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IP protection and life science investment: strategic considerations

Simon_Turner_AlacritaThis year’s Investor Perception Survey predictably confirms the continuing importance to VC investors of effective IP protection, alongside technology and management. More noteworthy is the result that as much as 15% of respondents did not believe IP protection to be very important, and while 73% cited innovative technology as one of their top three investment criteria, only 54% cited effective IP protection in one of these positions.

This may reflect an increase in investable technology propositions, such as bioinformatics-based plays, where conventional IP protection through patents is either ineffective or impossible. In this case, silence may be the best policy, at least while the technology develops. Over recent years we have seen many examples of biotech companies emerge from ‘stealth mode’ with a mature technology platform, a pipeline of early-stage product candidates and an eight-figure $ sum of funding to advance those products through early clinical trials.

Such secrecy is all the more understandable in contemporary science where few research institutes remain ahead of the field for very long. Technology Transfer Offices face an agonising dilemma over whether – and when – to protect innovations. File patents too early and lose prospects of a broad filing due to incomplete understanding of the science, and its potential, and inadequate exemplification, or file late and risk ceding priority to competition.

September 2018 saw final victory in the US Court of Appeals for the Broad Institute in its patent battle with Berkeley over the rights to CRISPR–Cas9 gene editing, concluding a three-year interference dispute. However, the uncertainty over IP ownership did not dissuade investors from investing an aggregate c. $500 million in the four licensee companies at the centre of the dispute. This, and other situations like it, would appear at first glance to stand at odds with the importance attached to IP protection. It seems, though, that investors were taking a calculated risk that a favourable outcome would see their investees in control of the platform, but even in an unfavourable outcome would have enough bargaining power to gain access rights while developing their platforms further and advancing a pipeline. It also highlights the fact that the more important IP is in the product rather than the platform. 

Simon Turner is Managing Partner at Alacrita.

Learn more: This article features in the LSX Investor Perception Survey 2019. The full report is available to download for free via the link below. You can also read the survey findings focusing on IP, regulation and compliance in our white paper extract:

Download the LSX Investor Perception Survey 2019Read the White Paper: IP, Regulation & Compliance 

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Simon Turner
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