Separation anxiety: drawing the line between funding and commercialisation

By Tanya Hollis
Tuesday, 09 April, 2002

A debate is emerging over where to draw the line on use of basic research funding, sparked by the wholesale push towards commercialisation of Australian research.

Research institutes are divided on the propriety of continuing to use National Health and Medical Research Council or Australian Research Council money once a project gives rise to commercial potential.

According to the NHMRC, that potential for conflict is being eliminated by phasing out block grants to major institutes.

But several institutes are putting their own policies in place to ensure conflict of interest allegations don't come back to bite them.

At the Walter and Eliza Hall Institute (WEHI), research is spun off into a company as soon as a commercial opportunity is spotted.

Its policy is to encourage key researchers involved to take a sabbatical from the institute to work within the new company, which, while incubated by WEHI for a short time, must find external funding sources.

WEHI head of business development, Dr Amanda Caples, said the institute was keen to keep research and business separate, and the first example under her tenure is Genera Biosystems.

"We will allow them to use the facilities for 12 months then they have to find somewhere else, and it is all on a fee for service basis, so it is kept at arm's length," Caples said.

"We will do a short-term contract with the entity to get it going and all the IP and results generated are left to the company's policy of disclosure.

"But the institute reserves the right to use licensed technology for non-commercial activities and to provide facilities under a research services agreement with cost recovery plus margin," she said.

Long-time director of WEHI, Sir Gustav Nossal, said the issue was a prickly one without a clear solution.

"Right around the world the norm has been that the government pays for (basic) research, because where there is so much public good and so many externalities, it is not proper that commercial interests be asked to pay," Nossal said. But he said once commercial potential was identified the possible conflicts of interest had to be analysed on a case-by-case basis.

"There is no right or wrong way and I'd be reluctant to put down hard and fast rules, but I'd suggest transparency, honesty and decency," Nossal said. "It is one of those shades of grey things where a healthy conscience is the best option."

Block grants

Chair of the NHMRC research committee Prof Warwick Anderson said there might have been a lack of clarity when block grants - funding that was not attached to any specific project and included staff grants - were given to major institutes.

Anderson said the NHMRC began phasing out the grants two years ago in favour of more directed funding.

Recipients of the final round of block grants, worth a total of $27 million, were the Baker Medical Research Institute, Garvan Institute of Medical Research, Howard Florey Institute, Queensland Medical Research Institute, WEHI and Murdoch Childrens Research Institute.

The grants, which comprised about 15 per cent of the NHMRC's total research budget, will be phased out completely at the end of 2004.

Anderson said recipients of the more-specific basic research grants now signed an agreement that the money would be used to complete that project, even if some element of the research gave rise to commercial potential.

He said that in keeping with the Federal Government's desire to encourage commercial outcomes, NHMRC also offered development grants to help researchers take their work to the next step.

Director of business development at the Garvan Institute, Dr Jonathan Izant, said that while it and all other research institutes had an obligation to achieve appropriate commercialisation ends, there were certain areas where conflicts could arise.

Izant said the Garvan had a strict policy as part of its terms of employment where all staff had to declare any commercial interests, whether in an unrelated company or an institute spin-off.

"With spin-offs you get a situation where the inventor is a scientist in the institute but may also have equity in the company," he said.

"If we have such a situation we will put in place people, Chinese walls, whatever to make sure there is no unfair advantage to that scientist and that things are in fact commercialised at the end of the day."

According to Caples, another potential problem was delaying publication of research results because of the need to protect commercial interests.

She said WEHI's policy was that publication could not take longer than three months, unless there was a justifiable reason for exceeding that time.

"From the institute's point of view it is unassailable, especially when money is coming from the NHMRC," Caples said.

"You've got to watch every step because the reputation of the institute is paramount."

But the director of Unisearch, the commercial arm of the University of NSW, said there was no reason for patent requirements to hold up publication.

Dr Richard Sharp said patents could be prepared and filed fast enough to have a discovery protected without compromising publication timelines.

"Also, what tends to be published isn't always the same as what goes into the patent, because that needs to expand on how the process operates," Sharp said.

He said the university found no conflict in moving research into commercialisation through Unisearch, with leftover basic research moneys being plugged back into discovery work.

"Most certainly fundamental research may generate new IP or patents but these themselves generally take a great deal of time and investment to get to the true commercialisation stage," Sharp said.

"So what tends to happen in a productive research group is there will be a whole body of research that will regularly spit out potentially commercial work, which in turn will need separate funding to push it forwards.

"Things can happen in parallel, so it is a balancing act rather than a conflict."

Money for basic research

The chief commercial officer at the Monash Institute of Reproduction and Development, David Campbell, said it was vital to back blue-sky research.

"I would agree that the remaining money should be directed back into the basic research and still applied to that area to build up the body of knowledge," Campbell said.

"Where it has potential, then you have got to ask what other resources are needed to get proof of concept and then it becomes a separate project with a different set of requirements and funding inputs."

The importance of basic research not being overshadowed in the rush to commercialise was an issue also raised by Murdoch Childrens Research Institute director Professor Bob Williamson.

He said research areas that were not commercially competitive could be disadvantaged if institutes sought business deals at the expense of fundamental research.

"Everyone appreciates the need to have as strong a biotech industry as we can because it provides sustainable jobs and the opportunity to ensure what we do is available to our patients," Williamson said.

"But I have seen instances where institutes go overboard to commercialise and lose sight of the fact that we should be carrying out research for the public good.

"Probably the most important and interesting diseases are not of interest to commercial companies, but we still have a scientific and medical obligation to study them, even if they are not so commercially viable."

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