Speed, aggression, surprise

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Speed, aggression, surprise

• IP in biotech
• Christian Hansen, PhD, MBA
• Partner, Nordic Biotech
• December 5, 2002

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Speed, aggression, surpriseMotto of the Special
Air Services (SAS)
How a small, agile, and highly efficient unit
can strike with great impact at key positions of
much larger forces
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Agenda

• Kort personlig baggrund hvorfor er jeg her nu?
• Hvad er biotech?
• Hvad er det økonomiske rationale i biotech?
• Typisk relateret til lægemidler
• Andre slags biotech
• Hvorfor er patenter særligt vigtige i biotech?
• Praksis mht patenter og biotech

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Hvorfor er jeg her nu ?

• Studerende (1984-92)
• Cand. polyt. Kemi
• Ph.D. molekylær biologi/biokemi
• MBA
• Funktionær (1992-99)
• Chef for patentstrategi i Novo Nordisk
• Entreprenør (1999-2001)
• Adm. dir./grundlægger ProFound Pharma/Maxygen
• Investor (2001-02)
• Partner/grundlægger Nordic Biotech
• Patenter i biotek 1992-2002

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Hvad er biotech industri?
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Hvad er biotech industri ?

• Virksomheder,
• som anvender life sciences
• til at frembringe nye produkter eller processer
• indenfor lægemidler, fødevarer, materialer,
  planter, o.l.,
• hvor denne aktivitet ikke finansieres af en
  løbende forretning.

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The attraction of pharmaceuticalsNo other
industry deals with products with greater impact
on human health and wealth

• Unique importance
• Saving, prolonging and improving the lives of
  more people who get older
• Unique economics
• Potential for gt1 billion/year products
• 90 gross margins
• 10-15 years of market exclusivity

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The complexity and danger of investing in drug
development

• Average development cost of bringing a new drug
  to the market is now 860 mill.
• It takes 12 years from idea to market
• Most drug development projects fail

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Market driversChanging demographic profile
Source Danmarks Statistik
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Biotech driversPharma pipelines do not support
their current growth scenarioBig pharma must
launch 3 times more products than they do
Assumed target growth rate of 8 - 10
Sales
Assumed natural decay of 50 over 10 years
In the next ten years, the pharma industry will
see patent expiries of drugs currently generating
some 80 bill. of about 300 bill. sales
(Jan Leschly, Former CEO of SmithKline Beecham,
2001)
Source Mr J. Leschly, former CEO of SmithKline
Beecham
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Patent expiry exposure
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Biotech drivers pressure on FIPCO Defragmentat
ion and specialization of the value
chain Pharmaceutical out-sourcing to highly
specialized biotechs Big pharma specializing in
global marketing and distribution
FIPCO Fully integrated pharmaceutical company
Source BCG Report, 1999, Parexels
Pharmaceutical RD Statistical Sourcebook 2000
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Fragmentering af værdikæden chancen for biotech

• Lægemiddelfirmaer er typisk fuldt integrerede med
  snævre fokus på bestemte sygdomsområder
• Biotech kan fokusere/specialicere indenfor
• Bestemt teknologi på tværs af værdikæde/sygdomsomr
  åde/marked
• Et enkelt opportunistisk udviklingsprojekt

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Biotech drug and vaccine approvals
PEG-Intron
Herceptin
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Rituximab
30
Avonex / Interferon beta
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Betaseron / Interferon beta
20
G CSF/ filgrastim
EPO
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TPA, Activase
10
5
0
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Source Biotechnology Industry Organisation
(BIO), 2001 and Handelsbanken
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The Global Biotech Pipeline
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Men der er andre væsentlige anvendelser af biotech

• Planter
• Fødevarer
• Fødevareingredienser
• Finkemikalier
• Materialer
• Energi
• Miljø

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Speed, aggression, surpriseMotto for pursuit of
opportunity in biotech vis-à-vis the established
industries

• Speed Decions can be taken and executed
  instantly
• Aggression 100 of a biotech company can be
  dedicated to a single new opportunity (e.g.
  recombinant DNA)
• Surprise No one knows what the new company is
  doing for a while

