Sir

Since the inception of the biotechnology industry more than two decades ago, the major pharmaceutical companies have supported discovery-phase research in the sector through collaborations and out-sourcing. Even when the economics seemed unfavourable to the biotechnology company, these arrangements have been beneficial in critical ways.

But the earliest phases of R&D — target discovery, validation and screening — are receiving less and less support within the pharmaceutical industry. The major companies are under enormous pressure to continue high growth, while dealing with unspectacular results of genomics collaborations, consolidation and the establishment of internal infrastructure. All this has greatly reduced their appetite for discovery-phase partnerships with biotech start-ups.

A preference for late-stage product opportunities will create long-term problems for the drug industry and for health care in general. Clinical compounds do not materialize out of thin air. If the pipeline input is squelched, the downstream output will eventually tail off.

The change in the commercial funding environment creates some interesting opportunities for academic institutions. Without departing from their primary mission of assisting the public good through education and other services, they could seize the chance to fill this gap and attract government funds for discovery-stage work. As projects mature, universities could create mechanisms to transfer programmes into a commercial setting where they can exploit greater amounts of private capital and command higher returns on investment than has typically accrued to them.

Universities can already tap into large sums of public money to support work of medical value. If they could undertake a focused effort on early-stage technology and drug-discovery R&D, I believe that a relatively simple and productive transfer into the private sector could be arranged. The universities could find the business expertise necessary to launch companies successfully through their internal resources and through cultivated venture-capital groups. Academic institutions could thus exert considerable control over commercialization of their discoveries.

A properly conceived and managed university unit of this type would require an initial investment of funds before becoming self-sufficient. Once the infrastructure is built, a unit could rapidly become a source of income for the university through government grants, research contracts and, ultimately, its own commercial ventures.

Returns on the initial investment would probably derive in part from royalties on exclusive (for example, drug) or non-exclusive (for example, technology) licences. In addition, universities could gain income through equity positions in companies that they help to found, and institute regulations to ensure openness and mitigate perceptions of conflict and exploitation.

Universities stand to benefit in several other ways. Much of the infrastructure for target validation and drug screening operations could be used to accelerate, and possibly transform, their own applied or basic research activities. These services could be provided by the unit as a core facility or as collaborative projects. For instance, a target validation or chemical screening system could be used by any faculty member wishing to explore the roles of his or her favourite genes in a specific disease area.