IP and business: two sides of the same strategy

November 2024  |  SPECIAL REPORT: HEALTHCARE & LIFE SCIENCES

Financier Worldwide Magazine

November 2024 Issue

Business plans and intellectual property (IP) strategies are not mutually exclusive. Whether short or long term, these strategies must complement, and even inform, one another as the business develops, particularly in IP-rich sectors such as life sciences and healthcare.

The life sciences and healthcare sectors are built on IP. Although the number of pharmaceutical patent applications filed with the European Patent Office decreased by 3.4 percent in 2023, medical technology, pharmaceuticals and biotechnology remain some of the busiest fields for patent applications, ranking second, seventh and eighth respectively in 2023.

Indeed, IP can play a crucial and formative role for life sciences and healthcare, both at the early stages of research and development (R&D), and further down the lifecycle when routes to market (and even exit) are being considered.

The strength of IP can, and frequently does, dictate the viability of a concept for further R&D, the form in which a proof of concept will take, that concept’s ability to secure funding (whether early-stage seed funding or series A investment), and the most suitable exit scenario.

A 2023 report by the European Intellectual Property Office (EUIPO) reiterates the importance of IP, stating that IP rights “deserve strong attention as a means not only of capturing the value potential of their intellectual assets but also of signalling this value to investors”.

While having a comprehensive IP strategy that complements that of the business is important at all stages of growth, there are two key milestones that life sciences and healthcare businesses in particular need to be aware of when evaluating their approach to IP.

The first is in the early stages of R&D and involves identifying the IP itself and deciding the best way in which to protect it. The second comes after a proof of concept is developed and involves analysing the value of that IP.

Milestone one – protecting ideas

In the early stages of R&D, protecting IP must be, but often is not, an important consideration. There are various reasons for this, such as significant upfront costs, regulatory hurdles or a lack of access to the specialist advice and support needed to evaluate IP and decide on the best form of protection.

This is particularly acute in an academic context, where furthering the research is, understandably, prioritised over protecting the IP, which can often be to the detriment of that research’s future commercial potential.

There are many examples of innovative, and potentially lucrative, research that has lost its value, or even commercial potential, because it is published in an academic journal or otherwise shared in the public domain before the IP is adequately protected.

Leaving considerations around IP too late is particularly risky in life sciences and healthcare sectors, where many inventions are incremental in nature. As such, there is often an abundance of prior art. If protection is delayed, there is a higher likelihood of competitors securing rights prohibitive to the future commercialisation of the technology, or the opportunity for protection to be lost because relevant prior ‘freedom to operate’ assessments or patentability searches are only undertaken once the initial concept is researched and extensively fine-tuned.

This means it is quite often advisable in these sectors for IP protection to be checked early, and considered before the potential of R&D is completely understood. Doing so comes with its own risks and considerations, however, as applying for and securing IP protection can be expensive and can even hinder future growth and development if said protection is either too prescriptive or does not protect something that goes on to be the more commercially viable element of the research.

An effective life sciences IP strategy starts, therefore, with finding the sweet spot where IP is needed, and identifying what this IP’s best form and scope will be, both now, and in the longer term.

Milestone two – valuing ideas

IP protection, once secured, becomes an asset in its own right. As such, understanding the value of this asset is crucial in order to explore how this may complement, or even drive, the commercial strategy and future research.

More and more investors, banks and funding providers are recognising the importance of IP, and even using it as a factor for their decision making. The introduction of several IP-backed finance initiatives, some by major high street lenders, is testament to this growing trend.

Analysis of the IP will also form part of the due diligence process in mergers and acquisitions and may significantly increase or decrease the overall valuation of a business, depending on its perceived strength and future potential.

The EUIPO’s 2023 report, for example, suggests that filing a patent at the seed or early growth stage can lead to a more than six times increase in the likelihood of securing venture capital funding, while startups that file for European IP rights have the highest likelihood of achieving initial public offering or acquisition.

Having an appreciation of the value of its IP, therefore, helps a business enter negotiations in a much stronger position. It is, therefore, a good idea to dedicate time for this activity and avoid leaving it until the last minute. As an intangible asset – particularly within highly innovative sectors such as life sciences and healthcare, with potentially disruptive technologies – IP is not always straightforward to value.

Depending on the circumstances and data available, IP valuation will often require a blend of approaches, including having an understanding of the costs that have led to the generation of the IP, future development and manufacturing costs, and market comparables. A valuation should also include assessment of the IP’s future value and potential in the marketplace.

This process will always require professional, specialist advice, particularly to allow the business to defend and justify its position to potential buyers, franchise or licensing partners, or investors.

A fluid process

Like many R&D-intensive sectors, life sciences and healthcare companies rely on IP to create a barrier to entry for potential competitors, and strengthen value and market potential, particularly in the early stages. Having in place an IP strategy that complements that of the business, backed and supported by frequent professional advice, can make all the difference in untapping the full potential of that IP.

 

Lee Samuel is a director and patent attorney and Amy Lam is associate director of consulting & IP transactions at Symbiosis IP. Mr Samuel can be contacted by email: lee.samuel@symbiosisip.co.uk. Ms Lam can be contacted by email: amy.lam@symbiosisip.co.uk.

© Financier Worldwide

BY

Lee Samuel and Amy Lam

Symbiosis IP

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