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Venture kapital i biotech
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Nordic countriesBiotech centres

• Medicon Valley facts
• Population of app. 3 million people
• 30,000 people work in the medical industry in
  Medicon Valley
• 26 hospitals, 11 universities and 5 science parks
  
• More than 135,000 students and 4,000 researchers
  in total

Helsinki and Turku (10)
Stockholm, Uppsala and Linköping (30)
Medicon Valley (60)
Percentages represent approximate proportion of
total biotech industry in the Nordic countries
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Medicon ValleyLeading position in European
biotechnology

• Main Scandinavian biotech/pharma growth centre
  (about 60 of total)
• Strong pharmaceutical industry presence
• Novo Nordisk
• Lundbeck
• AstraZeneca
• 100 biotech/biomedical companies
• Genmab (just started phase III)
• Neurosearch (several phase II projects)
• Q-med
• Medivir

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Comparison USA, Europe and Nordic
countries Number of medical publications per 1000
inhabitants
Source PubMed and Handelsbanken
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Building the company
Log (Company value)
Compounds
VC round
Expansion
Infra-structure Recruitment Project start
Seed financing
Management
Business plan Best projects
Idea Patents Founders
Log (Time)
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Investment and company criteria

• Global potential
• High Pipeline efficiency (cost / output)
• Sustainable business model extremophile
  companies
• A balanced mix between innovation and lower-risk
  approach

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Examples of ideal candidates

• 2nd generation drugs small incremental
  improvements with new patent life
• New uses of known compounds
• Orphan drugs
• Replacement therapy
• Drug delivery
• Very few important technology concepts, that
  change cost/time/probability
• Regional commercialization rights
• Under-loved failed technologies now ready to
  succeed
• And in 2-3 yearsGENOMICS !!

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Case Story Genmab A/S
DKK
6000
5000
4000
Genmab A/S is a biotechnology company that
creates and develops human antibodies for the
treatment of life-threatening and debilitating
diseases.
3000
2000
1000
0
1998
1999
2000
Valuation
Cash infusion
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ProFound Pharma
DKK
600
500
400
300
ProFound/Maxygen is focused on the development of
improved second- generation protein
pharmaceutical products
200
100
0
1999Q2
1999Q2
2000Q2
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Patenter i biotech
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Hvorfor er patenter særligt vigtige for biotech ?

• En person kan udtænke/opfinde den essentielle
  komponent af et produkt, som kan sælges for
  milliarder
• Denne essentielle komponent kan nemt
  identificeres og kopieres af andre
• Det er nødvendigt at kunne fastholde
  markedseksklusivitet (værdien!) for at sikre
  finansiering af udviklingsforløbet
• Tidshorisonten for udvikling og liv på markedet
  passer godt med patenters løbetid (ca. 20 år fra
  indlevering)

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Hvad kan patenteres ? nyt stofEvnen til
kvalitativt og kvantitativt at beskrive stof og
processer i biotech har muliggjort patentering
frem for hemmeligholdelse

• DNA-molekyler (bestemte sekvenser og homologer)
• Proteiner (sekvenser, funktionalitet, etc.)
• Små molekyler (struktur)
• Celler
• Populationer af celler
• Kombinationer af stoffer
• Bestemte kombinationer af stoffer
• Bestemte fysiske former af stoffer
• Formuleringer
• Opløsninger
• Krystaller

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Hvad kan patenteres ? Nye anvendelser

• Producere noget under anvendelse af noget andet
• Opdage noget under anvendelse af en bestemt
  proces
• Lave et lægemiddel til behandling af sygdom X ved
  at tage et stof, som virker på receptor Y og slå
  det til piller
• Anvende stof X (eller proces Y) til formål Z

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Novo Nordisk the enzyme business
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Novo Nordisk in the early 1980s

• Used to protecting microbial inventions by
  secrecy
• Value-creation was in isolation and mutation of
  rare microorganisms
• Spying was on-going between enzyme
  manufacturers trying to isolate producer
  organisms from enzyme product, or even sending in
  agents to take samples
• Patenting was inefficient due narrow strain
  protection

