NCN Summit 2001: Sir Alan Langlands (University of Dundee)
A View from the Regions

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Introduction

1. The Scottish Parliament, Ministers, Scottish Enterprise and the Higher Education Institutions in Scotland are all committed to increasing productivity, competitiveness and entrepreneurship in Scotland. The Scottish Institute for Enterprise (SIE) - which I Chair - is a new partnership between industry and the universities which aims to turn this commitment into practical action. The Institute's approach is consistent with the requirements of A Smart, Successful Scotland and builds on the partnership which has been developing between the University of Cambridge and the Massachusetts Institute of Technology. One of the key requirements of your partnership is to link a number of UK Science Enterprise Centres (including SIE) into an international network. We intend to hold you to that requirement.

2. My day job is as Principal and Vice Chancellor of the University of Dundee; a world class research institute in life sciences, teaching a broad range of undergraduate and postgraduate courses which has developed from a small, poor University on the outskirts of Europe. The University operates on three campuses (including the Teaching Hospital at Ninewells). With a turnover of £110m, 12,000 students and 3,000 members of staff, it plays a key role in the economic, social and cultural life of Scotland. Formerly Queen's College Dundee and part of St Andrews University; the University of Dundee was given its Royal Charter and its independence in 1967. Interestingly the two Universities - St Andrews and Dundee - are once again working together to promote joint degree courses and research programmes, including groundbreaking new work on optoelectronics.

3. My intention today is to talk about creating the right conditions for improving competitiveness and new company formation - both at local level - by explaining what's happening at the University of Dundee - and at national level - by looking at the aims and forward plans of the Scottish Institute for Enterprise. I want to explain how we are trying to develop a virtuous cycle of research and enterprise in Dundee and then look at a number of new national initiatives. My focus is on biotech but Dundee is also making important contributions in developing advanced materials for the microelectronics industry and in the creative industries, drawing on the work of the Duncan of Jordanstone College of Art and Design and its Visual Research Centre.

Dundee

4. Dundee is located on the East coast of Scotland and enjoys its own microclimate. Set on the North bank of the Tay estuary, its reputation as a successful, post-industrial city is growing rapidly. These are just some of the views from the window of my office. The tall ship in the centre of this picture is The Royal Research Ship Discovery which took Scott to the South Pole and which was - in its day - as much of a pioneering vessel as NASA's space shuttle Discovery. It is now a metaphor for Dundee's emergence as a city of science and innovation.

5. At the heart of this success is the Wellcome Trust Biocentre, home to one of the biggest concentrations of scientists in the world working on the causes and potential cures for cancer and other diseases. Supporting this work is a new post-genome research centre which brings together in one place state of the art technologies - including bioinformatics, DNA array technology and DNA sequencing and our work on structural biology and molecular interactions - all designed to exploit the vast quantities of genome data which can now be downloaded every day. I won't labour this too much longer other than to say that 2,000 people are employed in biotechnology and life sciences research; that about £45m was generated in research and commercial income last year; that 8 of the world's top 10 pharma companies have significant research contracts in Dundee and there are 18 biotechnology companies in Tayside.

The Virtuous Cycle of Research and Enterprise

6. Universities have four key responsibilities:

(i) to provide an environment in which every student and every member of staff can achieve his or her full potential

(ii) to enable learning through expert teaching

(iii) to foster world class research and

(iv) to contribute to the economic, social and cultural life of their country.

The commercialisation of the University research base is not the be all and end all - Universities have other important responsibilities - but it is significant; partly as an end in itself, contributing economic advantage and partly as a means to an end, fuelling the development of the University's own research activities. My virtuous cycle of research and enterprise has six main components:

(i) tapping into all available sources of research funding to support high quality basic research and to develop modern research infrastructure

(ii) providing teaching and training programmes in entrepreneurship and new business skills

(iii) ensuring that scientists and technology transfer specialists work together to identify research and IPR with commercial potential and then devise effective commercialisation strategies

(iv) providing early stage funding to extend the protection and applicability of intellectual property and to demonstrate its potential commercial value.

(v) providing incubation facilities and a range of specialist support services to prepare projects for market exploitation

(v) the development of licensing deals and spin out companies which, as they grow, have the potential to let contracts and/or sponsor research with the 'parent' University.

High Quality Basic Research

7. Upstream investment in basic research is an essential pre-requisite for successful company formation. This is a long game; it depends on building a critical mass of highly motivated scientists with complementary skills and interests, drawing on a diverse range of funding sources and investing in the infrastructure and the analytical capacity required to support cutting edge science. There are no short cuts; the building process takes time and it can be quickly undermined by the loss of key staff or changes in funding policies.

