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with China and India, 201–202
cross-border, 142–143
due diligence and, 375–376
equity, 116–118
formal contractual agreements, 113–116
and ICT offshoring trends, 126–127
informal agreements, 110–113
information gathering for, 346–348
key points, 172–173
legal structure for, 156–159
managing, 137–172
opportunistic, 111
and outsourcing, 110, 119, 123–127, 141, 157,
165
overview, 109–110, 132–133
partnering candidate selection. See Strategic
Alliances, partner selection
progress review, 169, 577n21
strategic (See Strategic alliances)
types of, 110–119, 133–135
AM-Pharma, 193
AmpliChip CYP450, 204–205
Amsterdam Molecular Therapeutics,
189
Analysis:
competitor, 47–48
external (See External analysis)
fundamental, 391–392
internal (See Internal analysis)
PESTLE (political, economic, social,
technological, legal, and environmental),
54–56, 65
situational, 40
strategic gap analysis, 67, 69–70
SWOT (strengths, weaknesses, opportunities,
and threats), 69–70
Anchor companies, 64–65, 66
Angel investors, 481
Antidilution provisions, 235–236
Antitrust provisions, 326–328
Applied Mergers and Acquisitions (Bruner), 159,
422, 424–426
Appraisal of Firm’s Resources and Capabilities,
67–68
Appraisals, 456–457
Appropriation of profit, 21–22
Appropriation of value, 22
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Abandonment options, 155
Abingworth, 479
Academic collaborations, 183–185, 207
Acceptance of offer, 213
Accounting values, 445–447
Acquisitions, 86
Adjusted present value (APV) method, 421–422,
428
Adoption, 19
Advanced Dermal Delivery, Inc. (ADD), case
study, 522–555
Affymetrix, 195
Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS),
281–282
Agreements:
comarketing, 131–132, 135
copacking (coproduction) agreements,
130–131, 135
equity joint ventures, 116–117. See also
Genzyme-Geltex Pharmaceuticals Joint
Venture
equity ownership agreements, 116–118
formal contractual agreements, 113–116
informal agreements, 110–113
investment agreements, 229–248
licensing, 186–188 (see also Technology
transfer agreements)
licensing agreements (see also Patent licensing
agreements)
minority investments, 117–118
nondisclosure agreements (NDAs), 183, 211,
216–218
patent licensing agreements (See Patent licensing
agreements)
procurement agreements, 129, 134
production-sharing agreements (PSAs),
129–130, 576n27
subcontracting agreements, 113–114, 133
technical assistance agreements, 128–129, 134
technology transfer agreements (See Technology
transfer agreements). See also Alliances
Alliance networks, 104, 182, 202–203, 206
Alliances, 109–135
and biopharmaceutical companies, 175–207
and biotechnology/pharmaceutical value chain,
181–188, 201–202, 207
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Backward integration, 51
Balanced scorecard, 165
Balance sheet, accounting, 446–447
Balance sheet, economic, 447–449, 472–473
Balance sheet ratios, 465–466
Bamford, James, 142, 160
Bankruptcy, 93
Barney, Jay, 49
Barriers, exit, 58
Baxter International, 199
Bayh-Dole Act of 1980, 184
Beamish, Paul, 114–115
Ben & Jerry’s, 57
Beta selection, 410, 531, 584n28, 584n30
Biacore Life Sciences, 195
Bioinformatics, 197, 579n28
Biol Limited, 327
Biopharmaceutical alliances, 181–188
with China and India, 201–202
defined, 182
importance of, 205–206. See also
Biopharmaceutical business models
Biopharmaceutical business models:
and alliance formation, 183, 205–206
basics of, 199–200
choice of, 206–207
Fully Integrated Pharmaceutical Company
(FIPCO) model, 188–189
key points, 206–207
Medical Device business model, 198–199
No-Research, Development-Only (NRDO)
business model, 191–192
Platform Technology business model,
193–196
potential changes in, 200–201
Royalty Income Pharmaceutical Company
(RIPCO) business model, 190–191
Service business models, 196–198
Virtually Integrated Pharmaceutical Company
(VIPCO) business model, 192–193, 207
Biopharmaceuticals:
and academic collaborations, 183–185
Advanced Dermal Delivery, Inc. (ADD), case
study, 522–555
contract manufacturing in, 196
deal structuring in, 186–188
defined, 578n3
development risks, 175–179
discovery and development cycle, 176–178,
578n4
exit strategies and, 492
generic drug companies, 311–313
and innovation gap, 185–186
licensing agreements and, 186–188
mutualism in, 185–188
offshoring manufacturing, 125, 197, 201–202
open innovation and, 182
partnering candidate selection, 183
and personalized medicine, 201–202
risks associated with development, 178–179
royalty rates, 187
start-ups, 181–182
value chains in, 179–188
Biotechnology. See Biopharmaceuticals
Biotechnology, defined, 578n1
Blizzen, SA, 327–328
Bolles, Richard Nelson, 6
Book value, 446
Book value ratio, 471–472
Boston Consultancy Group (BCG), 202
Boston Scientific, 198–199
Boyer, Herbert, 188
BP Plc, 112, 575n4b, 575n5
Brand, Tom, 15, 601
Brandenburger, Adam, 60, 572n22
British Telecom Plc (BT), 308
Browning, Robert, 4, 5, 569n1
Bruner, Robert F., 140, 159, 346, 406, 422,
424–426, 582n8
