In This Issue Power Networking: A Strong Success With Key Lessons Learned Spring Meeting + LES International President's Message: Sector Spotlight: Health Care Sector Received A Charge Of Patent Infringement? What To Do Next Local Chapters Celebrate The Holidays LES International Americas Connect With New Collaboration Markets For Technology: Challenges and Opportunities Foundation Focus |
Sector Spotlight Activities, News and Trends
Chemicals, Energy and Materials Sector Mini-Plenary Covers Diverse CEMC Interests Thanks to everyone who attended the LES Annual Meeting in Vancouver. I believe it was a meeting that was fun and appeared to be fruitful for everyone. I want to personally thank everyone who attended the CEMC Sector Meeting, participating in the brainstorming sessions and helping us highlight topics on which our members would like the committee to focus.
Special thanks are in order to Tony Venturino for serving as past Co-Chair of CEMC. Welcome to Andrea Cohen as our new Co-Chair. CEMC Programming We would like to thank our mini-plenary presenters for their participation: Lorena Forster from Alberta Research Council, Davis Gobey from Ohio State University, Randy Park from Thinking for Results, Gordon Petrash from Cargill, Katsuyuki Tsuji from Showa Denko K.K., and Kevin Chen from NanoGram. To highlight a few best practices from the presenters Kevin Chen, Technical Marketing Director at NanoGram, demonstrated the strength and use of their patent portfolio and how their business leverages the portfolio for joint development and commercialization. He also discussed the processes for collaboration of jointly held intellectual properties which supported NanoGram and their partner's specific field of use. Their strategy and IP were clearly reflected in the impressive list of products and areas of research in which they are leading. Davis Gobey from ATECH, the Food and Agricultural Technology Commercialization and Economic Development entity from Ohio State University, illustrated a unique business model. ATECH focuses on technology development in specific sectors referred to as Agbioscience Centers. A few of these sectors are based on food safety and diagnostic assays. The unique experience and skill of the ATECH team combined with its clear mission of commercialization provide an atypical go to market approach along with a few best practices that should be considered when implementing technology transfer and development programs. Randy Park provided an interesting and entertaining overview of the Future of Energy in his presentation, "Future Energy: Assessing the Big Picture." Randy emphasized that intellectual property and collaboration are at the forefront of energy and alternative energy development. This was followed with a presentation by Katsuyuki Tsing of Showa Denko K.K. which included discussion of a new development in "Green Chemical Processes." Based upon feedback from our members, we will continue to highlight opportunities in these areas as intellectual property continues to play a key role in alternative energy and green chemistry spaces. Survey of Members' Interests Looking forward to seeing all of you at future meetings!
Private Equity Comes To Biotech
Now consider The Invus Group's $205 million investment in Lexicon Pharmaceuticals, which could eventually total $550 million. Like Roche, the privateequity firm wants to change the R&D game for a cashstrapped but productive biotech by liberating it from its indentures to the public markets. They are hardly identical situations. But pairing the deals does highlight an odd evolutionary coincidence. Big Pharma's research drought has driven up the price of Phase II compounds to values that investors find extremely compelling. At the same time, as money has poured into new and old private-equity (PE) firms, they face more price-increasing competition for their usual asset-heavy, cash-generating targets—while productive discovery companies with the capability of getting programs to high-value Phase II milestones are cheap. Thus the new PE opportunity exemplified by the Invus-Lexicon deal: an investment group attempting to recapitulate, in pharmaceutical discovery, the success of a strategic buyer. If PE groups can find and finance companies capable of outputting a regular stream of Phase II projects, they will be able to diversify and limit R&D risk while shooting for a handsome return from product-starved drug companies. On the one hand, such companies—like Lexicon—are theoretically capable of creating a broad stream of products; many compounds will fail in preclinical testing but at least several will move forward into the clinic. No one project is a betthe- company gamble. Second, these investments don't run the risk of full development and commercialization: returns should start at Phase II. And Invus figures that, at least with Lexicon, it's buying into a company whose R&D platform provides higher-than-average predictability through proof-of-concept, if not through ultimate market approval. The skepticism about the deal is palpable. Certainly the market hasn't reacted with any enthusiasm at all given the dilution facing Lexicon investors. Through a "put" mechanism, Roche at least guaranteed a floor for Genentech's stock price; Invus is issuing no similar guarantees. Nonetheless, one could look at the Invus investment as the latest evidence that biotech and PE have plenty to talk about. Consider this progression. In 2004, Kohlberg Kravis Roberts put about $200 million into Jazz Pharmaceuticals—a theoretically stable, spec pharmaish kind of deal. The financing underwrote Jazz's takeover of the commercial-stage Orphan Medical, so KKR at least got some cash flow, in general a sine qua non for PE investors. KKR avoided discovery risk—but bought plenty of development risk. Two years later, the PE firm New Mountain Capital enabled discovery-based Ikaria to merge with medical- gas supplier INO Therapeutics into Ikaria Holdings— creating a theoretically self-financing company (like Jazz, it has a commercial organization providing the requisite cash flow). But the new company depends for its real success on the crapshoot of discovery. Now Invus has gone one step further—the business it's acquiring into generates no significant cash flow; everything is based on the productivity of research. Now that Invus has done its deal, other PE firms will begin to look at the discovery opportunity. And biotech CEOs will certainly be willing to talk to them. It's possible that other discovery companies will be able to get a better deal than Lexicon managed: the company has wallowed for years in the lower-valuation reaches of the capital markets. Others may have more leverage. But the real moral is that as long as Big Pharma's pipeline problems continue, and as long as new drugs continue to be huge cash-spinners, young productive companies will find new sources of capital to exploit the opportunities. Welcome to biotech, private equity.
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Consider two deals. The first is the Roche-Genentech pairing, unquestionably the most successful pharmaceutical- biotech relationship ever created. It freed Genentech from the stock market's restrictions on its R&D costs to spend what it needed to build one of the most efficient pipeline-creation engines in the industry. And it provided Roche with virtually its entire new-product pipeline, not to mention astonishing equity appreciation. 