Cashing in on its intellectual property, Memorial Sloan-Kettering Cancer Center in New York reaped $142 million last week through the sale of a portion of its royalty interest in two cancer drugs.
Memorial Sloan-Kettering is only the latest teaching hospital and research institute to boast that it has brought in significant revenue from a source other than patient services. Last month the University of Pittsburgh Medical Center walked away with $45.1 million when radiology giant Royal Philips Electronics acquired Stentor, a developer of picture archiving and communication systems that was created by UPMC.
The sale of Sloan-Kettering's royalties in more than 60 countries to Royalty Pharma, a New York-based fund that provides capital in exchange for revenue-producing intellectual property, includes additional payments should yearly sales of the two drugs -- Neupogen and Neulasta -- exceed certain thresholds.
It follows a January 2004 deal in which Royalty Pharma acquired U.S. royalty interest in the drugs for $263 million. Sloan-Kettering retains a minimum 20% stake in global royalties from these two drugs, which are manufactured and marketed by Amgen, said Christine Hickey, a Sloan-Kettering spokeswoman. As part of the earlier agreement, the hospital invested $7 million in Royalty Pharma.
Income from licensing for universities, teaching hospitals, research institutes and technology investment firms has increased almost tenfold since 1991, according to the Association of University Technology Managers, a not-for-profit organization which conducts an annual licensing survey of such institutions.
Among teaching hospitals in fiscal year 2003, the last available year in which data were available, more than 30 teaching hospitals and research institutes collectively reported receiving $307 million in adjusted gross license income while spending $3.7 billion in support of research activities.
Sloan-Kettering ranked fifth among teaching hospitals and research institutes in that survey, reporting $224 million in research expenditures.
In total, Royalty Pharma purchased royalty interest in Neupogen and Neulasta worldwide except for China, Japan, South and North Korea and Taiwan. The two drugs are "certainly our biggest royalty position," Hickey said. In 2004, Sloan-Kettering earned $61 million in royalty income and $1.5 billion in revenue, according to a financial summary posted on its Web site.
The cancer center earned $50 million in income on operations last year.
Net proceeds from the sale will be used to reinvest in Sloan-Kettering's research programs and facilities, "which we hope will produce new discoveries that will benefit our patients and cancer patients elsewhere," officials said in a news release.
Royalty Pharma has been providing capital to research institutions, inventors and life-science companies in exchange for royalty interests since 1996. The fund holds royalties in 18 different products and has made deals with such organizations as Yale University, Emory University and Gilead Sciences, said Mike Herman, Royalty's vice president of the investment group.
Launched by Amgen in 1991, Neupogen was designed to protect certain cancer patients against bacterial infection while undergoing chemotherapy.
Neulasta is a longer-lasting version launched in 2002. Sloan-Kettering researchers identified the so-called granulocyte colony stimulating factor, a genetically engineered version of a naturally occurring protein that defends the body against bacterial infection, and then worked with Amgen to clone the gene that encodes the protein.
Scientists at Amgen subsequently produced a recombinant version that allowed the drug to be made in large quantities.