Budapest Treaty on the International Recognition
of the Deposit of Micro-Organisms for the
Purposes of Patent Procedure, 281
Building the Gherkin (von Arx), 9, 570n15
Burrill, G. Steven, 201
Business, solid vs. thriving, 14
Business intelligence, 340
Business models:
in biopharmaceutical companies (See
Biopharmaceutical business models)
biotechnology business models, 199–201
(see also Biopharmaceutical business models)
compared to business plans, 102
Fully Integrated Pharmaceutical Company
(FIPCO) business model, 188–189
functions of, 42–43, 102, 574n1
key elements of, 101–106
key points, 206–207
Medical Device business model, 198–199
No-Research, Development-Only (NRDO)
business model, 191–192
Open Innovation business model, 181–182,
331. See also Open Innovation
Platform Technology business model, 193–196
Royalty Income Pharmaceutical Company
(RIPCO) business model, 190–191
Service business models, 196–198
Virtually Integrated Pharmaceutical Company
(VIPCO) business model, 192–193, 207
Business plan, 42, 102, 571n3b
bo
Arcadian Microarray Technologies Inc., capstone
case study, 472
Architecture, 77
Assets:
operating current assets, 444, 585n1
tangible/intangible, 444–445
types of, 68–69
AstraZeneca, 190
AT&T, 90
Atari, 13, 62
Attrition rates, 178–179
Avery-Dennison, 20–21
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Capabilities, organizational, 68, 69
Capital Asset Pricing Model (CAPM), 406–411,
429
Capitalizing income stream, 399–400
Carlson, Chester F., 10–14, 570n17
Carried interest, 489
Carve-outs, 88, 89
Cary, Lucius, 479, 577n8
Cash flow, 186–188
Cenciarini, Renzo A., 121
Change, types of, 94–97
Chesbrough, Henry W., xiii–xiv, 13, 102, 182,
201
Chipotle’s Mexican Grill, 89
Chitham, Conan, 602
Ciba-Geigy, 85–86, 88–89, 574n5 (See also
Novartis)
Cisco Systems, 78–79
Clearance search, 311
Clinical trials, 177–178
Cluster competitiveness, 62–65
Codevelopment agreements, 130, 135, 190
Cognitive biases, 395–396
Comarketing agreements, 131–132, 135
Committed capital, 488–489
Common equity shares, 442–447. See Common
stock
Common stock. See also Shareholders’ Equity;
Preferred shares
Community Trade Mark (CTM) system, 267–268
Comparable transactions approach, 459–460
Competition, industry, 58
Competitive strategy, defined, 44. See also
Business strategy
Porter’s Cluster theory, 62–65
Porter’s Five Forces framework, 58, 59, 61, 63,
65
Porter’s Generic Value Chain, 59–60
Competition, intensity of, 47
Competition law, 326–328
Competitive advantage, 45, 52–53, 67–68, 72
Competitive Advantage (Porter), 59–60. See also
Porter’s Generic Value Chain
Competitive Advantage of Nations, The (Porter),
62–65. See also Porter’s Cluster theory
Competitive intelligence, 313, defined 340–341,
360
Competitive Strategy (Porter), 58. See also
Porter’s Five Forces framework
Competitor analysis, 47–48
Complementors, 101, 104. See also Value Net
Complements, industry, 61–62. See also
Co-opetition
Compounding, 384–385
Confidential information, 24, 25
data room, 366, 581n14a
enforcing rights in, 262
identification of, 259–260
vs. intellectual property (IP) rights, 260, 261.
See also Trade secrets
Confidentiality agreement. See Nondisclosure
agreements (NDAs)
Consideration, 213–214
Consortia, 111–112
Constant-growth model, 400–401, 404, 414
Contemporary Strategy Analysis (Grant), 40
Contingent payment mechanisms, 322–323
Contingent rights, 155–156
Contract manufacturing organizations (CMOs),
196–197
Contract research organizations, 181
Contracts:
cross-cultural differences in, 215–216
elements of, 211–214, 580n2a
form of, 214–215
nondisclosure agreements (NDAs),
216–218
shareholders’ agreements, 218–219. See also
Agreements
Control premium, 533–534
Conversion rights, 235
Cooperation problem, 76
Co-opetition, 60–61. See also Value Net
Co-opetition (Brandenburger and Nalebuff),
60
Coordination problem, 76
Copacking (coproduction) agreements, 130–131,
135
Copyright conventions, 254, 581n6a
Copyrights, 252–255, 270, 581n4a
defined, 17, 252
duration of, 254
enforcement of, 255
vs. other types of IP protection, 23
in racing industry, 24, 25
U.S. vs. U.K. positions on, 253
Core competence, 48–50, 57–58, 73,
572n10
Corporate Pathfinders: How Visionary Managers
Use Imaginative Strategies to Shape the
Future of Their Companies (Leavitt), 6
Corporate strategy, 45–52
Corporate venturing, 51
Corporations, 221–224
Cost of capital. See weighted average cost of
capital (WACC)
Cost of equity, 406–411, 530–531, 547–548
Creativity, 5–7, 70, 81
Critical capabilities. See Core competence
Critical success factors. See Key success factors
(KSF)
Cross-border joint ventures, 142–143
Cross-licensing, 330–331
Cross-shareholding arrangements, 86
Crowd sourcing, 203
Culture, 77
Curalogic A/S, 192
Customer perspective, 165
bo
Business strategy, 44, 52–53. See also Competitive
strategy
Buyout funds, 476–477
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cross-border issues in, 369–370
and data rooms, 366
defined, 362
financial, 367–378
information sources for, 366–367
