Pharmaceuticals are among the most innovative field of science, but running pharmaceutical and biotechnological research is also one of the most costly areas in which to invest. According to the latest estimates from the Tufts Center for the Study of Drug Development, a new prescription medicinal product requires $2.6 billion investment, more than triple the sum needed in 2003 ($802 million) and double with respect to 2013 ($1 billion) (see here Policy & Medicine for more details).
It is thus understandable the importance the pharmaceutical industry gives to the protection of intellectual property (IP). Innovators can experience a theoretical twenty years exclusivity on the market for new products provided by the corresponding patent, decreasing to 10-15 years at the best if taking into consideration the time needed to develop and register the product. Some other years of exclusivity (usually five) can be granted by the Supplementary Protection Certificates (SPC) or orphan drug designation.
New collaborative models for R&D are giving the academia and small, innovative biotech companies the role of leaders in the identification of new ideas and methodologies (we spoke about this in the April newsletter). Basic and early phase research is often run by start-up companies that are rich in ideas and patents, but that might experience some difficulty in finding a proper source of financing in order to translate their innovative potential into a real product able to reach the market. This issue has been addressed by a post on EFPIA blog signed by Ari-Pekka Laitsaari, an expert in innovation financing at the European Investment Bank (EIB).
The EIB is one of the institutions part of the Exploitation Strategy and Innovation Consultants network (ESIC), established by the Industrial Technologies (NMP) programme.
The ESIC network provides consultancy to the European Commission in the field of technological innovation and industrial technologies, with the goal to bridge the gap between the scientific and technical performance of funded projects and their socioeconomic performance. ESIC gives project partners the opportunity to work with a consultant to better identify risks and determine a strategy to maximise results. We offer readers a brief summary of the different areas of specialisation of the ESIC partners.
The role of the EIB in support to life sciences
The European Investments Bank (EIB) is the main provider of funding for innovative EU-based SMEs in the growth stage of development, providing about €700 million each year in venture debt, explains Laitsaari from EFPIA’s blog.
Companies receive a “venture debt” that they can use to alleviate immediate debt repayment pressures, so to better face the rounds of financing typical in the life of startups. An advantage offered by the EIB, according to its expert, is that contrary to traditional venture capitals and other types of investor, it does not require any share or seat on the board of the participating company. “Crucially, it gives them space to focus on the science and develop their products without diluting the value of the company.”, writes Laitsaari, also highlighting the possible reassuring role the EIB participation might play with respect to other interested investors or partners.
IP protection is another fundamental asset that marks a distinction with other highly innovative sectors. Patents might not be seen as so relevant by many technological companies, while they are the center of the business in the biopharmaceutical field. This is why the analysis of applications run by the EIB considers also the robustness of the patent portfolio for life science startup companies and the possibility for competitors to patent derivative molecules.
This is also why the EIB looks favourably at incentives like the SPC or the orphan drug designation to sustain the innovator industry: “Despite the uncertainties associated with clinical trials and securing marketing authorisation, it offers a degree of reassurance that successful products will recoup investment”, writes Laitsaari.
Venture debt is not the only form of lending made by the EIB: the Bank offers a wide array of tools able to adapt to each different need and size of the funded company. The Project loans, for example, are targeted to individual projects with total investment costs of more than € 25 million. Midcap companies with up to 3,000 employees may sometimes access this tool, where the loan volume requested is in the range € 7.5 – 25 million. Intermediated loans are directed to local banks and other intermediaries which subsequently “on-lend” to the final beneficiaries; they are intended to pursue at least one of the public policy goals established by the EIB.
The European Investment Fund (EIF) is also part of the EIB group; it focuses on establishing a sustainable venture capital ecosystem in Europe, and provides funding to venture capital funds. These act in turn as intermediaries that invest into innovative high-tech small and medium sized enterprises in their early and growth phases. Micro firms are a peculiar kind of entrepreneurial activity needing targeted resources; the Microfinance tools from the EIB are directed to companies employing fewer than 10 people, with up to € 2 million/year balance sheet.
The reference point for SMEs
The Executive Agency for Small and Medium-sized Enterprises (EASME) is an initiative of the European Commission to help manage several EU programmes in the field of SME support & innovation, environment, climate action, energy and maritime affairs. EASME is responsible for the management of significant parts of the COSME, LIFE, Horizon 2020 and EMFF programmes. With respect to H2020, for example, the agency has been involved in actions to develop the “Industrial leadership” action, the INNOSUP programme exploring new modalities and funding opportunities for clusters, innovation agencies and other SME intermediaries and several actions within Part III “Social challenges”.
A partner to provide coaching and support
Gate2Growth is a private Danish company member of the ESIC network providing services for EU projects and societal challenges across many industry and business sectors. It usually acts as the “business development, funding and exploitation” expert partner of the projects, with experience in more than 25 European countries. Among the areas of expertise are commercialisation processes, business model development, internationalisation and raising finance, value chain modelling, Term Sheets and Shareholder Agreement negotiations, the raising of capital for high-tech ventures and private-public partnerships, the identification of strategic partnerships for spin-offs from universities and research institutions and coaching activities on various aspects of Horizon 2020.
The voice of private equity
Invest Europe is the European association of private equity, venture capital and infrastructure sectors, and their investors. Its main target is long-term investment in privately held companies of any size to support strong and sustainable growth. Investor members of the association adhere to the professional standards laid down in the Invest Europe Handbook.
Political advocacy is among its core services: the association acts as a counterpart of European legislators to discuss policies affecting private capital investment in Europe; it also elaborates studies and provides public information on the sector. Invest Europe Library and Research Helpdesk provides the members with industry data and information. Promotional activities focus in building a better understanding and awareness of private equity at various levels are pursued by an extensive networking activity and conference organisation.
The CIP financial instruments and COSME programmes
The Competitiveness and Innovation Framework Programme (CIP) was an initiative of the European Commission aimed to provide SMEs with better access to finance, support for innovation, and regional business support. The programme ran in years 2007-2013 with a total budget of € 1 billion, and according to its website some financing is still available through financial intermediaries that have been recently selected and approved.
The EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) has now replaced CIP. The new programme support SMEs’ access to finance in all phases of their lifecycle, from creation to expansion and business transfer. Under COSME’s tools, the EU ‘financial instruments’ are channelled through local financial institutions in the different European countries, that can be found through the Access to Finance portal.
The European IP Helpdesk
As mentioned above, intellectual property plays an extremely crucial role for the success of a biopharmaceutical business. The ESIC network includes a specific tool, the European IP Helpdesk, to provide first-line, free of charge support to beneficiaries of EU-funded research projects and EU SMEs involved in transnational partnership agreements.The IP SME Corner, for example, is the reference contact point for smaller companies, often lacking internal competences on IP issues. The Corner offers a selection of publications to support the easy and rapid understanding of the possible impact of IP on the company’s activities.
The IP Helpdesk is managed by EASME, under the guidance of the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG Grow) of the EU Commission. Its services are aimed to cover all different IP practices, from awareness to strategic use and successful exploitation. Upon registration, it is possible to receive a consultancy on specific IP issues – under strict confidentiality – from a team of experienced legal specialists within no more than three working days.
The European Patent Office
For companies ready to make the big jump and file a patent, the main reference is the European Patent Office (EPO). The Office is responsible for the examination of all European patent applications and manages the database of patents valid in the territory of the European Union. The protection obtained from EPO is not limited to the EU, as patents granted by EPO are valid in up to 44 different countries through a centralised and uniform procedure that requires just one application. All services are provided in accordance with the European Patent Convention.