Strategic Alliances 11

8/9/2019 Strategic Alliances 11

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OPTEON

Philip Mendes Level 3, 33 Queen St

Brisbane QLD, Australia

Ph + 61 7 3211 9033

Fax + 61 7 3211 9025

[email protected]

Topic 22

Strategic Alliances

WIPO-KIPO-KIPA IP Panorama Business School Investment Summit10 October 2008

Geneva


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Outline

Commercialisation of IP

License Strategic Alliance

Co-Development Co-Marketing

Passive Partnership


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Outline

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Commercialisation of IP

License Strategic Alliance

Co-Development Co-Marketing

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Passive features of a license

Licensor grants exploitation rightsto a licensee

Licensee pays royalties and other

remuneration to the Licensor

Licensor is passive

Has no further exploitation rights

Licensor has no need to actively do

anything Licensor passively sits by and

collects royalties

Licensor

Licensee

IP

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Strategic Alliance

In a strategic alliance both parties contribute to their joint venture theirrespective resources and capability

Aim is to add greater value to their respective positions By doing so, to

Increase their financial return

To access the capability of their partner which they themselves lack

To acquire skills that they themselves may lack

Strategic PartnerStrategic Partner


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Co-Development Agreements

Co-Marketing Agreements

Co-Development Agreement

Partners collaborate scientifically to further develop the IP

Take the IP further along the development path

Licensor increase the value of the IP as a result of the collaboration

Co-Marketing Agreement

Partners co-market the products of their alliance

One may manufacture only, and the other may sell products only

They may sell products competitively in the same territory

Or, they may sell in different territories

Licensor retains some marketing rights, achieving greater financial upside


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Strategic Alliance Financial Terms

Payment of research monies

Licensee pays an agreed amount for research and development to be continuedby Licensor

Licensor owns the New IP that results of that further R&D

New IP may be jointly owned

Different categories of New IP may be solely owned by the Licensor andLicensee

Licensee may pay research monies at an FTE rate that the Licensee isaccustomed to pay

Licensor may do the research more cost effectively, and profits from thecontract research


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Provision of assets and expertise

To assist the further R&D:

Licensor may purchase an asset (lab equipment) and give it to the Licensor

Licensee may lend an asset, which is returned to the Licensee at thecompletion of the research

Licensee may provide expertise, giving the Licensor access to thatexpertise

All of these have a monetary value to the Licensor Licensor receives something of value which is required, without having to

pay for it


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Collaborative research

Licensor and Licensee collaborate in the further R&D

Each pays its own expenses in the collaboration

New IP:

Licensor owns the New IP that results of that further R&D

New IP may be jointly owned

Different categories of New IP may be solely owned by the Licensor andLicensee

Again, the Licensor receives something of value


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Equity Payments

Licensee subscribes for shares in the Licensor

Share subscription monies used to

Fund further R&D

Pay for its marketing and promotion expenses in a co-marketing alliance

Not repayable

Licensee acquires an equity stake in the Licensor, and therefore has an equitystake in the Licensors financial benefits under the terms of the license


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Convertible Notes

A Convertible Note is a loan, which either

Is repaid by money, or

Is repaid by the issue of shares in the receiver of the loan (the Licensor)

Election as to repayment or satisfaction with equity is made by:

Licensor only, or

Licensee only, or

Either licensor or licensee

Loan monies used by Licensor to:

Fund further R&D

Pay for its marketing and promotion expenses in a co-marketing alliance


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Genentech and Xoma Raptiva License

Xoma licensed Genentech 1996 compound (FDA approved Oct 2003, now marketed asRaptiva, for psoriasis (skin condition)

1999 deal amendment:

Future development costs to be shared 25% Xoma and 75% Genentech

Future co-marketing costs to be shared 25% Xoma and 75% Genentech

Future profits on sales shared 25% Xoma and 75% Genentech

Genentech providesXoma loan facility up to $80m to fund future development (that is,clinical studies)

Genentech providesXoma loan facility up to $15m to fund future marketing

Xoma can elect to Repay loan

Issue equity instead of repaying loan

Defer payment of up to $40m of loan against future profit share

Xoma mortgages its future profit share to Genentech as security for repayment


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Pluristem Life Systems and Stem Cell Innovations deal

Deal announced 22 February 2007

Pluristem licenses STI PLX-I product - stems cells obtained from the placenta and

expanded by using Pluristem bioreactor that mimics physiological environments Cells are immune privileged reduction or absence of rejection of the cells in a patient

first application in bone marrow transplantation

Deal terms:

Up front not cash - but instead 23 million fully paid shares Plurstem receives inSTI

Additionally, STI issues 28 million shares to Pluristem, and Pluristem issues 66million shares to STI

Undisclosed royalties

Undisclosed milestone payments


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Pluristem Life Systems and Stem Cell Innovations deal

What is achieved by:

Up front shares instead of cash

Share swap where Licensor and Licensee each obtain shares in the other ?

