It wouldn’t be a stretch to think of the past year as the golden age of initial public offerings (IPOs) for Israeli startups and tech companies. The biggest deals over the past year include Kaltura, monday.com, WalkMe, Global-e, Playtika, SimilarWeb, SentinelOne, Taboola, ironSource and Payoneer. Together they have raised over $ 2 billion and are traded with combined market caps of over $ 50 billion.
While these tech IPOs reverberated loudly with huge media coverage, biotechnology has not been part of the trend. For biotech companies, an IPO is typically less of an exit than a fundraising event meant to fund expensive research, development, and clinical trials.
The average reader probably cannot name the recently listed Israeli biotech companies. Ayala Pharma, PolyPid Ltd. and Nano-X Imaging Ltd. These are just a few of the biotech companies that made Nasdaq IPOs in 2020. Despite the lack of publicity, biotech offerings are on the rise, both in terms of number of offerings and overall capital raised. .
65 biotechnology companies were listed in the United States from January to August 2021. Each company raised more than $ 50 million. By comparison, in 2020 there were 71 biotech offerings, up from 39 in 2019 and 44 in 2018. In total, biotech companies raised $ 15 billion in 2020, up from just $ 4.7 billion in 2019 and $ 5.4 billion in 2018.
A review of recent Israeli biotech companies shows us that most companies held patent portfolios with dozens of patent families – an indication that investors and businesses recognize the importance of protecting their intellectual property in general and their patents. specifically. In fact, empirical research from the University of Bordeaux conducted in the United States and Europe ten years ago has shown that every patent filed by a company before its IPO increases the market value by one percent.
Patents serve to protect a company’s technological advantages, distinguish it from its competitors, and provide the company with significant marketing and business opportunities. Patents protect new technologies or new products and prevent competitors from entering the market. Thus increase profits and market share. Patents, a company asset, allow companies to enjoy exclusivity for up to 20 years from the filing of the first application – and prevent competitors from competing with them, or allow the company to earn royalties in exchange for the patent license.
Research shows that the sale of large patent portfolios has a positive influence on the value of the company. In addition, filing a patent infringement complaint often results in an increase in the share price. It is also important to map and analyze competing patents to anticipate potential technological developments and the advent of new competitors.
Twitter’s IPO is a well-known negative example of intellectual property failure. The offer was seen as a failure, among other things, because Twitter only had nine registered patents. As a result, Twitter was exposed to legal action and forced to acquire as many as 900 patents from IBM for $ 36 million.
The obvious advantages of intellectual property justify the allocation of significant resources to build a patent portfolio before an IPO. Building a useful patent portfolio requires the company to define quantitative and qualitative objectives, in the short, medium and long term.
To protect the early developments of the business, before market launch, it is important to have a patent plan from the earliest stages of business creation. It is important to note that a patent application may be filed after obtaining preliminary development results for a product or technology. Unfortunately, in too many cases, companies do not understand the need to patent their innovations until the product is on the market, disclosed in an article, or presented at a conference. This may limit the company’s ability to patent its innovations only to future product improvements.
It is also important to take into account the time between filing a patent and registration. The United States Patent and Trademark Office, the European Patent Office (EPO) and the Israel Patent Office (ILPO) allow expedited examination. Expedited examination can be important when companies need to show the market – and in many cases investors – that their patent portfolio includes registered patents deemed innovative by patent offices. Conversely, there are also cases where it is important to carefully manage the patent registration process. This allows a company to ensure that its patent applications are published and then registered at the right time from the company’s point of view.
Finally, it is important to select the right countries in which to file patent applications. A patent is a territorial right that prevents the use of the invention in the country where the patent is registered. Patent applications must be filed in the main markets in which the company operates or plans to operate, and sometimes the countries in which the main competitors of the company are active. A company should independently assess filing countries for each patent application, depending on the budget and overall strategy of the company. Sometimes it is advantageous for a company to file patent applications in a number of countries (for example during the early stages of technology development) but sometimes it happens that a patent application only needs to be filed in one. single main country (eg United States), or in a limited number of countries.
In summary, the path to Wall Street represents an important stepping stone for Israeli businesses that are expanding globally. Accurate patent planning can increase the value of companies’ shares after the public offering.
Dr. Tamar van der Boom is Senior Patent Advisor at Pearl Cohen Law Firm, specializing in chemicals and pharmaceuticals. Av. And Patent Attorney Yoav Alkalay is a senior partner at Pearl Cohen specializing in intellectual property strategy planning.