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IPO Outlook for Biotech Remains Dreary in 2012

Written by on Thursday, February 16th, 2012 Print This Post Print This Post

Biotech industry watchers unfortunately have yet to give us good news about the direction of the industry. 2011 finished as another disappointing year for IPOs, and 2012 is anticipated to bring us more of the same.  The prevailing wisdom continues to be that today’s investors have more of an appetite for investing in social media than biotech. 

Fierce Biotech reported that only 10 U.S. biotech companies went public last year, which is down from just 13 in 2010, listing these  companies as follows:

 

  • Clovis Oncology for $130 Million
  • Sagent Pharmaceuticals for $92 Million
  • Fluidigm for $76.5 Million
  • Endocyte for $75 Million
  • Tranzyme Pharma for $54 Million
  • Horizon Pharma for $49.5 Million
  • New Link Genetics for $43.3 Million
  • Paciri Pharmaceuticals for $42 Million
  • BG Medicine for $40.25 Million
  • AcelRx for $40 Million.

Genetic Engineering Biotechnology News (“GEN”) counted 13 IPOs in 2011 and 16 in 2010, apparently including biofuel companies in the list, and reported that “of the 20 biopharma IPOs now trading below their IPO price, nine lost more than half of their share price, while eight lost between 26-50%, and other three between 1$-25% of their share price.” 

The consensus was clearly that the outcome of these IPOs was at best lackluster and certainly not what the companies had hoped for.

Unfortunately, 2012 is not expected to be any better.  GEN is reporting that G. Steven Burrill projects that a mere 25 biotechs worldwide will complete IPOs in 2012.  

What biotechs are anticipated to be on that list? 

Investorplace and GEN both are reporting that Verastem, an oncology therapeutics company,  intends to go public in 2012 and to sell 4.5 million shares at a range of $9 to $11.  In addition, GEN is reporting that five other biotech companies plan to go public:

 

  • Argos Therapeutics, a company focusing on metastatic renal cell carcinoma and HIV, plans to raise up to $86 Million;
  • Cempra Pharmaceuticals, a company having two Phase III products: a pneumonia treatment CEM-101 in three separate studies and a MRS and skin infection treatment CEM-102 in another study, plans to raise $86.25 Million;
  • Merrimack Pharmaceuticals, a company having a Phase II lead candidate MM-398, which is a pancreatic and gastric cancer chemotherapy treatment, plans to raise $172.5 Million;
  • Rib-X Pharmaceuticals, a company having a Phase III candidate delafloxacin for acute bacterial skin and skin structure infections, plans to raise $80 Million; and
  • Supernus Pharmaceuticals, a company having a lead candicate SPN-538 for epilepsy, which received FDA approval in November 2011, plans to raise $100 Million. 

All in all,  the outlook for biotech IPOs is not expected to improve much in the coming year.  Moreover, there is really nothing on the horizon to suggest that we will see any real improvement in the coming years either.   In the current economic climate, investors remain dubious about investing in early stage biotech companies, and biotech companies remain nervous about going public for the same reasons.  As GEN observed:  “[The] way to measure the health of the biopharma IPO market for this year will be to see how many companies backtrack on plans to go public.  Since 2010, six biopharmas have withdrawn their IPOs.”

I think I can safely speak on behalf of California’s biotech community when I say that we are looking for the light at the end of the tunnel.  Until that happens, however, biotech companies will have to continue to look for other means of raising capital and to focus on acquisitions  rather than IPOs as the primary business goal.

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Category: Biotech IPOs  |  Comments Off

The Passage of Patent Reform: Is this Really a Win for the Biotech Industry?

Written by on Sunday, September 25th, 2011 Print This Post Print This Post

Now that President Obama signed the patent reform bill into law on Sept. 16, 2011, it is only fitting to ask whether the passage of this bill was a win for the biotech industry?

According to Roy Zwahlen, manager of intellectual property and technology transfer policy at BIO, the answer is a clear “yes.” He posted a blog posting on the BIO website, in which he articulated a number of reasons why he thought the bill was good for biotech:

1) Greater resources and operational flexibility for the PTO;
2) New and improved proceedings for patent quality review;
3) Will end the abuse of a loophole in false patent marking litigation;
4) Change America’s first to invent system to a first to file system;
5) Make it easier for inventors to file a patent; and
6) Eliminate the “best mode” requirement in patent litigation.