and intellectual property rights, 372
on initial public offerings (IPOs), 378
during innovation, 372–373. See also invention
disclosure
during investment process, 373–375
key points, 379
legal process for, 365–367
and letters of intent (LoI), 364–365
of management, 368–369
nonlegal, 367–369
overview, 361, 378–379, 564–565
in partner selection, 144–146, 375–376
preparation for, 362–363
questionnaire, 365
reports, 367
and rights verification, 371–372
specialties within, 369
technology due diligence, 369, 583n1
Dyson, 307
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Earnings multiples, 463–464
EBITDA (earnings before interest taxes,
depreciation and amortization) multiples, 471
Economic value added, 22, 47
Ecosystem, 40
Electronic Data Gathering, Analysis, and Retrieval
System (EDGAR), 347
Ellis, Charles D., 10, 570n16, 570n33
Employee incentives, 301
Endo, Ltd., 329
Energy Biosciences Institute (EBI), 112
Enterprise multiples, 465
Enterprise valuation method, 411–428, 436
application steps, 417–422
case example, 429–439. See PB Electronics case
study
formulas for, 413–415
and market value, 441–443
overview, 412–413
and publicly listed companies, 471
Enterprise value ratios, 465
Entrepreneurs/Entrepreneurship, 9–14, 80–81,
557–560
Equity, cost of, 406–411, 530–531, 547–548
Equity joint ventures, 116–117, 134
Equity market characteristics, 451–455
Equity market risk premium, 409–410, 429
Equity ownership agreements, 116–118
Equity residual cash flow method. See Dividend
discount method of valuations
Ernst, David, 142, 160
European Patent Convention (EPC), 275,
280–281, 284–287
Excess cash, 418
Exclusivity, defined, 319–320
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Databases:
patent, 341–345
technical and business information, 345–348
Data gathering. See Data mining; Patent
mining/mapping; Searches
Data mining, 349–350. See also Patent
mining/mapping; Searches
Data room, 366, 581n14a
Da Vinci, Leonardo, 5, 569n2
Deal screening techniques, 346–348, 582n8
Deal structuring, 186–188
Deconstruction of value chains, 119–123, 133,
192–193
Deferment options, 155, 156
Design patents, 18, 256–257
Designs:
defined, 18, 255
protection of, 18, 255–257, 270
in racing industry, 24, 25
Detkin, Peter, 310
“Diamond of National Competitiveness”. See
Porter’s Cluster theory
Diffusion, 19
Disclosure process, 25–26
Discounted cash flow (DCF) valuations, 383–429,
588n16
adjusted present value (APV) method, 421–422,
428
basic concepts and terminology, 384–388
case study 429–439, 441–443, 471
dividend discount method, 397–411, 423, 428
dividends and forecasting, 394–396
enterprise valuation method, 411–428
intrinsic value, 388–394
method selection, 423–424
overview, 396–397
using multiple valuation methods, 424–426
Discounting, 384–385
Discounting dividends vs. cash flows, 392–393
Disruptive technologies, 95, 574n11
Distinctive capability. See Core competence
Diversification, unrelated, 51
Divestiture, 91
Dividend discount method of valuations,
397–411, 423, 428
constant-growth model, 400–401, 404
Multiple-period dividend growth model,
402–406
zero-growth perpetuity model, 398–400
Dividends, 234, 392–394
Drag-along rights, 237
Draper, Fisher, Jurvetson (DFJ), 480
Drugs. See Biopharmaceuticals; Pharmaceuticals
Due diligence, 361–379
addressing problems found, 370–371
in alliance formations, 375–376
commercial, 368, 375–376
in company acquisitions, 376–377
and confidentiality, 363–364
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Goldman Sachs Mezzanine Partners, 478
Goodwill, defined, 445, 446, 463, 473
Graham, Benjamin, 388, 393
Grant, Robert M., 19, 40, 56, 67–69, 166–169
Grant-backs, 329–330
Greenfield operation, 51
Growth, corporate, 84–87, 98
Growth (expansion) options, 154–155
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Fair market value, 456, 585n7
Family ties, 111
Field of use, defined, 320
Financial intermediaries, 476
Financial markets perspective, 165–166
Financing policies, 449–451
First mover advantages, 22, 571n4
Fisher equation, 404, 420
Fisher, Irving, 404, 420. See also Fisher equation
Five Forces framework, 58, 59, 61, 63, 65
Forecasting, 394–395, 431, 432
Forecast time horizon, 420–421
Forward integration, 50
Fox, Sara B., 9
Franchising, 115–116, 134
Free cash flows, 417–419, 434
Free cash flow to the firm method. See Enterprise
valuation method
Freedom to operate (FTO), 194
Freedom-to-operate searches, 339
Freedom to use (FTU), 194, 273–274
Free float, 453
Frueh, Felix W., 205
Fry, Art, 21
Fubini, David G., 142, 160
Fuji Photo Film, 163
Fully Integrated Pharmaceutical Company
(FIPCO) model, 188–189
Functional strategy, 45, 46, 53
Fundamental analysis, 391–392
Häagen-Daz, 57
Haloid (Xerox), 10–14, 163, 570n33
Hamel, Gary, 48–49, 166
Harvesting, 90–94, 97, 99
Heads of terms. See Memorandum of
understanding (MoU); Letter of Intent (LoI)
Healthcare:
aging of population, 200–201
business models in, 199–205 (see also
Biopharmaceutical business models)
paradigm shift in, 206
personalized medicine, 204–205
recent trends in, 199–205. See also
