Why Patents Matter

by

Trini Vargas, Ph.D., of University of Rochester Medical Center Technology Transfer Office, and David G. Perryman, Tina W. McKeon, Ph.D., David E. Huizenga, Ph.D., and Gibson J. Lanier, Ph.D. Needle & Rosenberg, P.C.

dhuizenga@needlerosenberg.com 404-688-0770

Value of Intellectual Property

June 18, 2003

Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

Explosion of IP
35 , 3 , 25 , 2 , 15 , 1 , 5 ,
Industrial Revolution Biotech Revolution Information Revolution

No. Applications (orange) No. Patents (yellow)

1 9
June 18, 2003

18 0

1900

1980

1990
3

Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

Corporate Value 1978

1978
Intangible 20%

Ta ible 80%

Rembrandts in the Attic: Unlocking the Hidden Value of Patents by Kevin G. Rivette, David Kline, December 1999

June 18, 2003

Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

Corporate Value 1997

1997

I a 73

a 27

Rembrandts in the Attic: Unlocking the Hidden Value of Patents by Kevin G. Rivette, David Kline, December 1999

June 18, 2003

Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

An Example of Value of a Patent

August 9, 2000 U.S. Court of Appeals invalidated Eli Lillys patent on Prozac Upon news
Shareholders dumped $36 billion in Lilly stock, roughly a third of the pharmaceutical giants market capitalization.

June 18, 2003

Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

Why is This? Specifically in Biotechnology and Pharmacology

In general Provides the reward for all of the risk (See Monopoly Pricing) In Biotech there is a LOT of risk . . . and a lot of cost . . . meaning . . . There is huge value placed on patent position

June 18, 2003

Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

What drives Risk vs. Reward in Biotechnology

300 million in actual outlays over 10 years to bring a FDA approved product to market (Biospace Online, 2002) Today it costs approximately $ 802 million to bring a new drug to market adjusting for cost of failures (DiMassi et al, 2001) Estimated cost 1.6 Billion by 2005 adjusting for cost of failures (Lehman Brothers 2001) Biotechnology is driving this cost drugs and products are getting better, more precise, but genomics and precision make discovery much more expensive
June 18, 2003 Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice 8

Drug Discovery Risk 12 Yrs 1 5-7 yrs

Phase III Clinical Phase II Approval

3-4 yrs Time

June 18, 2003

5 20 5000 Compounds
Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

Phase I Pre-clinical Validation Identification

9

Publicly Funded Licensing Ventures Create Value

University Technology Transfer
In 1999 university licenses created $40.9 billion in economic activity and supported 270,900 jobs* 5,545 patents were issued to universities in Fiscal Year 1999* 6,812 patent applications filed by Universities in 2001* 4,058 new licenses between Universities and industry created in 2001* 494 start-ups based on a University license created in 2001 *

In the US this activity drives the Biotechnology Industry

*Statistics from the Association of University Technology Managers

June 18, 2003

Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

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Rochester Success Story

[A] immunogenic conjugate comprising the reduct[i]ve amination product of an immunogenic capsular polymer fragment having a chain length of from about 10 to about 30 monomeric units and a reducing end, which fragment is derived from the capsular polymer of a Streptococcus pneumoniae or Haemophilus influenzae bacterium, and a bacterial toxin or toxoid. Claim covering Dr. Porter Andersons Hib Vaccine, United States Patent No. 4,673,574

June 18, 2003

Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

11

Bench to Market
Originally could not be licensed, A start-up, Praxis, was created, to continue to move the technology from the bench to the market What has bringing the product to market done
Before the vaccine 20,000 children a year caught bacterial meningitis -- After the vaccine 200 children a year catch bacterial meningitis Rochester has received $96 million in royalties to date

June 18, 2003

Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

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Patent Portfolio
First patent issued June 16, 1987 First application filed Aug. 31, 1981 Eventually seven patents covering technology issued First FDA approval in late 1990 Patents now licensed to Wyeth Portfolio now covers vaccines for Streptococcus pneumoniae (Prevnar) and Haemophilus influenzae bacterium (HibTiter)
Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice

June 18, 2003

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Take Home Lessons From Hib Vaccines

Almost 10 years from the filing of the application to approval of FDA patents very important to adding value to this long process Initial transfer failed, a perseverance was required to bring the product to market Took multiple commercialization routes, start-up to large corporation Unlikely that the technology, without patent protection, would have ever protected children
June 18, 2003 Needle & Rosenberg, P.C. For informational purposes only and not intended as legal advice 14