Drug Patent Cliff And Intellectual Property Valuation

 

In today's global economy, intellectual property Valuation and money are increasingly linked.

Even as intangible assets make up a growing market proportion, Wall Street is unsure how to value them. Companies also recognize that patent acquisition does not always enhance company value, but how those patents are utilized does.

More pharma firms are seeking to diversify their portfolios to fight rising healthcare costs, huge impending patent expirations, a deflated economy, and other market challenges.

Diversification of drugs:

Many pharmaceutical firms are diversifying their portfolios in preparation for new patent waves.

According to Data monitor, the patent cliff is projected to erode $78 billion in worldwide revenues from brand medicines produced by Merck, Teva, and Mylan, with patents scheduled to expire anytime.

 Continued degradation of already-expired brands will cost another $32 billion. Price reduction, reimbursement limitations, healthcare reforms, and increasing regulatory pressure to control costs are anticipated to affect sales.

Meanwhile, Bayer, a German pharmaceutical firm, is reducing expenses and employment to reinvest in the development and marketing of pesticides and genetically modified crops and a greater emphasis on Asia's growing markets. Merck's expansion strategy involves local and regional collaborations or acquisitions for new and mature products, including branded generics and other items.

Investment Trends in Intellectual Property:

Many investors prefer companies with well-positioned intellectual property rather than those that merely collect patents. The IP must be free of any danger of infringing on the intellectual property valuation of others, and it must be enforceable. Patents must also be put together in a logical order to form something larger that has the potential to open up new markets.

According to Alexander Butler, executive vice president of IP Vision, a Cambridge, Massachusetts-based firm that uses patent analytics and database systems to help clients design or improve business processes relating to their IP, a firm and its management that spends the time, effort, and care to develop strong patents by working with attorneys, technologists, and investing in strong legal filings is likely a good investment.

When deciding how to utilize his or her IP, an IP holder should consider three important questions: What is the quality and utility of the underlying innovation; how effectively has that invention been recorded in legal papers; is the patent itself strong enough to deter prospective infringers; and what is your plan for extracting the patent's value? Plus, how can you create a large number of patents in such a manner that they have the greatest value?

Trolls with Patents:

Patent trolls – companies or individuals that buy patents solely to enforce them, also known as "non-practicing entities" – have long been regarded as a costly irritation to technology companies such as Microsoft, Apple, Google, and Verizon Wireless, but some are now perfecting the business model of patent enforcement – and it appears to be paying off. NPEs are monetizing their assets – patents – without bringing any innovation to the table. Instead, they try to compel businesses they believe are infringing into licensing deals for the intellectual property valuation.

Last month, Acacia Research Corporation, a publicly listed company, reached a settlement and license arrangement with ARM Holdings over copyrighted property related to advanced pipeline microprocessors, as well as a deal with Texas Instruments. Last month, Acacia also obtained additional patents for wireless monitoring technology, dynamic random-access memory, and power management technology.