I thought Mr. Zwahlen’s apparent support for the patent reform bill was interesting in light of the industry he represents. Like many of my Bay Area counterparts, I have a completely different take on the issue.

While I am all in favor of making government agencies work better, as someone who regularly works with start-ups, I simply fail to see how changing our prior first to invent system in the U.S. to a first to file system could possibly have been good for the biotech industry. There is no question that the rest of the world has been using a first to file system and that our system was out of sync with the system adopted by the rest of the world. Yet, I would argue that our first to invent system was beneficial to cash-strapped start-ups and small businesses, which often do not have the budget when they first launch their businesses to immediately file patents to protect their inventions. As a lawyer working with start-ups, I frequently get the question “how much time do I have to file?” Particularly in the current times, when start-ups and small businesses are arguably more cash-strapped than they have ever been and investment money is so difficult to come by, patent prosecution costs are a huge concern. It’s hard to see how it can be in the best interests of a start-up to have to race to file a patent on an invention or to risk losing the opportunity to own the rights on the invention altogether.

Moreover, I can’t help but ask the question: in light of the challenges posed by the current economy, why in the world did Congress and the President choose now to impose yet another burden on start-ups and innovators?

Stepping back from this issue a bit, as a small business owner myself, I’ve been very vocal in my criticism over what I think is our country’s recent misguided financial support for so-called too-big-to-fail businesses at the peril of small businesses, which I would argue are the backbone of our country and of our country’s future. The average small business in this country (with a few notable exceptions such as the scandal-ridden and bankrupt Solyndra) has not been able to so much as pay a financial institution to loan it money in this environment. Yet, all kinds of taxpayer money has been handed out to large institutions since the recession started. This is not a criticism of any particular administration, as both the Bush and Obama administrations have taken this approach, as well as the past few Congresses. Moreover, while I’ve listened over and over again to the arguments in support of why these decisions have been made, I continue not to agree with them. My position is that the innovation we are all seeking to give our economy a much-needed boost is just not going to come from a large business, and that starving small businesses of capital and funding instead the largest businesses in this country is just a very misguided policy approach. So, this is the perspective I come from as a small business myself, whose business is largely comprised of working with start-ups. And that is the perspective from which I approach this issue.

The bottom line: I would argue that the decision to move to a first to file system in a bad economy is yet another example of enacting policies that hurt the little guy in tough times. And I think that it ultimately is bad for the biotech start-up out there who is trying to come up with cash to fund a patent program, or for the inventor who is trying to do something productive with his or her invention.

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Fourteen States Launch Constitutional Challenge to Health Care Reform Bill

Written by on Wednesday, March 24th, 2010 Print This Post Print This Post

Fourteen states filed suit yesterday to challenge the constitutionality of the health care reform bill.

The states of Florida, Alabama, Colorado, Idaho, Louisiana, Michigan, Nebraska, Pennsylvania, South Carolina, South Dakota, Texas, Utah, and Washington joined together in a suit filed in Florida.

Virginia filed its own suit separately.

The crux of these suits is the constitutionality of the new health care legislation, which will now increase the federal government’s regulatory powers into health care insurance, which had been traditionally regulated at the state level (along with most private insurance), and will impose penalties on individuals for failing to purchase private insurance policies.

If you have been following the commentary on this issue at all, you know that this argument is basically a classic states’ rights debate: that the legislation deprives the states of sovereignty and violates the 10th Amendment to the Constitution, which says that powers not delegated to the federal government are reserved to the states.

Of course, the other side of the argument says that the bill is constitutional because Congress has the power to regulate interstate commerce under the commerce clause of the Constitution.

As most lawyers recall from our Constitutional Law courses in law school, the commerce clause has been read in recent years to provide the federal government greater and greater powers to regulate interstate commerce in various ways.   For this reason, many commentators are predicting that the legislation will stand up under constitutional scrutiny.

