Competition in the field of tissue engineering and cell therapy is intense, whether it be attracting top scientists, obtaining licenses to university-owned patents, being the first to reach market with a particular technology, obtaining coveted investment funding, or gaining the attention of larger companies with deeper pockets.
With new companies being founded every day, competition is intense among these new enterprises to obtain these coveted prizes. Meanwhile, most large medical device and pharmaceutical companies are still choosing to cautiously evaluate which companies, if any, they might acquire or partner with.
Licensing a patented academic technology for further development is one way biotechnology companies can expand their intellectual portfolio. It is also a way to defend one’s turf by preventing a competitor from using that patented information. Thorough networking can work to the company’s advantage here, because it can yield insights about research progress, about who to contact for licensing discussions, and what other companies may be sniffing around for a good licensing opportunity.
If a company is considering licensing, then it should examine the quality of the patent (whether it is both broad enough and defensible), how much access the company will have to the inventors, rights to publish further research and the rights to sublicense out the work. The company must decide if the technology could form the basis for a new company or if it is an assistive technology that may broaden core strengths the company already possesses. The technology should also be examined to see how far from market an end product likely is. Of course, the details of dividing up any monetary awards must also be addressed. Licensing involves fees, which may include upfront fees, fees or royalties to be paid on a milestone or quarterly basis, and annual maintenance fees. The patent holder naturally expects value for licensing out the patent, whether that value is harvested at the beginning of the relationship or at the end.
Industry Focus. The majority of biotech companies involved in this industry are focusing on disease areas that have the most patients and the largest unmet needs. These include cancer therapies, diabetes, orthopedics and cardiovascular products. Some companies are taking a different approach, attempting to carve out a niche for themselves in a disease state with a smaller population and a less crowded playing field, such as Alzheimer’s, ophthalmology or central nervous system disorders.
Investment Levels. As the debate on health care reform nears resolution, the market will likely see a modest increase in mergers and acquisitions among pharmaceutical, medical device and biotechnology companies.
In terms of investment dollars, the stock market crash of 2008 had a major impact on the amount of investment dollars available to fledgling businesses. In the case of biopharmaceuticals, the typical drug development process for drug candidates that make it to market can take more than 12 years and $1.2 billion. Unfortunately, nearly 90% of drug candidates will fail in development.
Typically, venture capitalists provide five to eight years of equity to start-ups who may or may not amount to a successful enterprise. Because of downturns in financial markets for the last two years or so, venture capitalists and investment banks have increasingly been choosing to fund their prior investments rather than new start-ups.
Investor Returns. Primarily because of the lengthy and costly rigorous clinical trial process required, biomedical companies require great deals of capital to support them until their innovative product reaches market. Biotechnology companies may need as much as $1 billion to allow it to survive a 10–12 year time span to reach market. Because of the tightening of financial markets, less money has been available for new companies, forcing some either to license to larger companies future rights to their technologies or to sell their technology outright. Others less fortunate have been forced to close their doors.
Investing in biomedical enterprises has always been risky as only a small percentage ever make good on the investment. In the face of a global recession, investors are only getting more difficult to find and many new companies are struggling to stay afloat. For instance, in California, 334 biotechnology companies with an aggregated market cap of $352.1 billion were traded publicly on major U.S. markets in the third quarter of 2009, according to PricewaterhouseCoopers. Of these, 135 had less than one year of cash remaining and 42% had less than six months of funding left.
Source: MedMarket Diligence, LLC; Report #S520, "Tissue Engineering, Cell Therapy & Transplantation 2009-2018."