Panel's premise: "The panel will discuss the
financial, legal and practical aspects of starting a
company in the biotech and biomedical device arena.
Good and bad practices will be discussed, including
obtaining and arranging financing, corporate and
intellectual property law strategies, personnel
issues, partnering with other companies large and
samll, and simple steps and missteps that can help
make or break a new company."
J. Peter Fasse, Ph.D., Principal, Fish & Richardson
P.C., served as moderator, with the following
panelists:
Stephen Bloch, Partner, Canaan Partners
Douglas Fambrough, Ph.D., Oxford Bioscience Partners
Harry Penner, Jr., Chairman & CEO, Marinus
Pharmaceutials
Elizabeth Douville, Ph.D., Vice President, GeneChem
Management
Key Observations From Panelists:
* VCs continue to embrace M&A as an exit strategy for
emerging companies vs. IPOs, Fambrough acknowledged:
"In therapeutics, often it was IPOs or nothing ...
[now] there are buyers out there. We're thinking a lot
more about M&A than we were 2-3 years ago."
* The question of when to partner is still a tough one
for maturing biotechs - how do you fuel growth without
giving up too much? While partnering a compound with
big pharma/biotech may validate a company to some
extent, it doesn't necessarily make that company an
attractive investment for VCs, who are interested in
companies with high-ceiling programs that have not yet
been partnered. Marinus Pharmaceuticals' Penner
stated, "Economics may drive you to find a partner
(for a drug candidate) since the development costs are
so heavy ... there are no easy answers here. The
biggest downside is to wind up partnering the bulk of
what you have to offer the venture community - you
wind up becoming an annuity rather than a business."
Added Penner: "Getting partnerships early is something
everyone should think about. There's a temptation to
partner too early -- if you give away rights early, it
may cap the upside for investors." Penner suggested
exploring perhaps more limited partnerships "for a
geographical (territory) or an indication." Canaan
Partners' Bloch, however, stated his belief that
"indications can get to be messy."
I should note that the partnering question frequently
becomes a point of contention between biotech
companies and their VCs. A director of business
development for a company on the West Coast recently
told me that their VC board "frequently resists
partnering in order to take a program to the next
valuation inflection point, but also wants
non-dilutive cash now."
* The majority of the session focused on intellectual
property and I copied down some key slide notes.
Slide #1: Don't skimp on your IP budget
* How much money should you spend on IP acquisition,
analysis (e.g., freedom to operate opinion) and
enforcement?
* A detailed FTO analysis can costs many tens of
thousands of dollars; a litigation can cost millions
In other words, a lot is riding on the FTO so as to
prevent the 2nd and more costly scenario (litigation).
"Freedom to operate" alludes to a company's ability to commercialize a product without infringing on the intellectual property rights of competitors. Early on, a company needs to identify who else could have claims to its technologies/products and could impede the path to market. As the slide notes, patent litigation can be financially crippling for a company.
Slide #2: Don't Ignore Competitors' Patents
* Don't assume that you can market and sell your
product just because you own a patent or maintain a
trade secret
* Patents provide the rights to exclude, not to
practice the invention
* Consider your freedom to operate (FTO) before you
design your commercial products
* Budget both time & money to identify competitor
patents that may prevent you from making or selling
your product
The panel spent considerable time addressing the
formulation of IP strategy. Companies must identify
the types of IP - patents, trademarks, copyrights or
trade secrets - that will best protect their products.
The panel also addressed when a startup should begin
looking for CEO talent and the question of when
founding scientists should "bow out gracefully,"
although I'm not sure there are one size fits all
answers to these questions.
Marinus Pharmaceuticals' Penner did have an
interesting idea for those companies who are looking
to recruit top management talent but don't quite have
the funds on hand to bring those people in
immediately: go after the very best and if you can't
hire them at the outset, take them on in a limited
consulting role. Involve them in some capacity and
pose the question, "If I did have the money, would you
come on board?"
financial, legal and practical aspects of starting a
company in the biotech and biomedical device arena.