Biopharmaceuticals; Pharmaceuticals
Herceptin, 205
Hirst, Nicole, 602
Honda Motor Company, Ltd., 49
Hoover, 307
Horizontal integration, 51, 120–122
How to Think like Leonardo da Vinci: Seven
Steps to Genius Every Day (Gelb), 6
Hughes, Caroline, 602
Human resources, 69, 560–561
Hurdle rate, 489–490
Hybritech, 65, 66
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Exit barriers, 58
Exit strategies, 105, 106
in biopharmaceuticals, 491–492
in new ventures, 487, 516
overview, 83
Expansion (growth) options, 154–155
External analysis:
defined, 40
vs. internal, 72–73
tools for, 53–65
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Genentech, 188, 189, 205
General Atlantic, 477
General Motors, 130
General partners (GPs), 488–490
General partnerships (GP), 224
Generic drug companies, 311–313
Genomic Health, Inc., 205
Genomics, 204–205, 579n22
GenPharm International, capstone case study, 494
Genzyme, 130, 189
Genzyme-Geltex Pharmaceuticals Joint Venture,
capstone case study, 421, 427
Gilde Healthcare Partners, 480
Gilde Investment Management (Gilde), 480
Glide Pharma, 525, 588n5, 588n6
Goals, 44
Going-concern value, 457
IBM, 120
Idea farming, 301
Ideas, 4–7
Ignatius, Nadia, 602
Implementing, 7, 42, 563
Incorporation:
intellectual property issues of, 226–227
legal structure for, 219–220
Indaimo, Anthony R., 601–602
Industry complements, 61–62
Information searching. See searches
Information technology (IT) outsourcing. See also
Offshoring
Initial public offering (IPO), 91, 92–93, 494
Innocentive, 203, 580n39
Innovation:
continuous, 13–14
defined, 8
and invention, 8–10
stimulation of, 203. See also Open Innovation
xerography, 10–14
Innovation brokerage companies, 203
Innovation capacity, 202–204, 207
Innovation gap, 185–186
Innovation process, 19–20
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exit of, 239
financial details of, 230–232
key points, 240
key provisions of, 230
management, 238
milestones, 231
preferred shares, 234–236
sample of term sheet, 240–248
term sheet, 229–230, 240–248
transferability of shares, 236–237
warranties, 237–238
Investment in working capital. See Working
capital investment
Investors:
angel investors, 481
protection of, 235–236
venture capitalists, 477–483
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Johnson and Johnson, 168–169, 199
Joint purchasing agreements, 129, 134
Joint ventures, 86–87, 133, 575n7
cross-border, 142–143
nonequity, 114–116
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Kahneman, Daniel, 396
Kaplan, Robert S., 164
Kay, John, 48–49
Keys, Tracey, 54
Key success factors (KSF), 56–57, 68
Know-how, 582n1b
defined, 257, 318, 319
protection of, 257–262, 270
transfer of, 324–325. See also Trade secrets
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Innovex, 181
Inpro, 310
Insolvency, 93–94, 99
Intangible assets, 445
Intel, 310
Intellectual property (IP):
as asset, 445
crowd sourcing and, 203–204
defined, 15
due diligence, 371–373
expenses of, 297–301
identification of, 23–25
and incorporation, 226–227
value of, 16
Intellectual property (IP) rights:
in biopharmaceuticals, 179–181, 184
and computer software, 251, 276
vs. confidential information, 260, 261
and due diligence, 372
copyrights (See Copyrights)
defined, 250
designs, 18, 255–257, 270
key points, 270–271
know-how (See Know-how)
overlap in types of, 23
patents (See Patents)
securing, 301–302
and technological development, 251
trademarks (See Trademarks)
trade secrets (See Trade secrets)
types of, 17–18
Intellectual property law, defined, 16, 18–19
Intelligence gathering. See Data mining; Searches
Intention to be bound, 214
Interest rates, 390–391
Interim revaluation, 322
Internal analysis, 40, 65–79
vs. external, 72–73
PARC (People, Architecture, Routines, and
Culture) conceptual framework, 41, 73,
75–77
resource-based view of strategy, 67–73
Seven-S framework, 73, 74–75
steps for, 67–71
Internal process perspective, 165
Internal rate of return (IRR), 386–388, 587n10
International Committee for Harmonisation, 201
International Institute for Management
Development (IMD), 54, 572n15
International Registration (IR) system, 268
Intrinsic value, 388–394, 428
Invalidation searches, 339–340
Invention:
defined, 7–8
disclosure process, 25–26
and innovation, 8–10
Inventive step, 275–277
Investment agreements, 229–248
convenants, 238–239
defined, 230
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Lawrence Berkeley National Laboratories, 112,
575n3b
Lead identification, 177
Lead optimization, 177
Learning and growth perspective, 166
Leavitt, Harold, 6–7, 569n6
Le Bon, Gustav, 455
Legal structure for alliances, 156–159
Legal structures of businesses, 219–226
Leonard-Barton, Dorothy A., 95
Letter of Intent (LoI), 211–212, 364–365. See also
Memorandum of understanding (MoU)
Leveraged buy-out (LBO), 91, 92, 477
Liabilities, defined, 446
Liabilities, noninterest-bearing current, 444,
585n1
Liability, and corporate structure, 222–223
License-back. See Grant-back
Licensing agreements, 186–188, 522–555.