Licensors perspective: If technology fails and there are no sales

Licensor has shares in licensee and shares in Licensees profit across the wholeof its business other than the failed technology

If technology succeeds and there are sales

Licensor gets the usual royalties and milestones

Additionally, licensees shareholders are diluted from those benefits asLicensee now holds shares, but licensors shareholders now share in licenseesprofits across the successful technology, as well as the Licensees otherbusiness

Win Win for licensor in both cases


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Acquiring new skills

In a co-development agreement the alliance partners may work collaboratively

Opportunity therefore for skills transfer

That is, the staff of one alliance partner sharing their skills with the staff of theother alliance partner, and in that way to upskill the staff of the other

May be technical skills

Skill in generating transgenic animals

Skills extracting, isolating, or synthesizing the active chemical frombiodiverse resources

May be management skills managing pre-clinical studies such as animal studies, toxicology studies etc

Managing the regulatory pathway to product registration


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Acquiring new skills

Skills transfer can occur by

Collaborative teams working side by side and learning from each other

Internships where one alliance partner trains another at its own facilities

Observation, participation, and experiencing

Skills transfer benefits both alliance partners by

Increasing the skill and capability of each others staff for the purposes of

the alliance

Skills transfer benefits one partner separately Increasing the skill and capability of one partners staff that can be used in

other projects unconnected with the alliance


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Acquiring new technology

In a Co-Development Agreement one partner may make its IP available to theother

For the purposes of the collaboration

For purposes outside the collaboration

Collaboration benefits by the access to the IP of the strategic partner for the co-development program

Strategic partners benefit independently by access to the IP of the other forother research programs outside the collaboration

Access to research tools Animal models, vectors, cell lines, other biological material

Access to IP to pursue areas of investigation outside the collaboration

There may be preferential rights to access New IP given to the provider ofthe technology

Eg, option to negotiate a license


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Creating new technology

Purpose of the Alliance is to create New IP

Builds on the licensor partners IP

May create new unrelated independent IP

Purpose of the collaboration is to build on the existing IP to further develop itand to bring a product to market

That is the ultimate aim of the collaboration by the alliance partners

Side benefit is the creation of IP that may be beneficial to one alliance partner

only That partners IP position is enhanced, and its IP capability is strengthened


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Ownership of new technology

Who should own that new IP ?

Common Model #1

1. Partner A owns new IP that improves its own existing IP

2. Partner B owns new IP that improves its own existing IP

3. Partners A and B jointly own new IP outside categories 1 & 2

Common Model #2

No new IP is separately owned

All new IP is jointly owned by both Partners A & B

What are the implications ?


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Ownership of new technology

More complex models:

Partner A has a platform technology for producing vaccines against viruses Partner B has patents in the gene sequence and function of particular virus and

its interest is producing therapeutic drugs

Categories of new IP1. New IP that solely relates to vaccine technology2. New IP that solely relates to therapeutic drug against Partner Bs virus of

interest3. New IP that solely relates to therapeutic drug against viruses broadly

4. New IP that relates to 1 and 2 but not 35. New IP that relates to 1 and 3 but not 26. New IP that relates to 2 and 3 but not 1

How is ownership of these various categories of New IP dealt with ? How does each partner ensure that it shares with the other what is intended to

be shared, but does not prejudice its own core business by having to share newIP affecting its own core business ?


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Conclusion

Benefits of licensing

1. Financial payments

Benefits of strategic alliance

1. Upside financial payments

2. Increased financial resources Cash

Transfer assets

Equity

Loans

3. Skills Transfer

Technical Management

4. IP Acquisition

Platforms

Research Tools

5. IP Creation

In field of collaboration

Outside field ofcollaboration

6. Co-marketing

Manufacturing

Selling

Strategic Alliances 11

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