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Why Patents Matterby

Trini Vargas, Ph.D., of University of RochesterMedical Center Technology Transfer Office,

and

David G. Perryman, Tina W. McKeon, Ph.D.,David E. Huizenga, Ph.D., and Gibson J.

Lanier, Ph.D.

Needle & Rosenberg, P.C.

dhuizenga@needlerosenberg.com

404-688-0770

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June 18, 2003 Needle & Rosenberg, P.C.

For informational purposes only and not intended aslegal advice

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Value of Intellectual

Property

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Explosion of IP

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1 8 0 19 00 19 80 199 0

Biotech Revolution

Industrial Revolution

Information Revolution

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Corporate Value 19 78

1978

Ta ible80%

Int a ng ible2 0%

Rembrandts in the Attic: Unlocking the Hidden Value of Patents by Kevin G. Rivette, David Kline, December 1999

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Corporate Value 199 7

1997

I a e73

a e

2 7

Rembrandts in the Attic: Unlocking the Hidden Value of Patents by Kevin G. Rivette, David Kline, December 1999

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A n Example of Value of a Patent

August 9, 2000 U.S. Court of Appeals invalidatedEli Lillys patent on Prozac

Upon news Shareholders dumped $36 billion in Lilly stock,

roughly a third of the pharmaceutical giants marketcapitalization.

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Why is This?Specifically in Biotechnology and

Pharmacology

In general Provides the reward for all of the risk (See Monopoly Pricing)

In Biotech there is a LOT of risk . . . and a lot of cost . . . meaning . . .

There is huge value placed on patent position

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What drives Risk vs. Reward inBiotechnology

300 million in actual outlays over 10 years to bring a FDAapproved product to market (Biospace Online, 2002)

Today it costs approximately $ 802 million to bring a newdrug to market adjusting for cost of failures (DiMassi et al,2001)

Estimated cost 1.6 Billion by 2005 adjusting for cost of failures (Lehman Brothers 2001)

Biotechnology is driving this cost drugs and products aregetting better, more precise, but genomics and precisionmake discovery much more expensive

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Drug Discovery Risk

Time

12 Yrs Approval

Clinical

Phase III

Phase II

Phase IPre-clinical

ValidationIdentification

3-4 yrs

5-7 yrs

1

520

5000 Compounds

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Publicly Funded Licensing VenturesCreate Value

University Technology Transfer In 1999 university licenses created $40.9 billion in economic

activity and supported 270,900 jobs* 5,545 patents were issued to universities in Fiscal Year 1999*

6,812 patent applications filed by Universities in 2001* 4,058 new licenses between Universities and industry created in2001*

494 start-ups based on a University license created in 2001 *

In the US this activity drives the Biotechnology Industry*Statistics from the Association of University Technology Managers

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Rochester Success Story

[A] immunogenic conjugate comprising the reduct[i]veamination product of an immunogenic capsular polymer fragment having a chain length of from about 10 to about30 monomeric units and a reducing end, which fragment isderived from the capsular polymer of a Streptococcus

pneumoniae or Haemophilus influenzae bacterium, and a bacterial toxin or toxoid.

Claim covering Dr. Porter Andersons Hib Vaccine,United States Patent No. 4,673,574

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Bench to Market

Originally could not be licensed, A start-up,Praxis, was created, to continue to move thetechnology from the bench to the market

What has bringing the product to market done Before the vaccine 20,000 children a year caught

bacterial meningitis -- After the vaccine 200 children a

year catch bacterial meningitis Rochester has received $96 million in royalties to date

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Patent Portfolio

First patent issued June 16, 1987 First application filed Aug. 31, 1981 Eventually seven patents covering technology issued First FDA approval in late 1990 Patents now licensed to Wyeth Portfolio now covers vaccines for Streptococcus

pneumoniae (Prevnar) and Haemophilus influenzae bacterium (HibTiter)

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Take Home Lessons From HibVaccines

Almost 10 years from the filing of the applicationto approval of FDA patents very important toadding value to this long process

Initial transfer failed, a perseverance was requiredto bring the product to market

Took multiple commercialization routes, start-upto large corporation

Unlikely that the technology, without patent protection, would have ever protected children