See also Patent licensing agreements;
Technology transfer agreements; Royalties
Limited Liability Corporation (LLC), 222, 226
Limited Liability Partnerships (LLP), 225, 226
Limited partners (LPs), 488–490
Linowitz, Sol, 11, 12
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enterprise multiples, 465, 471
key points, 472–473
price to earnings, 470
price to sales, 471
selection of, 470–472, 473
valuation using, 441–459. See also Ratios
Liquidation, 91, 93–94, 98
Liquidation options, 155
Liquidation value, 457
Logos. See Trademarks
Lord, Richard, 603
Lütolf-Carroll, Constance, 599
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Nalebuff, Barry, 60, 572n22
Nearshoring, 125
Negotiations, overview of the negotiations
process, 173
Nestle, 57
Net present value, 385–388
Net working capital, 443–444
New market development, 50
New product development, 50
New ventures, 51–52. See also Start-up
companies; Venture capital method of
valuation
Nintendo, 7–8, 13, 62
Nokia, 117
Nondisclosure agreements (NDAs), 183, 211,
216–218
Nonequity joint ventures, 114–116
No-Research, Development-Only (NRDO) model,
191–192
Norton, David P., 165
Notation related book markers, patent for,
27–35
Novartis, 85–86, 88–89
Novelty requirement, in patents, 275–277
NTP Inc., 310–311
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M&A Lessons that Rise above the Ashes: Deals
from Hell (Bruner), 140
MacCormack, Alan, 127, 161–162, 576n24
MacQuitty, Jonathan, 494
Madrid system, 268
Make-or-buy decision, 123–124
Malladi Drugs and Pharmaceuticals, 197
Malnight, Thomas A., 54
Management buy-in (MBI), 477
Management buy-out (MBO), 91–92, 477
March, James, 167, 396, 557–558
Market attractiveness, 47
Market behavior, 453–455
Market capitalization, 452. See also market values
Markets:
development of new, 50
equity markets, 451–455
exit of, 52
private placement markets, 456
product and factor markets, 124
Market values, 441–443
vs. accounting values, 445–447
of equities, 453
Maycock, John D’A., 603
McDonald’s Corp., 89
McKinsey & Company, 160, 572n17, 572n20
McKinsey business system, 58–59, 65
McNeil Consumer Products Company, 168
McPherson, Rene, 80
Medical Device Business model, 198–199
Megafunds, 477
Memorandum of understanding (MoU), 211–212,
328–329, 332–333. See also Term sheet
Mergers and acquisitions (M&As), 85–86,
141–142
Messa, 329
Microsoft, 13
Millenium Pharmaceuticals, Inc., 195
Mind maps, 569n2
Minority interest sale, 87–88
Minority investments, 86, 116–117, 134
Minority shareholders’ rights, 393
The Modern Firm (Roberts), 78
Monopoly rights, 276
Monte Carlo simulations, 551, 589n18
Monzon-Cortarelli, Gabriel, 603
Mulcahy, Anne M., 569ch1n1
Mullally, Margaret M., 603–604
Multiple-period dividend growth model,
402–406, 414–415
Multiples, 459–460
earnings multiples, 463–464
EBITDA, 471
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Ocimum Biosolutions, 197
Offer (to contract), 212–213
Offshoring, 53, 576n21
and biopharmaceutical manufacturing, 197,
201–202
defined, 125–126
vs. local markets, 124–125
trends in ICT offshoring, 126–127
One-product businesses (one-hit wonders),
13–14
Open Innovation, 98, 102, defined on 181–182,
186, 201, 203, 207, 331, 337
Open Innovation: The New Imperative for
Creating and Profiting from Technology
(Chesbrough), 102
Open market value, 585n7
Open source initiative, 111, 575n1
Opportunistic alliances, 111
Opportunity cost, 388–390, 433–435
O’Reilly, Charles III, 79, 95, 573n43
Organic/inorganic growth, 84–85, 85
Organizational design:
challenges of, 75–77
coupling in, 78–79
creativity in, 70, 81
elements of, 77
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PanGenetics B.V., 191–192
Papadopoulos, Stelios, 195
PARC (Palo Alto Research Company), 65
PARC (People, Architecture, Routines, and
Culture) conceptual framework, 41, 73,
75–77
Paris Convention for the Protection of Industrial
Property, 278–279
Parmalat, 393
Partnering candidate selection, 144–149, 207
Partnerships, 224–225
Patentability searches, 339
Patent citation analyses, 348–349
Patent claims, 276, 312–313, 349
Patent Cooperation Treaty (PCT), 279–280,
282–284
Patenting ethos, 301
Patent landscape, 358, 359
Patent Law Treaty (PLT), 282
Patent licensing agreements:
case study, 522–555. See Advanced Dermal
Delivery, Inc. (ADD)
competition and, 524–525
cost of equity, 530–531
discounted cash flow (DCF) analysis, 535, 546
economic benefits, 518–521
financial forecasting and licensing model,
526–535
financial models, 535–542
key points, 555–556
licensee benefits, 519–521
licensing negotiations, 525–526
licensor benefits, 519, 520
negotiating, 553–555
new product opportunity, 523–524
scenarios for, 527, 527–530, 551–553
sensitivity analysis, 546–549
target capital structure, 530–531
trade-off table of key provisions, 554
valuation of, 518–556
Patent mapping, defined, 349, case study 350–357
Patent mining/mapping, 349–358. See also Patent
searches
Patents, 273–296
application process, 282–289
budgeting for, 298–299
and computer software, 251, 276
