Graham Lawton talks to the scientists who have founded companies and turned their research into gold

In 1992 Steve Davies, professor of organic chemistry at Oxford University, was trying to solve a dilemma. He had spent 15 years inventing ways to perform tricky chemical reactions but was finding it increasingly difficult to do research. "I was spending 60 per cent of my time generating money for my group to do chemistry," he says. "The rest of my time was spent teaching."

Professor Davies's work had obvious commercial applications. He was able to make molecules highly prized by the pharmaceutical industry. So he followed the lead of two Oxford colleagues and set up his own company. Oxford Asymmetry now has its own premises and is the biggest employer of new PhD chemists in the United Kingdom. It has spawned a sister company, Oxford Diversity, and looks to be well on its way to generating the research funding Professor Davies was finding difficult to obtain.

Professor Davies is treading a path that is becoming increasingly familiar to university researchers, a path that became available in 1988 when the Thatcher administration broke the intellectual property monopoly and gave academic institutions rights of ownership for the first time. Until 1988 intellectual property rights to all state-funded research belonged to the National Research Development Corporation, later the British Technology Group. The NRDC was set up by the Attlee government. Its record infuriated Thatcher.

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"They made lots of money on a couple of occasions but on the whole their record was pretty bad. They didn't patent monoclonal antibodies, for instance," says Graham Richards, theoretical chemist at Oxford and executive technical director of another of the university's companies, Oxford Molecular. Professor Richards took the commercial plunge in 1989 to exploit his work on computer-aided drug design. Oxford Molecular floated on the Stock Exchange in April 1994 valued at Pounds 30 million. It is now worth Pounds 220 million.

Oxford University is fertile ground for aspiring company bosses. Like Oxford Molecular before it, Oxford Asymmetry was given a helping hand. The university owns a company called Isis whose role is to market Oxford's intellectual property, to help scientists patent and license their work and, where appropriate, to help them start up companies.

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"There are two main motivations for scientists to set up companies," says David Thomas, acting chief executive officer of Isis. "Many are tired of the insecurity of having to apply for one set of grants after another and getting turned down. They see a company as a way of getting enough money in the bank to run research for a number of years. The second motivation is to get rich, and what is wrong with that?" Dr Thomas emphasises that even researchers motivated by the search for funding usually continue to file applications with the research councils. Professor Davies, for example, still does research under the roof of the university so his business venture does not take pressure off the hard-pressed state budget. But a company can help to increase the supply of money.

Professor Richards of Oxford Molecular makes it clear that he was not motivated by research funding. Somebody was going to get rich doing computer-aided drug design, so why not him? He says that the desire to profit from his work was frowned upon in the UK at the time. "But," he says, "I spent a lot of time in California and had role models there. I saw how good scientists could create companies without prostituting themselves and without damaging their science."

When companies like Oxford Molecular are successful, Isis is there to ensure that Oxford University benefits. It takes an initial equity stake in the company and can expect the value of that stake to grow if the company is a success. The university may own as much as 20 per cent of a company when it comes to the market.

The most recent Isis success story is Oxford Biomedica. The company was formed in 1995 to exploit the commercial potential of research carried out by a husband and wife team, Alan and Sue Kingsman. The Kingsmans work on gene therapy. They are trying to develop a technology that uses viruses to insert DNA into cells to correct genetic errors.

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"We were doing blue skies research funded by the university and the government," says Alan Kingsman, "but as patents were filed and we focused on clinical products it became clear we needed a different team. The university team is brilliant for blue skies research but not for focusing on clinical targets and being single-minded about getting to a goal. We needed a stand alone company."

In April 1995 Isis helped the Kingsmans to form a paper company to hold patent applications. The research progressed well and as they became increasingly confident about the potential of their technologies their thoughts moved rapidly to forming an operating company active in developing gene therapy products. By the autumn of 1995 they were ready to begin the process of raising money through the City.

Late last year Oxford Biomedica raised Pounds 6.1 million on the Alternative Investment Market. The capital injection will enable its research team to bring seven products - therapies for Aids, cystic fibrosis, Parkinson's disease and four types of cancer - to the threshold of clinical trials.

Gene therapy appears to be a slightly risky business venture. It has threatened to become the Interferon of the 1990s - lots of early promise, lots of early hype but not much clinical success. Professor Kingsman, however, is confident that viable products will emerge. He puts the loss of confidence in gene therapy down to the fact that US companies who performed early clinical trials skimped on development work, prompting the National Institutes of Health to demand that the technology be improved before more trials were attempted. Developing the basic technology is precisely what the Kingsmans' research group has been doing for years.

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For Professor Kingsman the step into the business world was not entirely new. Between 1987 and 1990 he spent 50 per cent of his time as an associate research director with British Biotechnology and has extensive contacts in the commercial sector. "Our group has been involved with the biotechnology industry for many years," he says. "We transferred technology to Celltech in the early 1980s, we did founding work for Delta Biotechnology and had a long standing collaboration with Glaxo. I've never started a company before but I'm very familiar with the intellectual property and patenting side."

The Kingsmans are fortunate. They will remain co-directors of the retrovirus molecular biology group in Oxford's biochemistry department for the foreseeable future but between them they can devote a great deal of time to the company. Sue Kingsman is on sabbatical and is fully occupied as research director of Oxford Biomedica. Next year it is Alan Kingsman's turn for a sabbatical. At the moment he spends 20 hours a week on company business as an executive director.

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Professor Kingsman is clearly very happy with the progress of the company. "My only regret," he says "is that we didn't float on the Alternative Investment Market in the middle of the biotech boom in May and June."