • Converts IP “raw materials” into a lower risk package which is attractive to larger companies • Financial / economic – creates jobs and clusters of small businesses in similar areas, along with jobs in support companies • Attracts larger companies to a region

14. Benefits for the researcher: • Academic research increasingly “iterative”. Start ups offer opportunity to carry out heavy lifting to put your idea into practice, and make a real difference • New career possibilities - small spin out companies / IP law / business • Maintain academic research programme, yet benefit from SME experience • Better paid / better resourced • Equity position, which can eventually prove highly valuable • Networking • Profile

15. Less time for research, especially “blue sky” research Substantial time spent on administration, business plans, financial systems, legal documentation, fundraising etc etc. Bar on presentation / publication until patents filed Need to prioritise applications which are closest to market Less job security (relative to tenured academic role at least) CAVEAT - don’t do it if these issues worry you:

16. More time for academic research Administrative procedures may be less cumbersome Technologies may be riskier, and more cutting edge Closer ties to Universities Culture more akin to academia Organisations leaner and more fleet of foot – higher productivity How does it compare with traditional industrial research:

17. Ai2 Ltd – a case study

18. Colleagues find that a human gene (APOE) determines the outcome of a broad range of viral infections My discovery of a region of the protein (apoE) coded for by the gene with antiviral activity against herpesviruses and HIV My Intellectual Property

19. Lead for antiviral / anti-HIV therapeutics ?

20. Lipoproteins resemble virus particles, and occupy the same cell biological niche HIV Lipoproteins and virusesevolutionary convergence? Human Serum Lipoprotein

21. 1.6 million individuals infected with HIV in US, Western Europe and Japan 14,000 new cases per day globally Market for anti-HIV chemotherapy $5.1b in 2002, and growing HIV strains are becoming resistant to current therapies Need for new anti-HIV medicines

22. virus virus virus virus virus attachment HIV Replication Cycle 4 fusion 5 ? HUMAN CELL Existing Therapeutic Targets (1 to 4) nucleus 1 / 2 3 replication virus reconstruction virus virus HUMANCELL DESTROYED virus virus

23. GIN – unique early stage funding – NW England. • Genetics Innovation Network (University of Manchester / Liverpool) - £40k • New peptides • Other human protein regions with similar activity ?

24. Outcome of GIN programme (late 2003) • Discovery of second apolipoprotein region with activity • Invention of two families of compounds relating to both original and new protein region, with distinct activity profiles • Activity against all strains of HIV tested, via novel mechanism

25. Broad anti-HIV activity of new compounds

26. Antibacterial activity? • Many peptides from non-mammalian sources / non-natural sequences have antibacterial activity • Features similar to our human apoE peptides • Commercially more likely to succeed quickly: • No need for peptide to enter body • Medical devices in particular probe to infection – often biocompatible, but without capacity to fight infection

27. Coating to Prevent Medical Device Related Infection Untreated Treated Materials treated with (fluorescent) peptide, and thoroughly washed

28. Untreated Treated Peptide-treated medical device materials resistant to Pseudomonas infection

29. Proven platform technology to provide novel and safe anti-infective coatings and therapeutics Discovery of specific regions of human proteins rich in anti-infective activity Unique opportunity to target unmet needs in high-growth and high-value markets, with several opportunities for early revenue generation

30. Ai2 aims to become a significant player in the large and growing anti-infectives market Core Business is identification of unmet anti-infective needs in the healthcare market, and application of Ai2’s proven platform technology to address those needs Current Focus on unmet biocompatibility and infection needs at the interface between biology and polymer surfaces (catheters, IV-equipment and related medical devices). Clear early revenue opportunities identified and currently being pursued Management Team of international calibre, includes former senior executives from blue chip medical device and pharmaceutical companies in UK and US Awards Most exciting biotechnology company in NW England Overview

31. North West Biotechnology Project of the Year 2004 North West Biotechnology Start up of the Year 2005

32. Product Pipeline – Key Product Areas • Medical Device • coatings • Partners in place • Novel Therapeutics • Long term • Large Market • Novel prophylactics • Building on • antibacterial coating • technology • Higher Risk Lower risk

33. Continued need to secure investment until company reaches profitability Expense of patent costs Company increasingly must “pay its way”. Lab and office space, payroll, legal expenses Variability in investment climate Risk of competitor technologies emerging Technical hurdles, particularly for long term therapeutic applications Challenges

34. University of Manchester – generous IP policy UMIP – unique resource Packaged IP Wide networks Dedicated business development personnel MTF venture capital fund Tough criteria Solid investment experience, as we negotiate with VC’s completely outside the University Currently signs of improved investment climate Opportunities

35. Research outside the University environment Just ^ • Dr Curtis Dobson • Ai2 Ltd