vs. confidentiality, 261
cost vs. value, 297–301
defined, 18, 319
design patents, 256–257
European Patent Convention (EPC), 280–281
excluded inventions, 277
filings, by country, 291–293
in force, by office, 293
freedom to use (FTU), 273–274
global evolution of filings, 289–294
history of, 274–275
infringement of, 311, 325–326
international patent treaties, 277–282
key points, 296, 313
licensing agreements and, 325–326
notation related book markers, 20–21, 27–35
vs. other types of IP protection, 23
overview, 295–296, 563–564
patent claims analysis, 312–313. See also Patent
claims
pending, by office, 294
pitfalls of not engaging in, 299–301
prosecution of, 294–295
in racing industry, 24
reexamination of, 311
Remmey, Robert H., 20–21, 27–35, 562
securing rights of, 301–302
status of, 312
term extensions, 274
xerography, 10–13. See also Patent licensing
agreements; Patent strategies
Patent searches, 312, 338–345
case study, 350–357
databases, 341–345
key points, 359–360. See also Patent
mining/mapping; Searches
Patent strategies:
British Telecom Plc (BT), 308
defensive, 304–305
development of, 297–302
devising, 302–304
Dyson, 307
examples, 307–308
first-to-file system, 308–309
first-to-invent system, 308–309
and generic drug companies, 311–313
offensive, 304, 305–307
overview, 313
patent trolls, 310–311
Pfizer, 307–308
Patent trolls, 310–311
Patent watch, 311
Patheon, 196
Pathfinding, 6
PB Electronics, case study, 429–439. See also
Valuation, Enterprise valuation method
Penrose, Edith, 67
Pereiro, Luis E., 532, 586n11, 588n12
Performance metrics, 164–166
bo
Organizational design (Continued )
PARC (People, Architecture, Routines, and
Culture) conceptual framework, 41, 73,
75–77
resource-based view of strategy, 41, 67–73
Seven-S framework, 73, 74–75
as strategic advantage, 77–78. See also Internal
analysis
Organizations, enduring success of, 79–80
Orphan drugs, 189
Outsourcing, 53, 110, 119, 123–127. See also
Alliances; Offshoring
Oxford Technology Management, 479
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Proto5, capstone case study, 395, 421, 427, 534,
555
Psion, Ltd., 117
Public offerings, 223. See also Initial public
offering (IPO)
Quintiles Transnational Corporation, 197
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Raisio Group, 167–169
Ratchets, 235–236. See Antidilution provisions.
See also Royalty ratchet
Rates of interest, 390–391
Rationale, strategic, 45
Ratios:
book value ratio, 471
price to earnings ratio (PER), 463–464, 470
price to sales ratio, 471
Real options, 154–156, 173, 530, 563, 565–563
Recapitalizations, 94
Recombinant Capital, 347
Redemption of shares, 234
Relative strength, 67
Relative valuations, 458–467
advantages/disadvantages, 460–461
case example, 467–470
overview, 458–459
ratios and multiples used in, 462–467. See also
Technology value
Remmey, Robert H., 20–21, 562
granted patent of, 27–35. See also Patent claims
Reorganizations, 91, 94. See also Restructurings
Replacement cost, 457
Replication costs, 184, 457
Research and design (R&D):
competitive intelligence, 340–341
outsourcing of, 197
patent citation analyses, 348–349
patent mining/mapping, 349–358
patent searches, 312, 338–345
technical and business information, 345–348
Research in Motion (RIM), 310–311
Resources, 68–69
Restrictive covenants, 239–240
Restructurings, 83, 87–91, 94, 97, 98–99
Return on liquidation, 234
Risk:
equity market risk premium, 409–410, 429
and financing policies, 449–451
risk assessment software, 427
risk-free rate, 409, 531
risk premium, 531–533
risk sharing, 188
technological risk adjustments, 534–535
technological risk assessment, 549–550
unsystematic risks, 531–533
Rivalry, industry, 58
Roberts, John, 78
Roche, 204–205
Rodgers, T.J., 310
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Permitted transfer of shares, 236
Perpetual growth rate, 548–549
Per share figures, 462–463
Personalized medicine, 204–205
PESTLE (political, economic, social, technological,
legal, and environmental) analysis, 54–56, 65
Pfizer, 307–308, 524, 588n4
Pharmaceuticals:
alliances and, 175–207
contract manufacturing in, 196
exit strategies and, 492
generic drug companies, 311–313
and innovation gap, 185–186
licensing agreements and, 186–188
mutualism with biotechnology companies,
185–188
value chains in, 179–188. See also
Biopharmaceuticals
PharmaVentures, 347
Pister, Karl S., xiii–xiv
Pirnes, Antti, 599–600
Platform Technology Business model, 193–196
Podolny, Joel, 44, 45, 76, 121, 122
Polymerase chain reaction (PCR), 194–195
Porter, Michael, 58, 59, 62, 572n20, 572n27
Porter’s Cluster theory, 62–65
Porter’s Five Forces framework, 58, 59, 61, 63,
65
Porter’s Generic Value Chain, 59–60
Post-it Notes, 21. See also Notation related book
markers, patent for
Potential industry earnings (PIE), 47
POZEN, 190
Prahalad, C.K., 48–49, 166
Preclinical evaluations, 177
Preemption rights, 236–237
Preference Shares. See Preferred Shares
Preferred shares, 234–236
Present value of an infinite stream of dividends.