But should it withstand constitutional scrutiny?   There is no question that insurance generally, and particularly health insurance, has up until now been entirely within the purview of state regulation.  Each state has its own regulatory requirements for what can be in health insurance plans offered under that state, each state has its own insurance commissioners, and each state makes independent regularly decisions about the activities of individual insurers.  We haven’t even been able to buy insurance over state lines–if you move to a new state, you have to get a new policy entirely.  So, clearly insurance has long been viewed as falling under the purview of the states.

Moreover, this legislation now allows the federal government to mandate that you buy health insurance, and if you do not, you will be penalized by the IRS.  While supporters argue that this is like state laws requiring that you buy car insurance, I think that there is a valid argument that this is different.  In the case of car insurance, states are imposing these requirements on residents of their state who choose to avail themselves of the privilege of driving, in order to protect other drivers from injury.  It’s hard to see the parallel when this is a federal instead of a state exercise of power, and when there is no privilege like driving involved with health care, which Democrats are now calling a “right.”

The bottom line is that the IRS is entwined in this bill, and there is a good chance that the Supreme Court will read this bill to be a valid exercise of commerce clause powers–even more so because a taxation component is involved.

However, if that happens, I think supporters of this bill should look beyond the current legislative debate and consider how continuing to broaden the commerce clause powers might be used in the future.  Extending the commerce clause is going to someday make it that much easier for a Republican Congress to use the new enhanced commerce clause powers in a way that may not be quite so palatable to Democrats.  Continuing to allow an encroachment of states’ rights does have consequences and they are consequences that may very well cut in both directions.   I think it is an open question as to whether we as Americans want to continue to see the commerce clause powers continuing to encroach on states’ rights.   The line is moving further and further over into the traditional purview of the states: where is the hard stop?  Do we as Americans care enough to draw a line in the sand and say it stops in any particular place or are we okay with the states’ powers continuing to dwindle?

Clearly, this challenge raises some very interesting constitutional and societal issues.  So, whether you support health care reform and this particular piece of legislation, or you oppose it, I would urge you to tune into this Constitutional debate.  How the issues are decided will have an impact that goes far beyond our recent health care reform debate. The California Biotech Law Blog will continue to follow this issue as it unfolds.

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Category: Biotech Legislative Developments  |  Comments Off

Biotech Industry Evaluates Anticipated Impact of Health Care Reform

Written by on Monday, March 22nd, 2010 Print This Post Print This Post

Well, unless you have spent the last few weeks stranded on a desert island, you probably know that yesterday was the big health care vote.  As expected, the Democratic majority in the House passed the health care reform bill–despite the fact that the bill was vigorously opposed by a large percentage of the American public.

While the legal battle challenging the constitutionality of the law is just getting started and is likely to continue for some time, the biotech industry is just starting to process what yesterday’s vote will mean for its industry.

BIO,  the biotech industry organization, released a statement on the vote yesterday, which took a decidedly positive tone.  In support of its position, BIO cited three key benefits of the bill:

  1. The bill provides hope for Americans living with debilitating diseases.
  2. The bill created a pathway to enable the U.S. Food and Drug Administration (“FDA”) to approve biosimilars.
  3. The bill included a Therapeutic Discovery Project Tax Credit, which is designed to provide financial relief to some biotech companies that are suffering in tight credit markets.

Why was BIO so positive about this legislation?

Well, the remarks suggest that BIO is happy with several of the carrots that were thrown at the industry in this bill: biosimilar legislation and a tax credit for biotech companies.

Noticeably absent in the BIO statement, however, was any statement to the effect that health care reform will advance the biotech industry in any way.  Instead, the only reference made to reform itself was that it will bring “hope” to Americans suffering from diseases.  Is this an oversight on BIO’s part?  In my opinion, no.

While there is no doubt that most biotech industry members applaud the idea of providing health care to all Americans, and you can certainly say that reform will increase the potential customer base for biotech products, it is a definite  stretch to say that this reform bill will prove beneficial in any way to the biotech industry.   How could it?  Any enterpreneur in the biotech space knows that the U.S. market has always been the most lucrative due to compensation issues–the U.S. consumer finances the world’s drug development costs.  What happens when you impose drug price controls, which are inevitable in government-controlled health care?  It doesn’t take an expert to see that the world’s most lucrative market will become a lot less lucrative.  It will become like most of the other markets in the world, which have price controls, too.  This kind of change will inevitably impact entrepreneurship in the biotech space.  Launching a biotech company requires huge risk and tremendous investment capital.  Will the capital be there when the huge  potential payoff is not?  It will take a huge amount of increased business to make up for the loss of revenues in the U.S. market due to price controls.  Will what is left be enough to encourage drug development?

