Knee-jerk reaction to COVID-19 – lean times ahead for some
November 2023 | SPECIAL REPORT: HEALTHCARE & LIFE SCIENCES SECTOR
Financier Worldwide Magazine
November 2023 Issue
Coronavirus (COVID-19) provided a rarely seen perfect storm of circumstances that allowed pharmaceutical companies to grow or at least benefit from the pandemic. With windfalls of money and investments coming from governments, it is hard to blame those wanting to jump on this gravy train.
A cursory search of patent databases lists thousands of patent applications simply by entering the search term ‘covid’. Interestingly, a number of entries list ‘applicants’ (owners of the patent application) which have previously had few or no patent filings. This is noteworthy as many companies use patents (patent applications) to increase their value most oftentimes in an attempt to be bought out by large multinational pharmaceutical companies.
The patenting process can be costly depending on a number of factors, which include the number of jurisdictions in which an application will be filed as well as the complexity of the technology being described which may incur somewhat substantial costs in the drafting stage of the patenting process.
For the small players, i.e., those companies that have not filed patent applications in the past, the patenting process can be overwhelming in terms of complexity and costs. The COVID-19 pandemic, however, has given hope to a number of them of a quick payout, akin to a lottery.
With all of the streams of development (new medicines and vaccines) related to the handling of the pandemic there is bound to be some winners and some losers. The following constitutes considerations which investors should be aware of when getting involved with a company whose focus is on COVID-19.
The speed at which pharmaceutical developments occur, especially in the present era, has caused many potential approaches to treatment of COVID-19, symptoms thereof, or the prevention thereof to be readily supplanted by newer approaches. This, in part, can explain jitteriness for investors to supply capital to an up and comer, which in turn, makes it more difficult for such start-ups to really be able to break through.
Large pharmaceutical companies will definitely hold the advantage in such market conditions. Why? Patent prosecution is relatively expensive and is compounded by the number of jurisdictions in which patent applications are filed. Both time and money are on their side. Having a large patent portfolio, they have obviously been around the block and know most of the ‘ins and outs’ of patent prosecution. Moreover, patent prosecution is a very slow process, in general it takes two to five years for an application to be granted as a patent in most jurisdictions. This timeline is hardly sustainable for ‘fly by night’ outfits looking to monetise their COVID-19 discoveries.
That is not to say that the discoveries made during the pandemic are not scientifically valuable, but it is a comment on the state of affairs for companies trying to come out ahead during such trying times.
How can a small company benefit from a pandemic?
As grim as it may sound, companies and people will benefit during such times. But given the David and Goliath scenario playing out between small research companies and large multinational pharmaceutical companies, it is imperative that a small company plays its cards right in order to monetise its scientific breakthroughs.
One way to achieve their goal is to manage to catch the eye of at least one large multinational, have some convincing data and have a patent filing already done. Of course, this is the dream scenario for a small company. Being small has its advantages in such a case as it permits speed and flexibility to perform the necessary research and file the application before others manage to do so.
As we have seen during the pandemic, development speed was everything. Also, multiple patent filings can occur within a very short period of time if there is good coordination inside a company. A patenting strategy involving multiple filings can be extremely advantageous for the applicant despite the fact that the costs are consequently increased.
What should investors do?
Investors should be cautious of companies with a business plan centred on a pandemic response, especially since the largest portion of the value is derived from intellectual property (IP). The patenting process is a medium-to-long term proposition (two to five years to patent issuance).
Now that it is widely accepted that the pandemic is over, there are a number of learnings which investors should focus on for the future. There are also a number of interesting discoveries which may merit further development and research. For small companies whose discoveries have not panned out, the investors need to look and consider whether acquiring the IP, which covers those discoveries, can benefit them in the not so distant future.
Of course, at this point in time, since the pandemic is over, many companies that have not capitalised on their COVID-19 research will be looking to cover their costs and perhaps make some money.
Investors, as well as larger pharmaceutical companies should, for their own interest, look at the published patent applications now available on most patent offices website (the United States Patent and Trademark Office (USPTO), the European Patent Office (EPO), the Canadian Intellectual Property Office (CIPO) and others) and conduct thorough analyses of what has been disclosed. There is undoubtedly a gem or two hidden in plain sight which is at risk of simply being abandoned over the next few years or so. Why? Human behaviour has shown time and time again that during lean times usually the first thing to get axed is research. Patents are intimately related to research and, consequently, they too are always at risk of becoming abandoned when executives look for ways to reduce costs.
What should take place instead of a blind abandonment approach to a patent portfolio is a rigorous examination of a company’s future plans and if, and how, patents come into play. If the decision is to abandon one patent filing, the company should at least attempt to monetise it rather than simply abandon it. That is where law firms and patent agents can be valuable as they can establish a landscape of developed medicines and vaccines for which patent applications were filed and published.
By putting together a picture of developmental breakthroughs (related to COVID-19) it will be helpful to all interested parties to evaluate the potential value of these and determine which warrant more investment and which are best left behind.
Investors would appreciate such an exercise as it will put the value of their target into context of other medicines and allow them to better appreciate the value of a potential investment in a small company.
Small companies will be able to better gauge their position versus the developments from other research companies and determine whether or not more work is warranted or abandoning a project is the more sensible way forward.
Large pharmaceutical companies are in a great position as they can have an idea of what has been done and determine if there are opportunities worth chasing. This is substantially more cost efficient than establishing a research group to pursue a singular treatment. Having access to a patent landscape analysis may save countless years of fruitless work as well as provide for a great blueprint of directions to take.
Large multinationals also have the benefit of time as the costs of patent prosecution can become increasingly difficult to maintain for smaller companies. Moreover, as time passes, newer patent applications are published, and this may provide additional clues as to where the gaps in patent protection are. Gaps equal opportunities and therefore, as time passes by, the opportunities tend to become clearer. The drawbacks of waiting longer and longer for large multinationals include the possibility of other interested parties and the possibility of missing a chance to file patent applications in multiple jurisdictions on the basis of a Patent Cooperation Treaty patent application (also referred to as a ‘worldwide application’).
In short, despite the fact that the pandemic is over, its impact on IP will continue to be felt for several more years and the lucky (read prepared) ones may yet strike it rich.
Charles Pigeon is a registered patent agent at Burnet Duckworth & Palmer LLP. He can be contacted on +1 (403) 260 0257 or by email: cpigeon@bdplaw.com.
© Financier Worldwide
BY
Charles Pigeon
Burnet Duckworth & Palmer LLP