Public Research for Private Gain 

UC Regents recently approved a new corporate entity that will likely give a group of well-connected businesspeople control over how academic research is used.

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Belldegrun, Doumani, and Mendelson are members of a tight-knit network of investors who have made millions by forming startup biotech companies, licensing university-developed technologies, and then selling the companies to bigger corporations for enormous profits.

Newco would effectively impose the model this group of investors has established over the past decade on all of UCLA's tech transfer activities, and Mendelson has pointed to Agensys as Exhibit A as to why this will benefit the university.

In 1980, Alan Mendelson, then a junior lawyer at the Silicon Valley office of Cooley Godward, was assigned an otherwise obscure and small corporate client: Applied Molecular Genetics. That company later became the $76 billion biotech giant known today as Amgen. Mendelson's role as Amgen's legal counsel put him at the center of California's booming biotechnology industry, connecting him to hundreds of venture capitalists and university scientists. Throughout the 1990s and 2000s, Mendelson represented and served on the boards of numerous small and large companies developing medical technologies. Many of these companies were started and funded by the same entrepreneurs and investors. Along the way, Mendelson also invested in many of these companies, becoming wealthy in the process.

Most of the corporations Mendelson worked with relied on technology licensed from universities. This placed Mendelson firmly on the side of private businesses in their often-contentious negotiations with university tech transfer offices over patent rights, royalties, milestone payments, and equity stakes. Private companies often seek exclusive rights and to lower royalty payments to the university. Sometimes investors want universities to take equity stakes because these are, in effect, public subsidies to highly speculative companies at their seed stage, when no private investor is willing to invest.

In 2005, one of Mendelson's clients, Kythera Biopharmaceuticals, entered into an exclusive licensing agreement with UCLA and a UCLA Medical Center-affiliated foundation called LA Biomed to exploit patents related to a drug developed by the school. (UCLA has kept the terms of that agreement confidential.)

In addition to working as Kythera's lawyer, Mendelson was an investor in the company. According to records filed with the US Securities and Exchange Commission on May 17, 2012, Mendelson advised Kythera in a public stock offering that netted about $86 million. The disclosure filing noted that Mendelson owned 13,000 shares of Kythera at the time. Mendelson's investments were through a family trust, and through VP Company Investments 2008, LLC, a Delaware-registered corporation that partners of the Latham Watkins law firm use as a co-investment vehicle. Mendelson was still a stockowner in Kythera when he became a UC Regent in July of last year.

Mendelson also represents and owns stock in Singulex, Inc., another corporation that licenses technology from UC. Singulex's offices and labs are in Alameda. In a filing with the SEC last year, Singulex's executives wrote, "our business is dependent on our exclusive license from the Regents of the University of California," and warned prospective investors that "termination of this license could negatively impact our market position." As of September 2012, Mendelson owned 34,004 shares of Singulex through his family's trust. He also owned a portion of another 34,004 shares, along with partners of the Latham Watkins law firm, held by VP Company Investments 2008, LLC.

As a regent-designate since 2011, and as a full voting member of the UC Regents since July 2012, Mendelson participated in the regents' special Working Group on Technology Transfer, an ad hoc committee of the board that was tasked with studying system-wide tech transfer policies. One of this working group's recommendations was "establishing separate institutional structures with funding and mandate to invest in UC start-ups." The regents' Working Group on Technology Transfer also took the lead in advocating for the establishment of Newco.

At last month's regents meeting, during the discussion preceding the vote to establish Newco, Mendelson recounted his version of the Agensys story. "As some of you may have heard, a mutual friend of chairman Lansing and mine, Dr. Arie Belldegrun at UCLA, he and a number of faculty members started a company. It was called Agensys. It was sold ultimately for $500 million dollars and the university benefitted greatly."

But according to Mendelson's version of events, UC didn't benefit much from the terms of the licensing agreement, but instead from the "largesse" of the university's private investors. Mendelson said UC was rewarded "not so much by the royalty revenues, because I don't think even now they have products approved, but it was in terms of some of the investors who are UCLA donors giving back. Once they got the largesse, if you will, from the sale of the company, they gave back significant amounts of money to UCLA."

It's unclear whether Mendelson has economic stakes in other companies — besides Kythera and Singulex — that license UC technology or otherwise use university resources. Mendelson did not respond to a request for comment for this story, and when I asked the University of California Office of the President for a copy of Mendelson's Form 700 (a detailed disclosure of personal economic interest required of the UC Regents and many UC administrators), a representative from UCOP responded that Mendelson did not have one on file, and that his annual report was late. I obtained a copy of Mendelson's Form 700 that he filed in August of 2012 with the California Fair Political Practice Commission. The FPPC also confirmed that Mendelson's annual filing, which was due April 2, is late.

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