While the answer to that question is still unclear, I think it is a safe bet that true entrepreneurs will find away to adapt to the new realities of the market.  Many entrepreneurs–me included–have had to do this in the past year to survive the recession.  I have adjusted my business model completely to deal with the new realities of the legal market,  and I think it is a safe bet that many other small businesses who survive this recession will have done the same thing for their markets.  I am sure that there will be biotech entrepreneurs who can adjust their business models to the new realities of the U.S. market after the passage of this bill as well.

Having said this, there is no question that this bill is going to have an impact on the industry.  Change is coming to biotech–and it may not be the kind of change that members of the biotech industry wanted.

So, what about the carrots that got thrown into this bill for the industry?  What kind of impact will those carrots have on the industry?

Well, the tax credit may be beneficial to some companies, but my guess is that it will have a minimal impact on struggling companies who are unable to land the capital they need to survive this recession.   It seems a stretch to say that a tax credit is going to “save and create thousands of jobs across our nation” as the BIO statement claims.  A tax credit only helps if you are generating revenue to pay taxes with, and many stuggling biotechs likely need investment capital more than they need a tax credit at this point in time.

As for the biosimilars piece to the legislation, this topic has been heavily debated for some time and remains controversial.  It is legislation that is going to benefit some companies at the expense of other companies, so it is difficult to say it really will “benefit” biotech.  The legislation will benefit companies seeking to manufacture biosimilars at the expense of the brand.  The California Biotech Law Blog will explore this issue in more detail in a separate blog entry.  The bottom line is that BIO is supporting the legislation simply because it creates a pathway for the approval of biosimilars, which previously did not exist, and BIO is taking the position that this is the right decision for biotech.

All in all, the impact of this bill on biotech is one that may be debated and evaluated in the months to come.  The California Biotech Law Blog will continue to follow the developments as they unfold.

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Category: Biotech Legislative Developments  |  Comments Off

California Biotech Law Blog Named to List of Top 50 Biotech Blogs

Written by on Wednesday, March 3rd, 2010 Print This Post Print This Post

Medicareer has named the California Biotech Law Blog to be on its list of Top 50 Biotech Blogs.

The California Biotech Law Blog joins  a number of well-regarded publications, which also made the list such as the  In Vivo Blog and the  BioHealth Investor.  The list also includes a number of blogs that I have not previously come across, which we at the California Biotech Law Blog look forward to checking out.

The California Biotech Law Blog thanks  Emily Johnston of Medicareer for letting us know that we were included on this list!  It is an honor to be recognized among so many other biotech publications on the Internet.

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Category: Biotech Blog in the News  |  Comments Off

Carl Icahn Makes Move to Raid Genzyme Board

Written by on Wednesday, March 3rd, 2010 Print This Post Print This Post

Billionaire Carl Icahn is at it again.  Icahn, who has a history of engineering board takeovers and initiating corporate sales at the corporations in which he invests, now has focused his efforts squarely on the Genzyme board.

Various media outlets are reporting that Icahn plans to nominate four new board members, including himself, when Genzyme’s nine director seats open up for election at the 2010 annual meeting scheduled for May.   This move would allow parties friendly to Icahn to control just under 50% of the Genzyme board.

What accounts for Icahn’s new interest in assuming control of the Genzyme board?

First of all, as Mass High Tech reported,  Icahn owns 4.8 million shares, which as of December, 2009, amounted to just under 2 percent of Genzyme.  This obviously is enough of a stake in the company to have a strong interest in its future.

Second of all, as Fierce Biotech reported, Genzyme has recently been plagued by some fairly serious problems, and Icahn seems to have lost confidence in the leadership of the company.  Its Allston Landing facility in Boston has suffered a series of setbacks resulting in shortages of Genzyme’s durgs Cerezyme and Fabrazyme.   Moreover, Shire and Protalix are close now to finalizing development of several competing drugs, which will likely give  those companies the opportunity to take over a significant portion of Genzyme’s existing market share.

