Behind the scenes - Spinning out!
Since 2002, over 2000 innovative ideas have been submitted to SHIL by healthcare professionals across the spectrum of disease and medical background. Within SHIL, commercialisation is the end goal. It generates revenue not only for the inventor but also the employing health board, generating vital funds for the NHS to reinvest in healthcare while simultaneously spreading improvements in patient care and saving the NHS time, money, and resources. In this issue of Behind the Scenes we explore the purpose, process and success of NHS spin-outs.
What is a spin-out?
When it’s based on NHS-generated intellectual property, the formation of a company is known as a ‘spin-out’ company. This essentially involves transferring NHS-owned intellectual property rights to a new company with the NHS taking shares in the ‘spin-out’ in return. SHIL will generally hold the equity stake in the company on behalf of the NHS board, establish royalty payments for the IP creators, and may take a place on the Board of Directors.
Forming a spin-out company is just one way to commercialise intellectual property (IP) and it is the route typically considered when there is no existing business to approach about the new IP or because the technology has clear potential to generate many products and engage multiple sectors. However an idea is only going to be suitable for a spin-out if it satisfies a genuine commercial need in a market which is large enough and valuable enough to attract outside investment from third parties with a real possibility of generating returns.
Why spin-out?
Spinning out the intellectual property contained in innovations developed originating within NHS with a view to commercialising such IP can satisfy two key requirements – it uses research and innovation to advance medical science and ultimately improve patient care, whilst also potentially providing an alternative source of funding for NHS. But there are other reasons:
• There may be no existing business to approach to partner with or license the IP to
• There are clear possibilities to generate many products and applications
• It helps establish a brand for the products
• Capital can be raised from a wide range of sources – including public and private development funding intended for small business.
Often with a spin-out there are good long-term prospects of a commercial return but the short term development costs and risks deter the private sector from getting involved at such an early stage. The IP is used as the asset to raise finance in return for an appropriate share of the equity. Returns to the shareholders will be subject to the future success of the business.
Actively supporting our healthcare professionals on this journey helps capitalise on the talent, entrepreneurism and commitment of our staff and uncover transformational ideas throughout NHS Scotland. Overall the creation of a successful spin-out company is also good for the individuals involved, the local and national economy, and the NHS.
SHIL supported spin-outs
SHIL has a strong record in producing spin-out companies on behalf of NHS Scotland. Each company has been set up to produce and market healthcare innovations that originated from NHS Scotland employees. This includes:
• Aurum Biosciences Ltd is a biopharmaceutical company developing novel pharmaceuticals for use in a number of different clinical indications of high unmet medical need. The company was set up in 2015 as a spin-out from NHS Greater Glasgow and Clyde, Scottish Health Innovations Ltd (SHIL) and University of Glasgow.
• Ambicare Health Ltd has developed a portfolio of wearable light sources for medical and consumer healthcare applications. The company was set up in 2004 as a spin-out of NHS Tayside, University of St Andrews and Scottish Health Innovations Ltd (SHIL); building on pioneering work undertaken at the University of St Andrews and Ninewells Hospital Department of Dermatology.
• Aridhia applies innovative analytical and data integration techniques to deliver integrated information to improve healthcare. The company was set up in 2007 as a spin-out from Scottish Health Innovations Ltd (SHIL) NHS Tayside.
• CardioPrecision Ltd is an award-winning medical device company providing advanced cardiovascular solutions. It was set up in 2007 as a spin-out from NHS Greater Glasgow and Clyde, the Golden Jubilee National Hospital, and Scottish Health Innovations Ltd (SHIL).
• Clear Surgical is a Scottish medical device company that develops, manufactures and sells innovative medical devices for use in surgery. The company was set up in 2013, as a spin-out from NHS Ayrshire & Arran, NHS Grampian and Scottish Health Innovations Ltd (SHIL).
• Touch Bionics is a provider of world-leading prosthetic technologies designed to achieve positive outcomes for people with upper limb deficiencies. The company was set up in 2002 as a spin-out from NHS Lothian and Scottish Health Innovations Ltd (SHIL), and the first NHS spin-out company.
Expertise and support
Setting up a new spin-out is a challenging bringing together various resources such as specialist management, facilities and funding (typically from a combination of investors, grants and customers). SHIL has the expertise to support this process and will critically assess if a spin-out is the best route to market.
If so, support will be provided at each stage of setting up the company. The goal is to help the company achieve and sustain growth, and provide the best change of long term survival and success.
It should be noted that specialist skills are required to operate a business, particularly a high risk ‘spin-out’ business, and the future success and profitability of the company will depend on the quality of the Board and team in place. Indeed, a decision by a Venture Capitalist to invest in a new company will often be based as much on the quality of the Board and team, as to the novelty and commercial potential of an invention/new technology.
The longevity of the companies outlined demonstrate this commitment.
Fostering and supporting the spread of healthcare innovation has the dual benefit of improving patient care and stimulating economic wealth; whilst supporting Scotland’s vision to become a world-leading entrepreneurial and innovative nation. SHIL supported spin outs continue to benefit the health service today, achieving great success and demonstrating the potential of an initial idea.
More information
A range of support is available to inspire and empower health professionals to think innovatively.
Corporate SHIL resources are available for your health board and can be requested via [email protected].
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