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The world in the early 1980s

• Recombinant DNA technology being applied by
• academics for therapeutics
• other enzyme manufacturers for developing
  production organisms
• by NN in exploratory, low-priority projects run
  by academics

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The opportunity lost

• NN had the muscle to have taken all important key
  technologies and key patents for recombinant
  manufacture of industrial enzymes as well as most
  protein engineering
• NN was reluctant to invest the sufficient
  resources, lacked the technological vision and an
  aggressive patent counsel willing to test the
  frontiers of an un-marked territory

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The consequences by the early 1990s

• By serious investment, the worlds largest RD
  organization in recombinant enzymes had been
  built
• Massive freedom-to-operate issues
• Bacterial and fungal expression hosts
• Transformation systems
• Promoter systems
• Having mapped the extent of threats, top
  management decides in 1993 to make it a strategic
  priority to solve FTO (CH responsible)

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The solution

• 6 years later of work, tension and diversion from
  main focus
• About 10 major cross-licensing deals among the
  competitive players
• Sale of various business units
• Consolidation of the entire enzyme industry
• Initiation and settlement of multiple litigations
  in US, EU and JP
• Spending a nine-digit number in DKK
• Diverting enormous efforts towards circumventory
  technology development
• Could have been avoided with vision, speed,
  aggression and surprise

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Speed, aggression, surpriseMotto for IP strategy
in early stage biotech

• Speed in hypothetically conceiving, and
  contiuously filing applications reduce to
  physical practice later
• Aggression broadness of claims across multiple
  dimensions with step-wise retreat positions,
  testing new claim types
• Surprise secrecy, patent applications are only
  published 18 months after filing

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ProFound PharmaExecuting speed, aggression,
surprise
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The world in 1999

• Protein-based pharmaceuticals are 10 of global
  drug sales,
• There are several protein-based drugs in the
  market and in development,
• Most of the important products in the area were
  developed and patented in the early 1980s and
  faced patent expiry in 2005-2010,
• The problems and desired improvements of 1st
  generation protein drugs were known as well as
  technologies addressing those short-comings,
• The owners of several major 1st generation
  products had not efficiently thought of and
  patented 2nd generation versions of their
  products,
• There is (was) an opportunity for creating and
  patenting those 2nd generation products in a new
  entity - ProFound.

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Conceiving like mad and patenting

• Combining well-known protein modification
  technology like PEGylation and glycosylation to
  solve the specific short-comings of individual
  pharma-proteins
• Everything made in silico and in gray matter ab
  initio, and subsequently in the lab
• gt50 patent applications filed in 1st year
• Speed, aggression, surprise in the back of
  everyones mind
• Lots of patent resources lots of management
  attention

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Hindsight

• It worked
• We did not know which of the 20 potential
  projects would be alive after 3 years
• We did not know what competition (Amgen, Biogen,
  Serono, etc.) had filed within the preceding 18
  months
• We can now see that some of the applications were
  
• Too late
• Directed at hopeless proteins
• Addressing wrong or un-important medical needs
• Providing wrong solutions
• But the sheer volume allowed for enormous degrees
  of protection and potential future royalty
  revenue from the entire protein pharma industry
• Company was sold for 20x the amount spent within
  1 year
• 3 products originating in ProFound Pharma will
  enter clinical testing soon

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Patentstrategi
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Similar minds get similar input to formulate
similar ideas at similar points in time.
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Patentstrategi

• Hemmelighed så længe som muligt
• Pas på publicering også uformelt/semiformelt
• Patentér nu tænk og udvikl senere
• Licensér nu betal senere
• Royalties
• Milestones
• Optioner
• Ubegrænset kreativitet mht parallelle/alternative
  løsninger og patentering af disse

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Konklusion

• Patenter er vigtige for at fastholde værdier i
  biotech
• Den enkelte persons/lille firmas vigtigste aktiv
  er patenter, da alt kan analyseres og genskabes
• Hastighed, hemmeligholdelse, ambition og
  kreativitet er nøglen til brede patenter

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Tak for i dag !