Biotech and IP: Financing and Strategy
August 27, 2019
Biotech and IP: Financing and Strategy
For many budding biotech entrepreneurs, the business side of launching a biotech startup can seem foreign and intimidating. While a great idea may be enough to birth a startup, reliable funding, monetization strategy, and calculated negotiations are necessary to turn an idea into an empire.
Today we explore three of the issues faced by biotech entrepreneurs as they launch their startups. Caldwell IP Law Patent Attorney Katie Rubino and a team of biotech experts will help us answer some of the most pressing questions faced by entrepreneurs and their promising biotech startups.
Meet the Experts
T Scott Johnson, MD ~ CMA of The Medicines Company, Co-Founder of MPM Capital LP, & Co-Founder of JSB-Partners, LP
Dr. Johnson is Chief Medical Advisor of The Medicines Company, a New Jersey biopharmaceutical company. He is a co-founder of healthcare investment firm MPM Capital LP, and investment banking and advisory firm JSB-Partners, LP. Dr. Johnson holds a BS and MD from the University of Alabama.
Jennifer Davagian ~ President and CEO of Cristcot
Jennifer is the President and CEO of Cristcot, a Massachusetts-based medical device company. She is a teacher at the Boston University School of Management and has written for the National Institute of Health and the Food and Drug Administration. Jennifer holds a BA in History and Economics from Furman University.
Dr. Abiche Dewilde ~ CSO & Co-Founder of InVitroMetrix
Dr. Dewilde is CSO & C0-founder of InVitroMetrix, a company established to create a self-contained, cell-based multi-well research device for drug discovery. Her past research includes tissue and limb regeneration, extracellular matrix isolation, and nanotoxicology research using the Quartz Crystal Microbalance, a whole-cell biosensor which she helped refine and patent. Dr. Dewilde holds a BS in Biotechnology from Worcester Polytechnic Institute, a MS in Biotechnology and PhD in Biomedical Engineering and Biotechnology from the University of Massachusetts Lowell.
Dr. Mark Tebbe ~ Co-Founder and CTO of Quench Bio
Dr. Tebbe is Co-founder and CTO of Quench Bio, a Cambridge-based company developing therapies targeting innate immune pathways to treat life-threatening auto-immune and inflammatory diseases. He has worked in the areas of pain, diabetes, metabolic disorders, infectious diseases, and cancer. He has platform-based experience with cell surface receptors/GPCR’s (including ion channels), proteases, and other enzyme targets. Dr. Tebbe holds a BS in Organic Chemistry from the University of Notre Dame and a PhD in Organic Chemistry from Stanford University.
What do investors look for in a startup?
Securing financing for a biotech startup is one of the most critical steps in a building a successful business. Entrepreneurs need every advantage when it comes to pitching their ideas to investors.
T Scott Johnson, MD knows a thing or two about securing funding for biotech innovations. Dr. Johnson is co-founder of MPM Capital LP, a Massachusetts based health care investment firm that has raised $3.9 billion of capital since establishing its first fund in 1997. As a result, MPM’s BioVentures portfolio boasts 49 FDA-approved drugs, and has facilitated over 100 IPOs and acquisitions.
Naturally, Dr. Johnson is an excellent resource for biotech startups curious about what peaks an investor’s interest.
“I think there are a few fundamental characteristics that I look for. You must have the freedom to operate and know that there’s not someone who can come in and block you from what you’re doing…you need legal support to do that effectively. And of course, there’s so much research, especially when you get into chemicals. There’s a huge amount of patent literature out there, and understanding that is crucial.”
Dr. Johnson further elaborates on the importance of a through understanding of existing IP, “I hate to say it, but things fall apart in various ways because at the last moment you find things that don’t sit well. The diligence is detailed and monotonous, but it’s absolutely crucial.”
Dr. Mark Tebbe seconds Dr. Johnson’s views on the performance of thorough diligence, “You have to invest that money up front. At least in our area of the world, it’s really critical to have that all lined up.”
Monetizing an IP portfolio
Acquiring intellectual property rights is an important step in building a biotech startup. Knowing how and when to monetize those rights is an integral component of a startup’s business strategy.
Jennifer Davagian explains her monetization philosophy as one that values flexibility and strategic commercialization, “Our philosophy in terms of monetizing is also commercializing…I try to leave broad opportunity and flexibility available for the future…Our company is structured in a unique way. We could sell off one drug and maintain the core technology to develop the next. Likewise, it could all be rolled up and sold together. Keeping that flexibility open in the future is, I think, reasonable.”
As Ms. Davagian explains, monetizing IP involves more than a single sale. It’s a massive strategic opportunity.
Dr. Dewilde concurs, “Our device can be used for institutional research, it could be applied to diagnostic and personalized medicine. Being able to parse that is what’s important.”
“Our philosophy in terms of monetizing is also commercializing…I try to leave broad opportunity and flexibility available for the future.” – Jennifer Davagian, President and CEO of Cristcot
Factors to Consider When Licensing IP Rights
Negotiating licensing deals often steps outside the scientific domain of biotech inventors establishing their startups.
Dr. Dewilde explains the value of crafting licensing deals with an eye towards investor preference, “There was a lot of information that was crucial in structuring our licensing agreement…We wanted to talk to angels and VCs because if they didn’t like our licensing agreement, we could have the greatest patent but it wasn’t going to get us anywhere.”
However, negotiating an ideal agreement can be a complex and lengthy process.
Dr. Tebbe explains the importance of incorporating experienced negotiators and advisors when entering into licensing agreements with potentially unforeseeable consequences, “It’s incredibly important when you’re doing those negotiations to have people who have lots of experience so they can help walk others who aren’t experienced through that and explain it all.”
A strong and thorough licensing agreement can be the key to a successful working relationship between parties.
Ms. Davagian recommends the including language that covers potential future events, “Anticipating what may happen if there’s additional invention or innovation that stems from what was jointly created and spelling that out very clearly as to who owns what and how it’s shared it very important. It can stymie your working productivity together….or could lead to a huge dispute later.”
Dr. Johnson explains the value in controlling one’s own IP, “You need to be able to control the intellectual property and the assets that go with it. That enables you to do things like sublicense, have an acquisition take place, etc. without some impediment showing up.”
Although turning a biotech invention into a thriving business can seem intimidating, a little understanding goes a long way in making such goals more attainable. Join us next time as we discuss networking with VCs and investors, industry perspectives on the CRISPR patent race, and the best time for startups to protect their intellectual property!