Government interest in the regenerative medicine industry is promising; but businesses need to know how to make it across the valley of death without big pharma's help
On a normal morning in October last year, newspaper readers sat down to their breakfast to see prominent headlines pointing towards the technology of tomorrow. No doubt the advances can be easily overstated, but it is difficult to ignore Darek Fidyka, a previously paralysed man, walking again as a result of having cells from his nose injected into his spine.
The prospect of these sorts of prestigious leaps in scientific achievement, and the economic benefits they could bring to the UK, are tantalising. And the evidence suggests that the Government agrees. The opportunity to give platform regenerative medicine (“RM”) technology the British stamp, and save the NHS money at the same time, is clearly something that the Government is keen to do.
With high upfront costs and potentially small patient groups and markets, the Government needs to make the process of getting RM technology to market as easy as possible. Otherwise, the considerable disincentives will win. The combined publications of RM industry stakeholders paint a picture of a fledgling industry dominated by SMEs, academic institutes and not-for profit organisations that have had to accept that the lack of interest from big business means they need a helping hand. The general consensus is that there is huge potential in the industry and we agree.
The patent landscape looks a bit flat
In 2010, the Government Office for Science published the report “Technology and Innovation Futures: UK Growth Opportunities for the 2020s” in which it identified RM as a potential key area of growth and predicted that the global market for cell-based therapeutics could potentially grow by $8.5 billion between 2010-2020. The report warned that the UK was failing to compete at the translation and commercialisation stages (although it pointed towards early signs that large companies were beginning to show interest in the technology).
BIS asked the UK Intellectual Property Office (IPO) to update its review of patenting activity in the RM sector. The IPO then published its report “Regenerative Medicine; The Patent Landscape in 2011” which looked at patentee activity through the European Patent Office between 1991-2011. BIS’ Office for Life Sciences then published its own report called “Taking Stock of Regenerative Medicine in the United Kingdom”, which incorporated the finding of the IPO.
Looking at the IPO report from June 2011, there is a fairly bleak picture of decreasing grants and plateaued applications towards the end of the study period. However, the IPO considered that the level of published applications, rather than grants, more accurately reflected the level of invention, the implication being that it was not as bad as it looked. The overall conclusion was that there was room to grow.
In summary, here are a few of the IPO’s findings:
- Globally, in 2011 there were 20,000 RM patents representing 7,500 patent families. Based on the number of patent families, the US took the lead and the UK achieved 6th position behind Japan, Germany, China and Canada. Other key players included Israel, Australia, France and Korea. The figures and rankings need to be considered in the context of patenting propensity differences between countries. Taking a patent propensity correction into account, Israel showed itself as the real RM star along with Australia and Canada who were performing very well comparatively. The IPO's general conclusion was that the UK was underperforming and should have been producing more inventions (by reference to the UK industry as a whole). In support of this, the BIS report in 2011 stated that the 33 RM patents filed per year was 25% less than expected.
- On average, the grant rate of RM patents was 30%.
- The IPO report showed that 67% of RM inventions belong to small portfolios in the UK (portfolios of five or fewer patent families). This was an indication that the industry lacked really big players.
- The IPO speculated that there were potential problems with patentability, patent quality or patenting strategies, which roughly supports the picture of an academic and SME dominated sector. In the UK, half of the top ten applicants were universities and 32% of RM inventions derive from the UK academic sector. The landscape, in terms of applicants and inventors, reflects the science-intensive, research-based nature of the field. This was demonstrated by the prominence of academic institutions and the fact that only 49% of applicants were corporates, which is low compared to other industries.
- In terms of specialist classifications of RM fields, the UK focus was shown (by number of applications/grants in relation to the EPO’s classification system) to centre on embryonic and nervous cell work, as well as materials for grafts/prostheses and coatings containing added animal cells.
More recently, the House of Lords Select Committee on Science and Technology published its own report on RM on 1 July 2013. As regards patents, the Lords’ report discussed whether the Brüstle case (which concerned the patentability of technologies utilising stem cells, and was heard in the Courts of Justice of the EU) had cast a shadow over the patentability of technology arising from the RM industry. The conclusion was that this issue was overstated, and that there is significant scope for patenting in the RM field. We will be discussing Brüstle and its implications in our next issue.
The Lords’ also raised the useful observation that academics (who are a vital group in RM) need help with patenting so that they are able to make shrewd commercial decisions and, as a result, maximise what they get out of their patents with the funds available to them.
Also, the Lords reported on industry concerns that the Patent Box regime (which allows businesses a reduction in corporation tax for patent derived profit) does not help early-stage businesses and complicates licence drafting (because of the exclusivity, active ownership and other criteria that applicants are required to meet). In our experience, there is often a difficult conversation to be had with licensees when licensing new technologies outside the UK (particularly in relation to exclusive licence agreements, in which it is common to argue over reservations of rights and control of patent prosecution). While it is clearly very important to protect the UK tax position of UK RM businesses, you will also see below that know-how may be more important than patents, in which case the Patent Box regime may not be a commercial driver anyway.
The flatness of the patent landscape, we think, is probably not an indication of a lack of ingenuity in the sector, but rather a symptom of patent laws being debated, policy and regulatory uncertainty in the sector, and the fact that know-how is just as important a commercialisable asset as patents are. It would be interesting to know whether the patent landscape has changed for the better since the IPO’s last report as a result of the recent focus on the RM industry.
Know-how can be one of your most important assets
The Lords’ report identified patents as key assets for attracting investment and collaboration opportunities. However, the Lords’ thought that know-how was also very important, and may even be more important than patents, in securing the viability of RM businesses and creating competitive barriers that protect investment in those businesses. As such, for RM businesses, effective management and protection of confidential information is crucial.
Know-how will be more relevant to certain types of technology, such as manufacturing processes. However, all RM businesses seeking investment should consider how their contractual matrix, procedures and technical measures, such as document management systems, can demonstrate to potential investors or funders that key information has been identified by the business and is protected appropriately.
Many of the reports referred to above agree that focused effort is required to help scale up the manufacturing and delivery capabilities of the UK. RM businesses working in this field could be dependent largely on valuable commercial know-how rather than patented or patentable inventions.
The predicted need for high-throughput, GMP-compliant services has led to wide calls for industry stakeholders to help devise scalable technology and practices that offer economies of scale to the industry. In addition, there is a suggestion that RM businesses should be encouraged to outsource their manufacturing requirements to CMOs with relevant experience and facilities. In this sense, it is a great opportunity for CMOs to capitalise and build on their know-how, but also a commercial risk for RM businesses which might inadvertently give away valuable know-how to their CMOs or other contractors or partners.
Know-how is a special type of technical confidential information. It should be given the respect it deserves by applying legal protection (through contracts restricting its use and asserting ownership rights) and practical protection (through internal and contractor processes designed to keep it secure).
That’s just the start!
There are a number of further issues that are of specific concern to industry stakeholders. We will be watching these issues carefully as they unfold, and Bio Brief will bring you the latest updates.