The Evolving Role Of Intellectual Property In Your Biotech Company
Biotechnology companies evolve through several stages, including start-up, research and development, scale-up, and commercialization. At each stage success depends on leveraging a different mix of business assets. Intellectual property is one of those assets, and its role and importance, like other business assets, changes as the company evolves.
Every biotech start-up includes a visionary entrepreneur who believes he or she can turn a promising new technology into a product that will transform human well-being. These entrepreneurs bring belief, commitment and sweat to the game. To make their vision real, they need capital, and lots of it – a biotech company may burn through $100M turning an idea into a successful product. But starting a biotech company is risky, both for the entrepreneurs, who invest their time and effort, and the investors, who invest their capital. The company could be a stunning success, or a complete failure. At this stage, IP mitigates this risk by giving founders and investors the security that they bear not only the downside risk of failure, but the upside benefit of success. Without IP, competitors can appropriate the fruits of success, while avoiding the risk of failure. This especially true in the field of drug development, where there can be a ten-fold price differential between a patented drug and a generic one.
At the R&D stage, the technology team transforms a concept into a saleable product. As the team advances the technology, the company expands its patent portfolio. This can involve patenting features that give products a competitive advantage in the market, as well as acquiring existing IP in a land grab to stake out territory. Competitors who are thinking about entering the market at this stage will be performing freedom-to-operate analyses. The company’s intellectual property gives notice to potential competitors that certain technology is off-limits as these competitors develop their own competitive products.
Clinical trials are a critical stage of product development for the pharmaceutical biotech company. Their success depends on the clinical development team. This is another chance to strengthen the patent portfolio, for example, by patenting dosage regimes or new indications for the drug.
In the scale-up stage, the product passes from development to production. Sales and marketing now assume a lead role, positioning the product, expanding markets and identifying customers. The sales and marketing team can use a strong IP portfolio to lend credibility to their marketing efforts. I’ve even seen the human resources department use company patents to attract talent. A liquidity event may not be far behind, and, again, intellectual property is part of the mix of business assets that makes the company attractive as an IPO or acquisition candidate.
At the commercialization stage the company is focused on selling product and making a profit. Company operations are critical to success, sourcing materials and parts through a supply chain, manufacturing product with high quality standards and at the lowest possible price, and developing strong distribution channels to get product to customers. At this stage, the company’s trademarks protect consumer brand loyalty. Patents assume their ultimate economic function of increasing profits by enlarging market share and profit margin. Patents may even find value by generating licensing income.
Of course, every company is only as good as its next product. The process repeats itself through iterations of innovation and next-generation products.
At each stage, different business functions contribute most to success. A biotech company can leverage intellectual property at each stage to support whatever critical business function is at stake.