Good and bad practices will be discussed, including
obtaining and arranging financing, corporate and
intellectual property law strategies, personnel
issues, partnering with other companies large and
samll, and simple steps and missteps that can help
make or break a new company."
J. Peter Fasse, Ph.D., Principal, Fish & Richardson
P.C., served as moderator, with the following
panelists:
Stephen Bloch, Partner, Canaan Partners
Douglas Fambrough, Ph.D., Oxford Bioscience Partners
Harry Penner, Jr., Chairman & CEO, Marinus
Pharmaceutials
Elizabeth Douville, Ph.D., Vice President, GeneChem
Management
Key Observations From Panelists:
* VCs continue to embrace M&A as an exit strategy for
emerging companies vs. IPOs, Fambrough acknowledged:
"In therapeutics, often it was IPOs or nothing ...
[now] there are buyers out there. We're thinking a lot
more about M&A than we were 2-3 years ago."
* The question of when to partner is still a tough one
for maturing biotechs - how do you fuel growth without
giving up too much? While partnering a compound with
big pharma/biotech may validate a company to some
extent, it doesn't necessarily make that company an
attractive investment for VCs, who are interested in
companies with high-ceiling programs that have not yet
been partnered. Marinus Pharmaceuticals' Penner
stated, "Economics may drive you to find a partner
(for a drug candidate) since the development costs are
so heavy ... there are no easy answers here. The
biggest downside is to wind up partnering the bulk of
what you have to offer the venture community - you
wind up becoming an annuity rather than a business."
Added Penner: "Getting partnerships early is something
everyone should think about. There's a temptation to
partner too early -- if you give away rights early, it
may cap the upside for investors." Penner suggested
exploring perhaps more limited partnerships "for a
geographical (territory) or an indication." Canaan
Partners' Bloch, however, stated his belief that
"indications can get to be messy."
I should note that the partnering question frequently
becomes a point of contention between biotech
companies and their VCs. A director of business
development for a company on the West Coast recently
told me that their VC board "frequently resists
partnering in order to take a program to the next
valuation inflection point, but also wants
non-dilutive cash now."
* The majority of the session focused on intellectual
property and I copied down some key slide notes.
Slide #1: Don't skimp on your IP budget
* How much money should you spend on IP acquisition,
analysis (e.g., freedom to operate opinion) and
enforcement?
* A detailed FTO analysis can costs many tens of
thousands of dollars; a litigation can cost millions
In other words, a lot is riding on the FTO so as to
prevent the 2nd and more costly scenario (litigation).
"Freedom to operate" alludes to a company's ability to commercialize a product without infringing on the intellectual property rights of competitors. Early on, a company needs to identify who else could have claims to its technologies/products and could impede the path to market. As the slide notes, patent litigation can be financially crippling for a company.
Slide #2: Don't Ignore Competitors' Patents
* Don't assume that you can market and sell your
product just because you own a patent or maintain a
trade secret
* Patents provide the rights to exclude, not to
practice the invention
* Consider your freedom to operate (FTO) before you
design your commercial products
* Budget both time & money to identify competitor
patents that may prevent you from making or selling
your product
The panel spent considerable time addressing the
formulation of IP strategy. Companies must identify
the types of IP - patents, trademarks, copyrights or
trade secrets - that will best protect their products.
The panel also addressed when a startup should begin
looking for CEO talent and the question of when
founding scientists should "bow out gracefully,"
although I'm not sure there are one size fits all
answers to these questions.
Marinus Pharmaceuticals' Penner did have an
interesting idea for those companies who are looking
to recruit top management talent but don't quite have
the funds on hand to bring those people in
immediately: go after the very best and if you can't
hire them at the outset, take them on in a limited
consulting role. Involve them in some capacity and
pose the question, "If I did have the money, would you
come on board?"
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