Weizmann Inst reaps huge pharma royalties

Weizmann Institute  Tamar Matsafi

The Weizmann Institute has received NIS 8.5 billion in royalties over the past six years, "Globes" has found.

A "Globes" probe of the Weizmann Institute of Science's complete financial statements for the past five years, obtained following a demand under the Freedom of Information Law, shows that it received nearly NIS 8.5 billion in royalties in six years. Nearly NIS 3.5 billion of this went into the pockets of the relevant scientists. These figures are part of one of the great secrets of Israeli academic institutions' pharmaceutical industry: the royalties that those institutions' commercialization companies receive from the drug companies and transfer to the institutions and their researchers.

The regulator of the academic institutions - the Council for Higher Education in Israel Planning and Budget Committee - does not require the academic institutions to publish complete financial statements, and the information about the activity of these institutions is therefore fairly limited; it includes mainly the annual allocations from the higher education budget in Israel, a budget that exceeds NIS 10 billion annually. The figures revealed by "Globes" reflected the Weizmann Institute's huge success in developing and selling drug patents, the great wealth of the scientists, but also the country's big failure. It is possible to argue that the scientific infrastructure at the Weizmann Institute has proved itself again and again in recent decades, but Israel has not exactly been able to leverage this scientific infrastructure and connect it with the country's growing pharmaceutical industry, except for the case of Copaxone, a drug for the treatment of multiple sclerosis that was commercialized by Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) and became a hit, with over $4 billion in annual sales (until the patent expired).

The result is that the Weizmann Institute enjoys huge royalties, as well as a very limited groups of scientists, each of whom has tens of millions, or even hundreds of millions, of shekels as a result of the drugs' success. The state's main profit is derived from taxes on the scientists' royalties and its relatively low budget allocations for the Weizmann Institute because of its success. The Israeli drug industry, on the other hand (except for Teva), is now in deep crisis - it has been unable to take advantage of the scientific infrastructure at the Weizmann Institute to establish a large pharmaceutical industry in Israel.

How does the model for commercializing drugs at the universities work? Every university has founded an effectively private subsidiary, which is not subject to the regulator. The purpose of these companies is to management the intellectual property created in the framework of the academic institutions, protect it, and commercialize it. Yeda R&D Company Ltd., the technology transfer arm of the Weizmann Institute of Science, is the largest of these companies, due to the Weizmann Institute's success. Yeda's financial reports are not revealed, of course; they are consolidated with those of the Weizmann Institute, but particulars about these companies' model can be found in a 2012 research report by the Knesset Research and Information Center.

Employees at the universities' commercialization subsidiaries are not classified as state employees, and the universities' policy on the rights to intellectual property is autonomous. According to the Knesset research report, in contrast to the health system and the Agricultural Research Organization of Israel (ARO) - the Volcani Center, the universities' arrangements provide no royalties whatsoever to the state (which is arousing criticism of this model).

According to the Knesset research report, the commercialization subsidiaries register patents through which property rights to the knowledge created are granted to the pharmaceutical industry and the business sector. The companies contract with both commercial concerns and financing concerns (government or private - in the case of the Weizmann Institute, mostly global pharma corporations), and rules are set for financing the activity. In addition, the subsidiaries draw up agreements anchoring the distribution of rights and revenue between the research institute and the researcher.

All the universities have intellectual property bylaws establishing what is permitted and what is forbidden in the scientists' connections with the industry, and the arrangements for handling intellectual property. There are some differences between them in matters addressed by the bylaws and the degree of details concerning the policy in which each university dictates various aspects, such as rules for publication, ownership of the patents developed during sabbatical years, the distribution of royalties between the researcher and the university's institutions, conflicts of interest, etc.

As early as 2005, a committee dealing with the connection between the university and the industry, headed by former Hebrew University of Jerusalem President Prof. Hanoch Gutfreund, recommended, among other things, guaranteeing an effective transfer of knowledge with applied potential from the universities to Israeli industry. This committee's recommendations, however, like those of many committees in many areas, remained on the shelf. The Council for Higher Education in Israel Planning and Budget Committee has recently been holding more discussions on the subject.

In any case, the flow of money is simple: the commercialization company collects royalties on the sale of a drug that for which it sold the patent (the percentages are small, but when sales of the drug are in the billions, the revenue flow per year is huge), and then transfers the money to the academic institution and the scientists.

Just how successful the Weizmann Institute is highlighted by one amazing figure: it turns out that the Weizmann Institute has an enormous investment portfolio amounting to NIS 9.5 billion. The investments are made through Gem Trust-W, a trust registered in the US that is a general partner in the Weizmann Global Endowment Fund limited partnership. According to the reports, the partnership collects and manages the Weizmann Institute's liquid assets and those of the overseas committees for the Weizmann Institute. The Weizmann Institute and the overseas committees are jointly represented according to a key that prevents any takeover whatsoever of the partnership's funds, and does not allow any one-sided control of the partnership. The Weizmann Institute and the committee also have the right to withdraw the money they transferred to the partnership at any time upon advance notice, subject to a number of conditions. Note the composition of this enormous investment portfolio: cash (NIS 332 million), bonds (NIS 1.6 billion), shares (NIS 980 billion), non-marketable securities (nearly NIS 6 billion), and mutual funds and gold (NIS 597 million).

Thanks to this figure, there is no doubt that the Weizmann Institute is Israel's wealthiest academic institution. What other institution, or any corporation whatsoever, has an investment portfolio of nearly NIS 10 billion?

Published by Globes [online], Israel Business News - www.globes-online.com - on December 5, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Weizmann Institute  Tamar Matsafi
Weizmann Institute Tamar Matsafi
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018