The document discusses the lifecycle development and financing needs of biopharma startups, emphasizing the importance of intellectual property (IP) in attracting investment. It outlines the initial steps for IP management, potential financing strategies, and regulatory exclusivity in the US and Europe. The text also highlights the need for startups to develop a clear product identity and to manage their IP proactively to mitigate investor risks.

1. IP and the Biopharma Startup
Craig Kenesky, Ph.D.
Wilson Sonsini Goodrich & Rosati, PC
October 29, 2014

2. 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
EXIT
IPO / Merger
Biopharma Company
Med Tech / Software Company

3. 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

4. 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

5. 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

6. 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

7. Know Your Regulatory
Exclusivity
United 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

8. 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
•

9. 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

10. 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

11. 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

12. BEST OF LUCK
IN YOUR
BIOPHARMA START UP