By Morgan Eichensehr – Reporter, Baltimore Business Journal
A biotech company looking to market technology licensed out of Johns Hopkins University raised $128 million through an initial public offering this summer. Hopkins gets a piece of that public funding pie, thanks to licensing agreements — but what about Baltimore?
Allakos Inc.'s IPO made a strong showing during a particularly busy period for health care IPOs. It initially priced 7.2 million shares at $18, and shares have been trading at between $26 and $46 since the IPO, according to Yahoo Finance.
It is the fourth company involving Hopkins-licensed tech to do an IPO, said Liz Burger senior director of Strategic Initiatives for Johns Hopkins Technology Ventures, a group that oversees intellectual property and commercialization at the university and medical campus.
But none of those companies are still in the city. Hopkins is steadily working to change that condition, by reinvesting some of the revenue it sees on these kinds of exits to fuel innovation and commercialization efforts aimed at bringing new funds and jobs to the city, and keeping them here.
Hopkins sets up licensing and royalty agreements for potentially lucrative technologies developed by researchers and employees through Johns Hopkins Technology Ventures. If those technologies ultimately see an exit — like an acquisition or IPO — Hopkins cashes in on some of the returns.
Burger said licensing deals differ is scope depending on the needs of a startup or researcher, and how viable or advanced a piece of technology is believed to be. The school maintains between 100 and 200 licensing agreements each year, she said, and evaluates agreements annually to determine if they are still of value. JHTV may take an equity stake in a startup built around a certain licensed technology, or set up a royalty agreement so that when a product hits the market, Hopkins gets a cut of each sale.
In Allakos' case, for example, the company disclosed in a filing with U.S. Securities and Exchange Commission that under the terms of its agreement with Hopkins, it has paid about $300,000 in upfront and milestone payments as of March 31. Allakos may owe additional payments to the school of up to $4 million in years to come, and is subject to single-digit royalty payments on any future sales of its licensed products.
Hopkins' intellectual property policy specifies how any revenue made on a licensed piece of technology is to be distributed:
- The technology's inventor gets the largest share of any return, at 35 percent.
- Then the inventor's lab or research team gets 15 percent.
- Then the inventor's university department gets 15 percent.
- Then the specific school that their department is in gets 25 percent to 30 percent.
- Lastly, the university gets the smallest share, of between 5 percent and 10 percent.
"Unless there is a huge windfall event, our cut ends up being pretty small at the end of the day," Burger said.
Overall, Hopkins saw about $17.1 million in licensing revenue through 174 agreements in fiscal year 2017, and $16.5 million on 138 agreements in fiscal 2018.
Burger said major exit events involving licensed technologies are still few and far between. Some life science technologies are still 10 years away from market, and some still may never even make it to sales, she said.
Hopkins tends to evaluate the success of its tech transfer efforts in other ways, though. She acknowledged another Hopkins-born company that did an IPO last year: Kala Pharmaceuticals. The company, which was co-founded by Hopkins ophthalmology professor Justin Hanes, managed to raise about $90 million in the exit. Burger said Kala's case is particularly exciting for Hopkins because the company's licensed technology is actually being used on patients today. Hanes also remains on as faculty at school of medicine, conducting new research and serving as an example for other students and staff of what can be achieved with Hopkins resources.
Burger also pointed to biotech firm Personal Genome Diagnostics as an example of the kinds of success stories JHTV is aiming to foster. The company closed a $75 million round of funding earlier this year, and announced plans to triple its physical footprint in the city.
It is encouraging for JHTV to see a company like that spin out and continue growing in Baltimore, Burger said. Regardless of whether PGDx ever gets acquired or does an IPO, she said, it is bringing new money and jobs to the city and demonstrating that Baltimore can make a great home for other life science startups.
"IPOs and acquisitions are great to see, but they are not the primary motivation behind what we're doing," Burger said. "We are more focused day to day on how we can contribute to the ecosystem as a whole, bringing new money and new job opportunities — not just for Hopkins, but for Baltimore."