By Dr Nicholas Jones, partner and patent attorney at intellectual property firm, Withers & Rogers.
A recent upturn in European biopharma IPO activity could be a sign of growing investor confidence and other innovative businesses in the sector could be planning to float in the year ahead. Before doing so however, preparation is key to secure the best possible outcome.
IPO activity has been buoyant in 2019 with French biotech, Genfit, raising $135 million on Nasdaq in March and Denmark’s Genmab raising $506 million on the same market in July. Scottish company, TCBiopharm and Cambridge-based antibodies specialist, Kymab, have also indicated that they are considering an IPO in the US. To make the most of such investment opportunities, biotech companies should be preparing their intellectual property (IP) portfolios now, particularly those involved in gene and cell therapy, which has been attracting a high level of investor interest on public markets and from private equity.
Before bringing their proposition to market, businesses should aim to address any issues surrounding the joint ownership of IP assets, or cross-border IP rights. They should also ensure that trade mark registration renewals are up to date so they can be extended geographically if needed.
If businesses do not present their IP portfolio in an orderly and well-managed way, they could undermine their market valuation. For this reason, before embarking on an IPO strategy, businesses should seek professional advice about how to optimise their IP portfolio in order to make the most of their assets by ensuring all information is accurate and up to date.
To help achieve its target price range, businesses should be prepared to provide investors with a summary of individual IP assets and their relative value in terms of their commercial potential. All relevant patents, registered designs and trade mark registrations should be included and there should ideally be no renewal fees overdue.
Rarely are IP assets the primary reason for an opening price exceeding market expectations, but for R&D-led businesses, they can have a positive effect on the share price. After all, investors are bound to be drawn to organisations that appear to be well run and offer plenty of commercial potential. On the other hand, if they discover that licence agreements have not been correctly executed or a patent assignment has not been recorded appropriately, this could be enough to encourage them to look elsewhere.
Another potential issue for investors is one of IP ownership. If it is discovered that key patents are jointly owned, with a university or research institution for example, this could dilute their perceived value considerably. Joint ownership of IP rights could also bring additional risks, which may require further explanation and, if necessary, the business should prepare this information in advance.
Another matter that should be considered as part of a company’s IPO preparations is information about the inventor or inventors. For example, if non-employed inventors or consultants have been used to lead research programmes, investors may require clarification about whether any IP rights generated as a result have been transferred to the company.
In some cases, the management of IP portfolios can be split amongst a host of patent and trade mark firms. While not an issue as such, this could lead to inconsistencies in the way that information is presented. Therefore, even if the business prefers not to consolidate the portfolio, a common standard of presentation should be adopted.
When it comes to the name and identity of the business, those operating without registered trade mark protection are more likely to be seen as a high-risk investment. While unregistered rights may provide a degree of protection, they can’t be fully relied upon and the brand could be vulnerable to third-party imitation as well as finding it difficult to bring an enforcement action.
Instead of waiting until the eleventh hour to get their IP portfolios in order, biopharma companies should address this at an early stage. As well as allowing the business to present the information to investors in a timely and transparent fashion, taking this approach means there is time to address any gaps well ahead of a stock market launch.
One gap which might require specific attention is the geographic reach of any IP rights. For example, a UK-based biopharma company may have deliberately restricted the reach of its existing IP assets to date as the medicine under development has not yet achieved the relevant regulatory and market authorisation. However, if seeking funds to scale the business, it may be wise to extend this commercial protection, where possible and at least for new assets, to more territories.
Further issues can arise surrounding whether the ‘classes’ of goods and services related to specific trade mark registrations are sufficient. If the business decides that more robust protection is needed prior to a planned IPO, this can take time to change depending on the geographies involved. In the UK it takes around six months to register a trade mark, but in India it can take up to four years.
From the investor’s perspective, the more preparatory work that has been carried out to ensure the IP portfolio is well presented will increase their sense of security. Some biopharma companies may be able to forecast the commercial value of their IP assets by providing supplementary technology and patent mapping data.
For businesses considering an IPO, treating IP as an afterthought could prove a costly mistake. Patents, registered designs and trade marks are strategic corporate assets capable of generating strong commercial returns and reinforcing investor confidence. Presenting IP portfolios in the best possible light could take time however, so it makes sense to start early.