Entrepreneurship and New Business Skills

8. A total of £6m has been awarded to the Scottish Institute for Enterprise (and its various offshoots like the Centre for Enterprise Management in Dundee) to encourage a culture change in Scottish Universities by embedding enterprise education into the science and technology curriculum, supporting the professional development of University staff in enterprise education, enhancing teaching through case studies, establishing business planning and innovation competitions and setting up a student patent fund. These initiatives are all at a very early stage and progress at the moment is often dependent on young scientists drawing inspiration and confidence from those who have successfully launched spin out companies whilst holding on to their scientific credibility and playing a full part in other aspects of University life. It will not be possible to establish the full spectrum of training and development activities in entrepreneurship in every University and it will be necessary to link to other parts of the UK science enterprise network and the international initiatives being spearheaded by the Cambridge-MIT partnership. Scotland does not have a world class business school; it is unlikely that we will be able to create one and we will have to draw support, where necessary, from the US, England and other parts of Europe.

Effective Commercialisation Strategies

9. Traditionally the most favoured route for the commercial exploitation of intellectual property from Universities has been direct licensing to an established company. This remains the case although in recent years the University of Dundee (and some others) have pursued other routes including:

(i) consortium arrangements eg the University of Dundee, the Medical Research Council and five major drug companies (with added support from Scottish Enterprise Tayside and the European Regional Development Fund) are exploiting the commercial potential of targeting protein kinases and protein phosphates for the development of novel drugs to treat a range of diseases. The consortium companies receive first option on any new targets resulting in licensing deals and any targets not taken up by the consortium companies can be licensed outside the consortium. This arrangement has secured £8m over 5 years, 25 post-doctoral research scientists have been recruited and it has played a key role in attracting inward investment from the US company Upstate Biotechnology.

(ii) spin out companies eg Cyclacel formed in 1996 with support from the Cancer Research Campaign, the Universities of Dundee and Glasgow and Merlin Ventures. Now established in a 47,000 sq ft building close to the campus, the company employs 60 people, including 27 PhD level scientists. It has set up a series of programmes to develop cancer drugs and recently completed a series C fundraising round of £34m drawn from a strong international investor group and has a major £13m collaboration with Astra Zeneca.

(iii) novel models of technology transfer; eg AMCET, a joint venture between the University and SET to establish an applications development company which has just licensed technology to new spin out company Aktina which will develop new products for the microelectronics industry (optical circuit boards) and the transport industry (sensors for catalytic converters).

These examples reflect the commercialisation experience and the wide range of connections in our technology transfer office and their role through every part of the virtuous cycle is vital to its success.

Funding Early Stage Development

10. Previously a bottleneck, we have had a number of recent successes in funding the early stage development of candidates for commercialisation. A range of funding mechanisms have been established:

(i) the University is setting up its own Business Venture Fund to provide seed corn for new projects

(ii) we have recently been successful in winning a University Challenge Fund of £3m from DTI in conjunction with the Universities of St Andrews and Aberdeen

(iii) we draw on the national Proof of Concept Fund; a £29m fund over 6 years which is operated by Scottish Enterprise and of course,

(iv) we work in partnership with the VC and business angel community.

This 'hierarchy' of funding options provides access to sums in the range £30k to £2m and will sustain a healthy flow of new ventures.

Incubation Facilities and Services

11. The requirement here is for high quality, low cost facilities close to the campus with access to equipment, training and development opportunities and responsive business services (legal and financial). This is a period when the founding scientist often needs personal support and mentorship from colleagues and the parent institution; providing a supportive environment is essential to the success of the commercialisation process.

Spinouts and Licensing Deals

12. And finally, the aim is to create a concentration of company activity which will sustain the University and its research activities into the future. Our vital statistics - research turnover of £43m, patents 98, licences 40, biotech companies 18, licensing income £1.3m - are impressive but we still have a long way to go to match Cambridge and the best in the US. We want to create a unique environment for new company formation, to be a magnet for investment and to be at the leading edge of teaching and training in entrepreneurship and new business skills. We are part of a global competition for capital and good people; we will succeed only if every part of the virtuous cycle is operating properly and if the overall conditions for new company formation are right in Scotland as a whole. This is where I now want to turn my attention.

Scotland's Current Position

13. Scotland is punching above its weight in research output. With just 9% of the UK population, Scotland wins 12% of the UK funding councils' resources for research, 13% of government departments' resources for research and 12% of the EU research resources spent in the UK. Scotland has 13% of all the UK academic departments rated 4, 5 or 5* and Scottish academics produce 1% of all research publications in the world; we are third in the world league table for publications per head of population. So far so good but ... Scottish industry invests only 0.5% of national GDP on research and development, half the level of the UK as a whole and a third of the OECD average. The Scottish business birth rate remains about 30% below the UK average.

14. Ministers are determined to unleash creativity and enterprise in Scotland and to take advantage of the research strengths of our Universities. The policies embodied in A Smart, Successful Scotland and the Science Strategy for Scotland are the right ones but they are only the beginning of a difficult process of cultural change to foster entrepreneurship and practical action to increase the number of people who study science and improve the standards they achieve. Both are rate determining steps.