According to Reuters, Genzyme has taken actions lately designed to fend off an Icahn move and to address investor sentiment generally, but it may very well be “too little too late.”

Reuters reported:

[Genzyme] recently announced an overhaul of its compensation system and added Robert Bertolini, previously chief financial officer at drugmaker Schering-Plough Corp, to its board.

The company also hired new managers to oversee quality control and agreed to appoint Ralph Whitworth of Relational Investors, another activist shareholder, to its board. In return, Whitworth agreed to support Genzyme’s slate of nominees.

So what is next for Genzyme? It seems likely that some significant changes are in its future.

The California Biotech Law Blog will continue to watch this story and keep you posted.

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Category: Biotech Industry News  |  Comments Off

TheScitechLawyer Profiles California Biotech Law Blog’s Kristie Prinz

Written by on Friday, February 19th, 2010 Print This Post Print This Post

I was recently interviewed by Clara Cottrell of TheScitechLawyer regarding the challenges of building a law firm and my advice for lawyers who are trying to build firms or even just simply build careers in these difficult economic times.

To read the article in full, please click here:

http://prinzlawoffice.com/wp-content/uploads/2010/01/scitechprofilekristieprinz1.pdf.

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Category: Biotech Blog in the News  |  Comments Off

Patrick Reilly of IP Society Interviews California Biotech Law Blog’s Kristie Prinz

Written by on Wednesday, February 17th, 2010 Print This Post Print This Post

I recently sat down with IP Society’s Patrick Reilly to discuss intellectual property licensing and what start-ups seeking legal counsel need to know about intellectual property licensing.  The focus of the interview was on technology licensing, particularly in the software area, rather than biotechnology licensing, but I wanted to bring it to the attention of blog readers, since the interview may be of interest to many of you.

Click here to view the video.

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Category: Biotech Blog in the News  |  Comments Off

Kristie Prinz Interviewed by Technology Transfer Tactics on Issue of Whether Poster Presentations Jeopardize a TTO’s Commercialization Efforts

Written by on Friday, February 12th, 2010 Print This Post Print This Post

Technology Transfer Tactics recently interviewed me on the issue of whether poster presentations jeopardize a tech transfer office’s commercialization efforts.

I wanted to share the interview because the article raised some interesting questions.  Of course, universities have long been dealing with the challenges of having to reconcile the competing interests of the educational/research institution’s desire to publish and provide educational opportunities to students vs. the intellectual property protection/commercialization goals of a tech transfer office.  However, this article addressed a unique aspect of that conflict, which I think will be of interest to blog readers.

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Category: Biotech Blog in the News, University Tech Transfer  |  Comments Off

Seventh Circuit Rules in favor of WARF in Licensing Dispute with Xenon Pharmaceuticals

Written by on Thursday, January 14th, 2010 Print This Post Print This Post

The Seventh Circuit decided last week in favor of the Wisconsin Alumni Research Foundation (“WARF”) in its licensing dispute with Xenon Pharmaceuticals.

As I stated in my Silicon Valley IP Licensing Blog posting on this case, I strongly agree with the outcome in this case and I view this decision as an affirmation of a licensor’s rights in an exclusive license of joint intellectual property.  Had the case been decided differently, I certainly would have had some practical concerns as an IP licensing attorney as to how exclusive licenses to joint intellectual property in collaborations should be drafted.

For another take on this case, you might want to check out PatentlyO, which did not really take a position on the outcome, but provided a little different commentary on the court’s decision.

While this case may not have any groundbreaking precedential value as an intellectual property decision, I think it provides some good practical lessons for anyone drafting or negotiating license and collaboration agreements in the biotech world, whether representing a corporation or working for a tech transfer office at a university, as well as for those who are actually executing the agreements once they are signed.  Clearly, some mistakes were made here that resulted in expensive litigation and will likely result in a costly damage award against Xenon as the loser.

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Copyright 2005-2014 The Prinz Law Office. All rights reserved. Biotech Lawyer & Attorney: Serving Silicon Valley, San Jose, San Francisco, Santa Cruz, San Diego, Los Angeles, Orange County, Irvine, Anaheim, Santa Monica, Silicon Beach, Santa Barbara, Sacramento, CA. Licensed in California and Georgia.
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