See Dividend discount method of valuations
Price to earnings ratios (PER), 463–464, 470
Principal investors, 476
Prior art, 276
Priority date, 276
Private equity funds, creation and development of,
483–490
Private equity investors, 475–476. See also
Venture capitalists
Private investment in public equity (PIPE), 476
Private placement market, 456
Problem solving, 6–7
Procurement agreements, 129, 134
Production-sharing agreements (PSAs), 129–130,
576n27
Profit, appropriation of, 21–22
Projected balance sheet, 438
Projected cash flow statement, 439
Projected income statement, 437
Proof of concept (POC), 177, 578n7
Proof of principle (POP), 578n7
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Saloner, Garth, 44, 45, 76, 121, 122
Salvage value, 387–388
Sandoz, 85–86, 88–89. See also Novartis
Scenario analysis, 40, 48, 395, 427, 429
Scope, 44–45, 46. See also Strategy
Searches:
information for alliance formation, 346–348
invalidation searches, 339–340
patent searches, case study, 350-357
patents, 338–345, 349–357
state-of-the-art searches, 339
technical and business information, 345–348
Seed capital funds, 479, 482
Sega, 13
Sensitivity analysis, 426–427, 429, 546–549
Service business models, 196–198
Service contracts, 129, 134
7-S Framework, 41, 73, 74–75
Shared values, 75
Shareholders’ agreements, 87, 212, 218–219, 227.
See also Investment agreements
Shareholders’ equity, 446
Sharpe, William F., 397, 407
Shepard, Andrea, 44, 45, 76, 121, 122
Silver, Spencer, 21
Skills, defined, 75
SMEs (small and medium-size enterprises), 182,
579n11
Social networks, 111
Sole trader (sole proprietorship), 220
Sony, 13
Sony Ericsson, 117
Speedel, 193
Spekman, Robert E., 577n21. See also Darden
Strategic Alliances Project
Spin-offs, 88–89
Split-offs, 89–90
Staff, defined, 75
Start-up companies, 181–182, 495, 587n8.
See also Venture capital method of valuation
State-of-the-art searches, 339
Stock market, 451–455
Strategic alliances, 123–132
in biopharmaceutical business model, 175–207
continuation or exit of, 166–170
cross-border, 142–143
designing, 151–153, 173
due diligence for partner selection, 138, 144,
375
in high-technology industries, 127–132
key points, 132–133, 172–173
managing, 137, 160–163, 172–173
vs. mergers and acquisitions (M&As),
141–142
negotiating, 159–160, 173
outsourcing, 123–127. See also Offshoring;
Vertical Integration
overview, 564
partnering candidate selection, 137–139, 142,
144–149, 172, 173, 183, 362, 375
patent licensing agreements, 518–556
performance measurement and assessment,
164–166
phases of, 149–160
planning and implementing, 137–172
preliminary decisions for, 139–144, 172
renewing cycle, 171–172
structuring, 153–159, 173
trade-offs of, 141–143, 157–158
types of, 118–119. See also Alliances
Strategic appraisal, 69, 71. See also case study,
WineOnline.com
Strategic fit, 78
Strategic gap analysis, 67, 69–70
Strategic gaps, filling, 137–138
Strategic importance, 67
Strategic Management (Saloner, Shephard and
Podolny), 44
Strategic management process, 40–41
Strategic rationale, 45
Strategic thinking, 39, 80–81
Strategy:
business, 44, 45–46, 52–53, 81
change of, 43
competitive (See Strategy: business)
core competencies approach to, 48–50, 57–58,
73
corporate, 45–52
defined, 40, 43–45, 74
as direction, 39–40
exit (See Exit strategies)
formulation of, 72–73
functional, 45, 46, 53
and high-tech start-ups, 42–43
importance of, 41–42, 80–81
key points, 81, 98–99
levels of, 45–53
PARC (People, Architecture, Routines, and
Culture) conceptual framework, 41, 73,
75–77
resource-based view of, 41, 67–73
7-S framework, 41, 73, 74–75
scope, 44–45
strategic thinking, 39
Strategy formulation, 68
Strategy statement, 42
Strengths, organizational, 70–71
Structure, defined, 74–75
Style, defined, 75
Subcontracting agreements, 113–114, 133
Sustainable competitive advantage, 45
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Rottman, Joseph W., 126
Routines, 77
Royalties, 187, 190, 321–323. See also Advanced
Dermal Delivery, Inc. (ADD) case study,
522–555
Royalty Income Pharmaceutical Company
(RIPCO) business model, 190–191
Royalty ratchet, 322. See also Ratchets;
Antidilution provisions
Rutter, William J., 92
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Tag along rights, 237
Takeda Pharmaceuticals, 196
Tangible assets, 444
Tanzi, Calisto, 393
Target capital structure, 530–531
Target customer identification, 52
Target identification, 176
Target rates of return, 495–497, 513–514
Target validation, 176–177
Taxation, and corporate structure, 223
Technical assistance agreements, 128–129, 134
Technological risk adjustments, 534–535
Technology, defined, 319
Technology license agreements. See Technology
transfer agreements
Technology transfer agreements, 115, 133, 184,
315–333, 562–563 (See also University
Technology Transfer Offices; Due diligence)
competition law and antitrust provisions,
326–328
cross-licensing, 330–331
deal structuring in, 186
examples, 316–317, 320
financial considerations of, 321–322
grant-backs, 329–330
and internationalization, 317
key points, 331–332
and know-how transfer, 324–325
memorandum of understanding (MoU),
328–329, 332–333
outline of, 317–326
parties to, 318
and patent infringements and licensing,
325–326
royalties and, 321–323
scope of, 315–316
structure of, 316–317
term definitions within, 318–321
termination of, 323–325
Technology Transfer Block Exemption (TTBE),
326–328
Technology values, 466–467, 585n10
Teece, David, 62, 79
Teisberg, Elizabeth Olmsted, 396
Terminal value, 419–420, 434, 512
Term sheet:
example, 240–248
role in investment agreements, 229–230.
