You may have recently seen that Spineology lost a patent infringement case against Wright Medical. Spineology sued Wright Medical in 2015 for infringing on their patent and the case went back and forth on appeals, finally ending in July of 2018 with Spineology on the losing end. A high-level synopsis can be found here.
I bring this to your attention because patents are the life-blood of many companies in the life science industry and yet many companies are vulnerable to either having their patent infringed upon or being forced to defend their patent. The cost for either is never cheap. The case went on for three years and one can only imagine how much money was spent in legal fees. What so few companies know is that there is actually an insurance policy that can insure your patents, it can be set up to both defend and enforce your patents.
Why is patent coverage important and what are the benefits? Here are a few reasons:
- If you are and R&D company with no revenue you may not have the financial strength to protect your patent.
- There are plenty of patent trolls that have bought low-quality patents and use these patents as a basis for demanding royalty payments from you and a patent policy can help defend against these trolls.
- If you are trying to raise money you can inform investors that you not only have a patent but it is insured which will give them some added comfort.
There are many other reasons to look at patent insurance, but one reason not to dismiss it is because you have hired great IP attorneys. Having quality IP attorneys is important and recommended, in fact it could help lower the cost of IP insurance, but it can’t help protect you against a third party infringing upon your patent, having to defend your patent, and patent trolls.
What many clients are surprised to learn is how easy it is to determine the economics of the coverage and whether it makes sense to move forward and put it into place. Many times the initial application can be completed in 15-30 minutes which allows us to get pricing indications. The worst case is the pricing does not make sense but at least you can report to your board of directors that you did the due diligence on how to protect your patent. The best case scenario is that you have taken the right steps to protect the patent and the terms and pricing of the insurance reflect that, resulting in an easy decision to put coverage in place.
A great mid-year report by Cornerstone Research on Securities Class Action Filings for the first half of the year. I recommend you check out the full report which you can find here.
These visuals really speak for themselves but the big takeaway is that if you are publicly traded company the chances of being subject to a Securities Filing are rising. In 2017, 8.4% of exchange listed companies were subject to a filing and in 2018 it is projected to be 8.5%.
If you are a member of the S&P 500 the chances of a filing are even higher at 9.6%.
Breaking this down even further, the industry you are in can change the odds dramatically as well as the chart below demonstrates.
The clients I work with are in the Life Science and Healthcare space and this is how filings breakdown in that group.
I will dig a little deeper on this at a later post, but I believe companies need to believe a Securities Class Action filing is inevitable and prepare accordingly.
Once again I recommend you check out the full report from Cornerstone Research which you can find here.
Almost every day I read about a company receiving a milestone or grant payment, but sometimes milestones aren’t met and it is not for lack of science. I often wonder how a company would be affected if the milestone or grant were not received because of a fire or some other natural event rather than the science simply not working? Even worse, how would a company and its shareholders feel if they knew this financial loss could be covered by insurance?
For many life science companies these payments allow them to continue operations or avoid having to raise additional money that will dilute shareholders. The financial loss of a missed milestone due to an event that is insurable but not covered by your insurance policy is inexcusable. For R&D companies where there is no cash flow, a missed milestone could put you out of business or significantly impact operations. Sadly, many clients never have the conversation with their broker regarding this important coverage. As you look through the chart below, how deep of a dive have you and your broker done?
Typically when I speak to new clients they have rarely gone deeper than the second question, “has your broker discussed what limit is appropriate?” Milestones and their applicable payment are usually well-known in advance so this is actually a rather straightforward coverage to determine the correct limit of insurance if the right questions are being asked. However, if you don’t know the coverage is available and your broker is not asking the correct questions it can turn into a costly coverage gap that is either uninsured or under-insured (limit is not adequate for the loss exposure).
If this is as deep as you have gone, what other coverage are you missing in your policy? If you think this is the only aspect of business income insurance commonly overlooked I am sorry to say you are mistaken. In future posts I will discuss other business income issues that are not often not covered properly or not covered at all.
If you have questions on whether your policy is correct, feel free to shoot me a message and I would happy to discuss.
I recently attended NY BIO’s annual meeting in New York City. This was my first time to this event but I have attended other Life Science events that were focused on New York City and I do my best to keep up with how they are developing the ecosystem. For those of you that don’t know, both the city and the state are making big investments to develop the life science sector and become a hub with I am guessing the goal of being in the same class as Boston and San Francisco.
From an outsider’s perspective looking in it would seem like the Life Science sector would be a natural fit for the city. A key ingredient for the industry is money and in New York City there is plenty of it. Another natural advantage the region has are its world class research facilities and hospitals. Big pharma has a presence across the river in NJ so there should be plenty of talent familiar with the full life-cycle of drug development.
The meeting featured speakers on the front lines and I learned that you can’t always judge a book by its cover. Let’s start with money, yes, there is a lot of money in New York but it is not necessarily the type of money that invests in biotech companies. A fascinating point was made by the CEO of Alexandria Real Estate, in Q1 2018 there was $1.6 billion invested in Boston, $1.7 billion invested in San Francisco and less than $150 million in New York. The general consensus was that despite this disparity between Boston and San Francisco the trend is going in the right direction and money is not as big of an issue as it was just a few years ago. In addition, the state and city seem to be stepping in and putting serious money into growing the sector. How easy or difficult it is to access the government money I cannot answer.
The biggest problem that I heard from virtually everyone was the lack of space. Everyone complained that there was just not enough lab space in the city. Again, inroads are being made but it seems like this is the biggest impediment. JLABS has opened up space and BioLabs NY is about to open a huge new facility in Hudson Yards with NYU, so progress is being made. Whether these new labs will be enough to curb the demand we will need to wait and see.
Finally, a somewhat surprising issue was the lack of depth when it comes to the talent pool. A shared belief is that there is plenty of talent at the research level but it seems to dry up when companies mature and need the C-level and mid-manager types. This was something I heard a few times and I would have thought with the big pharma presence so close it would not be an issue.
Overall, the trend is going in the right direction for New York, but it takes time. You need to have some companies have success before you can really build a hub. You need to have companies mature and build a sizable employee presence. Someone said it takes 25 years and a couple of generations of companies before you really have a sustainable and robust ecosystem and New York is not even in year 10. I know the people in New York are doing what they can to accelerate it so I will be anxiously watching to see how it turns out.
Welcome and thank you for visiting MattCorc.com. The goal of this blog is to provide background on issues that could cripple a company’s balance sheet but that are potentially avoidable through the use of risk transfer mechanisms.
The focus will be on companies that operate in the Life Science space, a rather broad definition of companies that I define as the follows: Pharma, Biotech, Med Device, CMO’s, CRO’s, and Med-tech. Although the Life Science industry is the focus, many of the issues discussed will be applicable to companies in all industries.
In addition, from time to time, topics such as raising capital, business development, marketing, and HR issues will be discussed.