LONDON – Oxford University's new technology commercialization body, Oxford Science Innovation plc (OSI), has announced the closing of its first fund at £320 million (US$505.7 million).

The second tranche of £110 million followed commitments of £210 million by six cornerstone investors in the first round, which closed last month.

The size of the fund transforms the landscape, said Jon Rees, CEO of OBN Ltd. (formerly Oxfordshire Biosciences Network), the industry body that has its roots in the innovation ecosystem of the region. "At one stroke, this new fund has the potential to form a boutique for institutional investors," he said.

"For several years there has arguably been a gap in the availability of sufficient capital to either attract internationally recognized senior managers to build new biotechs on university IP, or to get early proof-of-concept experiments completed that would have facilitated international venture capitalists to back [Oxford University] spinout companies," Rees told BioWorld Today.

The investors in the first tranche were Invesco Asset Management Ltd., IP Group plc, the Wellcome Trust, Lansdowne Partners LLP, Oxford University Endowment Fund and Woodford Investment Management Ltd.

The fund is the Oxford equivalent of Imperial Innovations plc, originally formed to back IP from Imperial College London, and of Cambridge Innovation Capital, which was established to back technology coming out of Cambridge University. However, OSI is much larger than either at the point of foundation.

OSI was set up by the Oxford University to be the preferred partner for funding spinouts from its math, physics, life sciences and medical sciences departments, in effect sidelining the technology commercialization company IP Group plc, which has had preferential agreements with the university's chemistry department since 2000.

However, IP Group is maintaining its interest in Oxford University research, committing £40 million to the OSI fund. And David Norwood, founder of the IP Group, has become chairman of OSI.

OSI will have the first rights on forming and funding companies for 15 years. That will not be the only way to form a spinout based on Oxford's research, but OSI will take a stake in every company based on the university's IP.

Unlike Imperial Innovations, which invests in companies from other universities and also pulls together portfolios of IP from academic groups at different institutions, OSI has a mandate to invest exclusively in Oxford University research.

Oxford University has had a long-held desire for an exclusive vehicle to fund commercialization of the IP arising from its $630 million-per-annum R&D operation, said Greg Smith, chief financial officer of IP Group. With the agreement with the chemistry department due to end this November, investing in OSI will broaden IP Group's interest in Oxford University's science. "Previously, we only had access to chemistry; now we have an 18 percent stake in a vehicle with access to any technology – this gives us close ties to Oxford science and, as a cornerstone investor, we will be on the board working with OSI," Smith told BioWorld Today.

IP Group funded its investment in OSI via a placing of 26.9 million shares.

THE GOLDEN TRIANGLE

Oxford University was recently ranked number one for the quality of its research in the UK in the government's Research Excellence Framework, and it is consistently number three in world league tables.

In addition to Oxford, IP Group has technology commercialization agreements with a number of other UK universities and recently established its first agreements with three universities in the U.S. The company's approach is not to be a passive investor, but to be involved in advising on the formation of management teams, setting business strategy and running companies. (See BioWorld Today, March 11, 2015.)

Smith said it is not clear as yet what level of interaction IP Group will have with OSI-funded companies. "Exactly how the relationship will pan out, we will see over the next few years," he said. "It's possible we will be involved in the formation and running of companies – it will depend on the circumstances."

Oxford University spinouts in which IP Group currently has a stake include Oxford Nanopore Technologies Ltd., which is developing an alternative DNA sequencing technology, along with Summit Therapeutics plc and Genomics Ltd.

For Smith, the formation of such a large fund dedicated to backing research from a single institution demonstrates the environment for commercializing university IP is changing. "For the handful of premier universities the way the model will develop will be to form bigger, dedicated funding vehicles. We intend to work closely with these funds and to have significant shareholdings," Smith said.

The quality of the investors in OSI also speaks of change. "The amount of capital and the types of institutions is another sign the whole sector of IP commercialization is gaining more and more widespread interest," Smith added.

OBN's Rees said Oxford would now rank alongside Cambridge as one of the two major life sciences clusters in Europe. "Taken together with the financial powerhouse of London, the golden triangle is taking its place in people's minds as the top biomedical innovation supercluster in Europe," he said.