Craig Kenesky, Ph.D.

Wilson Sonsini Goodrich & Rosati, PC

October 29, 2014

IP and the Biopharma Startup

Company Life Cycle

Development

• IP Created

• Seed

Financing

needed

• Additional

leadership

Development

Startup

Need idea

and

leadership

Startup

Partnering

Capital influx to

support G2

product or clinical

trials

Commercializati

on

IPO / Merger

IPO / Merger

Biopharma Company

Med Tech / Software Company

EXIT

Establish an Identity

• Are you going to:

o discover new drugs?

o discover diagnostics?

o draft code?

• Will you:

o sell a product?

o sell the tools to make

products?

• Investors fear a company

who promises to do it all

IP in an Innovator Company

• IP provides most, or all, the value of a bio

start up

• Major investors examine your IP closely

• Poor IP can make an innovation

unattractive

• Patent or publish?

o You can do both if you take patent

steps first

IP – Initial Steps / Diligence• First Generation Patents:

o Often licensed from a university

o Protect the key, novel

innovation

o What is the state of the art?

o When do they expire? (20 year

term)

• Third Party (Competitor) Patents:

o Can we license that too?

o Can we avoid competitor IP?

• Need a pitch deck and business

plan

University IP Licensing Terms

ECONOMIC

• Equity in Company

• Upfront Payment

• Royalty on Sales

• University Patent Costs

• Milestone Payments

• Sublicensing Revenue

NON-ECONOMIC

• Which, how many, patents

• Field of use

• Territory

• Term

• Diligence

• Sublicensing Restrictions

Know Your Regulatory

ExclusivityUnited States

• New Chemical Entity 5 Years

• Combination Drugs with a NCE 5 Years

• New Formulation of Old Drug 3 Years

• New Use for Old Drug 3 Years

• Orphan Indication 7 Years

• Biosimilar (i.e., antibody) 12 Years

• Pediatric 6 Month Extension

Can often postpone generic entry by 2.5 Years

Europe

• Data Exclusivity 10 Years

• Market Exclusivity +1 Year

• Second Indication +1 Year

Later Generation Patents• Can extend (double?) lifetime of portfolio

• Must provide protection beyond FDA

exclusivity

• Sometimes created / owned by the

company

o Especially important for university

spinouts

o Company should start generating its own

IP ASAP

o Protect improvements made by the

company

• Covers, for example, the exact commercial

Know Your Competitor IP

• Search for competitor IP

• Identify Freedom to Operate risks

• Keep your IP and publications a step

ahead of competitors

• In-license competitor IP when

possible

• Know the weaknesses in competitor

IP

• Patent competitor products

aggressively

Financing Your Invention

ANGELS

• Invest at early stages

• Invest $100k to $2M

• Frequently seek quick

exit

• Tolerate

inexperienced

management team

• Tolerate early stage

IP uncertainty

VENTURE CAPITAL

• Invest at all stages

• Invest $Millions

• Seek IPO or acquisition

• Require/provide

experienced

management team

• Intolerant of IP

uncertainty

Financing Strategies• Convertible Debt (up to $2M)

o Good for early investment

o Fast and simple to negotiate

o Postpones the need for valuation

o Frequently used by angels

• Stock ($Millions)

o Attractive to large investors

o Must agree on valuation of the company

o Normally used by venture funds

• Partnerships ($$ based on the project)

o Larger company finances research

o Possibility of shared ownership and

patent rights

BEST OF LUCK

IN YOUR

BIOPHARMA START UP