Scottish Institute for Enterprise

15. The Scottish Institute for Enterprise is a partnership between business and academia, set up with a £6m grant from DTI (as one of a network of Science Enterprise Centres) to support progress in this area. Its origins were in Scotland's top five research Universities but it has now expanded to all Universities. The key objectives of SIE are to:

a. increase the availability and uptake of educational programmes in entrepreneurship for staff and students

b. improve the infrastructure for commercialisation and increase the number of technology start-ups

c. increase the interchange between academia and business and

d. to capture, generate and disseminate examples of good practice and innovative approaches to teaching and learning of entrepreneurship.

Progress

16. The SIE is beginning to make a positive impact on both the infrastructure for entrepreneurship and support mechanisms available to student entrepreneurs. The Board and the core team led by Carl Togneri value the relationship with the UK Science Enterprise Centres and the MIT-Cambridge Institute; they work with the entrepreneurial community in Scotland (eg TVS and Entrepreneurial Exchange) and they are developing strategic partnerships with Connect and the Scottish University for Industry (SUFI). SIE's first priority is to stimulate entrepreneurial activity through enterprise education programmes. Student entrepreneurs are emerging and customised support services are providing connections to investment capital, market awareness and business start up know how, for example three undergraduates in computing science from Edinburgh have bucked the current technology trend to set up Amoza Ltd - developing cutting edge software for home control systems - with support from the Edinburgh Technology Fund and business planning advice from SIE. Many more will follow. Creating and sustaining competitive advantage means encouraging new businesses and keeping our most able and enterprising graduates in Scotland.

Education Programmes

17. SIE's enterprise education programmes take the form of a suite of eight multimedia modules which are web-based and available to undergraduate and postgraduate students; the focus is on:

• recognising business opportunities
• accessing resources
• venture management
• corporate entrepreneurship
• entrepreneurial finance
• IP and law
• marketing
• creativity and personal development for entrepreneurs.

All eight will come on stream in the period November 2001-July 2002. Existing modules are delivered through the partner University and SIE achieved nearly 7,500 undergraduate student contacts (32,066 contact hours) and 750 postgraduate student contacts (5,498 contact hours) in 2000/2001. Across Scotland, there is an annual cohort of about 17,000 science and technology students and our aim is to reach this whole group with high quality, properly accredited material.

18. The starting point for students is a CD-ROM, which introduces students to entrepreneurship by showcasing existing role models, including top scientists like Sir David Lane who have combined their research and teaching careers with commercial success. The CD-ROM acts as an introduction to SIE's modular programme.

IPEX

19. SIE also has a clear responsibility to improve the transfer of knowledge from the science and engineering base in Universities into the market place. Encouraging company-based R & D and better links between business and academia are key factors in improving competitiveness. Detailed work is underway to design an on line knowledge exchange (IPEX) which will aim to increase deal flow by marketing University technology and enabling SMEs to understand what is available and relevant from the University research base and where expert help exists. Current work is focused on testing the market, developing the business model and ensuring that any new product dovetails with and builds on current initiatives including Scottishresearch.com which will be launched by the Scottish Higher Education Funding Council in the next few weeks.

SIE is in good shape and we believe that we can make a substantial contribution to the success of Cambridge-MIT partnership and the UK 'science enterprise network' and gain a great deal from our involvement in it.

Conclusion

20. Scotland has a long and distinguished history of scientific discovery, innovation and enterprise and some of the world's leading scientists and engineers work in our Universities. But we have not always been very good at converting our research strengths into economic advantage - by creating and sustaining competitive companies and encouraging a culture of entrepreneurship in the staff and students of our Universities. There is a strong commitment to put this right:

• the policies being driven by the Minister for Enterprise and Lifelong Learning provide the right environment for progress
• Scottish Enterprise and their local enterprise companies are co-operating with the Scottish Higher Education Funding Council to stimulate the knowledge economy and
• Universities are working together, developing joint research programmes and new initiatives in enterprise education.

The Dundee example shows what is possible if you can combine high quality basic research, entrepreneurship, effective technology transfer, funding, a good incubation process and success in new company development and licensing deals. But as I said earlier, we are part of a global competition for capital and good people and we will only succeed in the long term if we consistently deliver on every aspect of the virtuous cycle of research and enterprise. The Scottish Institute for Enterprise is helping this process by encouraging cultural change, fostering entrepreneurship and taking a series of practical actions to support the staff and students in our Universities and their potential business partners.

So far so good ... but the real challenge is to scale up. This means staying at the leading edge of scientific and technological developments, providing a unique environment for new company formation, attracting large scale investment and taking an uncompromising approach to hiring (and rewarding) good people. It means moving to the leading edge of teaching and training in entrepreneurship and developing top flight business support services. It also means taking risks and accepting (and learning from) honest failure. That is the challenge ahead ...