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24 November 2016EuropeDimitar Georgiev

IP and investment: put your money where your mouth is

Evaluating an investment in the life sciences sector is essential, as mistakes can be encountered easily.Intellectual property-related investments should be divided into the following categories:

  1. IP developed from scratch

This is where the real cherry-picking takes place. It’s the cheapest but also the most risky form of investment, where up to 99% of the targets could fail because of a range of reasons. Risks are dependent on the viability of the IP. This is the category with the real thrill.

  1. IP developed and acquired at an early development stage

This is a form of investment with well-defined risks and benefits, normally preferred by small or medium-sized financial or strategic investors, where the “valley of death” (funding difficulties with the process of translating basic research into a viable product) is fortunately a thing of the past. However, there are still a lot of potential troubles ahead.

The successful outcome here depends less on the idea and more on the execution and sustainability of the efforts put in.

3. IP acquired at a late development stage/already marketed

This could be a billion-dollar investment with a potential blockbuster or game-changing piece of IP and is almost exclusively a financial transaction, because the viability of the IP is proved in categories 1 and 2.

Normally, this category is far too expensive for the majority of investors; in almost all cases, the invested money is other people’s.

Over the last two to three years, there have been a number of record-breaking mergers, which are actually a form of investment in a group of IP belonging to pharmaceutical blue chips or large medical technology companies.

Developing a strategy

The strategy for an investor should depend on three factors.

  1. Size and analytical power

It’s obvious that a small investor, such as a sole investor, cannot put billions into developed IP.

  1. Risk appetite

There is a thrill when investing in risky enterprises or IP, but the risk can be defined in different ways. Some people consider IP from certain countries to be risky; others love it. In general, IP developments in G20 countries bear less risk than those in emerging economies.

  1. Horizon

Every piece of IP in the life sciences sector has a life cycle and there are well-defined periods for IP protection. The people who invested in aspirin, for example, are probably billionaires now, as well as the people who invested in antibiotics or monoclonal antibodies.

A search of literature discloses a steady increase in the patents related to life sciences. There are obviously a lot of optimists and enthusiasts, along with good analytical groups who direct the money of investors into potential blockbusters.

“The millennial generation will surely invest massively in software and apps because they have grown up with smartphones, apps and gadgets.”

These products should make life better, longer, easier, and healthier. There are already a number of overlaps between life sciences and software developments with different apps, but the majority of innovations are in drugs, medical devices, special foods and even cosmetics.

The millennial generation will surely invest massively in software and apps because they have grown up with smartphones, apps and gadgets. This trend could be dangerous: ten years ago, investments in antibiotics fell out of fashion and this has caused a lot of trouble for medicine today.

It’s likely that there will be a lot of “traditional” investors, mainly institutional, who will put their money in the “classical” IP developments—drugs, medical devices, and medical foods.

A very trendy discipline in IP is genetics, but one must understand the difficulties of patenting in this area. However, massive investments are still being made in the field, which includes genetic testing, and some of the most recent IP lawsuits are in this field.

Genetics are still not adopted massively in medicine and especially not in poor countries, meaning there is a huge potential for return on investments undertaken now.

Overall, investments in the life sciences arena, and especially in IP, are promising and might contribute to the improved health of different groups, but are not easy to be evaluated and rated.

Dimitar Georgiev is the CEO and founder of  Paralax Life Sciences. He can be contacted at: dbgeorgiev@paralaxlife.eu

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