See also Memorandum of understanding
(MoU); Letter of Intent (LoI)
Territory, defined, 319
Theory of the Growth of the Firm (Penrose), 67
3i Group, 478
3M, 20–21
Time horizon, 96–97, 98
Tracking stocks, 88, 90
Trademarks, 262–269
Community Trade Mark, 267–268
defined, 17, 262–263
distinctiveness of, 264–265
enforcing, 268
International Registration (IR) system, 268
Madrid system, 268
nonword marks, 263–264
vs. other types of IP protection, 23
in racing industry, 24, 25
registering, 265–268, 270–271
Trade-off table, 553–554
Trade-Related Aspects of Intellectual Property
Rights (TRIPS) agreement, 250
Trade sale, 91, 92
Trade secrets, 18, 257–262
defined, 257–258
vs. other types of IP protection, 23
protection of, 257–262, 270
U.S. vs. U.K. positions on, 258–259. See also
Confidential information; Know-how
Trading multiple, 459
Training agreements, 128–129
Transferability of shares, 236–237
Triangulation in valuation, 425, 426
TRIPS agreement, 250
TSP Enterprises Seeks Venture Financing, case
study, 497–512
Turnkey projects, 127–128, 134
Tushman, Michael, 79, 95, 573n43
Tversky, Amos, 396
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Swanson, Robert A., 188
Swensen, David F., 489, 586n5
Swiss Re, 8–9
Switching costs, 195, 579n24
SWOT (strengths, weaknesses, opportunities, and
threats) analysis, 69–70
Symbian, Ltd., 117
SynCo Bio Partners BV, 92, 197
Systems, defined, 75
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Unfair competition, 18, 269, 326–328
Uniform Trade Secret Act, 257–258
Unilever, 57
University spin-off, 373, 583n3a
University technology transfer offices, 184,
372–373
Unrelated diversification, 51
U.S. Patent and Trademark Office, 287–289
Valuation, 426
Advanced Dermal Delivery, Inc. (ADD),
522–555
cash flow (See Discounted cash flow (DCF)
valuations)
case studies with spreadsheets, 429–439,
497–512, 522–555
comparable transactions approach, 459–460
enterprise valuation method, 417–422,
429–439
key points, 428–429
overview, 565
patent licensing agreements, 518–556. See also
Advanced Dermal Delivery, Inc.
PB Electronics, 429–439
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Venture capital method of valuation, 475–516,
587n9
application questions, 512–514
case study, 497–512
expected value vs. best case scenario, 514
key points, 516
and multiple rounds of financing, 502–512
overview, 515
steps for, 498–502
and young growth companies, 494–498
Venture development, case study, 497–512
Ventures, high-technology:
development process, 481–483, 484–485
employees, 561
IP rights and, 562–564
risk management, 561
vision in, 561–562
Vertical integration, 120–132
Video game industry, 13
Virtually Integrated Pharmaceutical Company
(VIPCO) model, 192–193, 207
Vision, in innovation, 22–23
Von Arx, Mirjam, 9, 570n15
Voting rights, 235
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Weaknesses, organizational, 70–71
Weighted average cost of capital (WACC),
415–416, 422
What Color Is Your Parachute? (Bolles), 6
Wheel of progress, 3, 4
Wii interface, 7–8
Williams, John Burr, 388–389, 397, 583n2b
Wilson, Joe, 11–12, 566, 571n34
WineOnline.com, case study, 71
Withers LLP, 601–603
Working capital investment, 418–419
R 274
Workmate,
W.P. Thompson & Co., 601
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Valuation (Continued )
practicing, 427–428
relative valuations, 458–467
and determining royalty rates, 522–555.
See also Advanced Dermal Delivery, Inc.
(ADD), case study
start-ups, 470–471
using market multiples, 441–473. See also
Technology Value
venture capital method, 475–516
Value, appropriation of, 22
Value added, economic, 22
Value chains, 40, 50, 103
in biopharmaceuticals, 179–188
deconstruction of, 119–123, 133,
192–193
Value creation, 386, 451. See also Economic value
added
Value Line Investment Survey, 410
Value net, 60–61. See also Co-opetition
Value network, 104
Value proposition, 8
Varian Medical Systems, 198
Venture capital:
acceptance rate of, 486–487
deal searching and screening techniques,
346–348, 486, 582n8
defined, 475–476
Venture capital funds, creation and development
of, 483–490
Venture capitalists, 477–478
and biopharmaceutical companies,
491–492
in Europe, 478–481
future challenges, 481
global, 480
key points, 516
overview, 515
perspective of, 583n5
success strategies of, 490–492
target rates of return required by, 495–497,
513–514. See also Venture capital; Ventures,
development process
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Xerography, 10–13
Xerox Corporation (Haloid), 10–14, 163,
569ch1n1, 571n33
Zero-growth perpetuity model, 398–400, 414