Monetizing R&D intangibles

In my job, I work quite a lot together with medical doctors and professors carrying out research projects where some form of commercialization potential has been identified. Often it is my role to come in as a business developer and by an initial intellectual asset due diligence process distinguish which of the R&D building blocks that are truly value creating and how these potential values may be extracted. As a part of this, I get to see quite a number of grant applications and discuss how these can be re-designed for effective communication of a project's value with a basis in their intellectual assets.

Tacit valuation model for early stage research

I think that it is interesting to think that a grant reviewer will (although probably to a large extent tacitly and indirectly) value the underlying potential of research activities and new technologies, and eventually determine whether the sought amount is a feasible investment. Certainly there are parallels with such an implicit valuation model to patent valuation where a challenge is to identify suitable metrics for estimation of the value of a technology.

So what are some of the soft metrics that could determine the value of a technology for a grant reviewer?

Value of scientific excellence

Most grant reviewers probably would like to say that their sharp eye spotted the Nobel Prize candidate long before its nomination and that it was that particular early-stage grant that enabled the discovery. However, in reality scientific brilliance may be difficult to determine. Especially so, if the grant reviewer's expertise happens to be in another area than what the application is describing. One way to "outsource" this determination is to rely on citations in scientific journals. A citation count corresponds to the number of times other research papers reference the results of a publication-of-interest. But it is not self-evident how to value citations solely based on the number. How would you distinguish between?

• A higher number of citations due to a rather basic discovery
• A low number of citations in highly respected journals
• A high number of citations but none within the same research area
• A low number of citations

Value of personal brands

Another aspect that is often quoted as high perceived value in the eyes of grant reviewers is to have successful competences associated to a project. Metrics to measure the significance of human capital include;

• Curriculum Vitae (e.g. previous positions and experience)
• Academic titles
• Citations (e.g. H-index, citations per year, total citations)
• Publications (e.g. how many, in which journals, co-authors)
• Previously raised financing through grants and commercialization

Value of association to other trademarks

Association of research projects with other entities and initiatives can be interpreted as different identities and perceived values for projects. Here are some examples;

• Market closeness: Letter of intent from a collaborating company
• National/regional importance: Proof of participation in research platform (e.g. IMI, FP7)
• Societal value: Grant approval letter from major foundation (e.g. B&M Gates Foundation)

Value of legal clarity and technology transferability

For grant reviewers that are interested in seeing research results being utilized and commercialized, value metrics may include;

• Patents (e.g. number of patents, coverage, assignee/inventorship)
• Agreements (e.g. consortia agreements - ensuring that rights to results are governed)
• Freedom-to-operate evaluations

However, there are also newer metrics in the knowledge economy such as quotes on how many registered unique users one's database has. Other interesting metrics could for example be generated in open innovation projects such as Folding@Home (where a complex biological computation is distributed on 250 thousand CPUs of personal computers) where the project could claim to have access to 25 000 CPUs (assuming 10% usage of each CPU).

Will we see the numbers of "Digg it"-clicks, twitter hits and LinkedIn connections in future grant applications as metrics for societal interest and networks?

Tobias Thornblad

(Contact via Twitter)

Biotech scarcity revisited

I would like to continue where I left off the last time in my exploration of intangible offerings by answering some questions that I have received about the blog post. There were some questions in regards to how the conception of scarcity can be more important than the uniqueness, brand value or connection to other brands. The point that I argue is that the perceived uniqueness or attached claims (e.g. brands, other objects, values) are the types of necessary parameters to create the illusion of scarcity. It is only by intellectually coupling the offering to something scarce that the receiver/customer/end-user will experience the object as being of any value. Few known examples of this comes to mind in regards to biotech, but some more widely known examples are for instance CD records (music + physical discs), Nike shoes (Michael Jordan’s “brand” + physical footwear), Nespresso coffee (coffee gourmet concept + physical plugs of ground coffee beans), all of which most of us (including me) gladly pay premium prices for.

This is to some extent still an untapped market for the biotech industry since the regulation for marketing is different than for everyday goods, but it is not impossible to imagine that future biotech drugs could be associated to celebrities having a certain (probably mild and non-visual) disease. An example, that we are bound to hear more about in the future in relation to the retail DNA test kit, from 23andMe, that I wrote about in a previous posting is the company’s connection to Google since one of its founders, Anne Wojcicki, is married to Sergey Brin.

The sort of loyalty and trust that we see in brand values, such as Google’s connection to 23andMe above, constitutes a promise of future value that we as customers experience as real, and therefore would be willing to invest in. Thinking about this makes it quite intuitive that most of experienced values in the biotech industry is built upon this very notion of trust, e.g. the next big blockbuster drug will soon reach the market, candidate drug X will soon enter Phase III trials, etc.. These are the types of promises that makes us “see the value” in these intellectual objects as it would be close to impossible to distinguish these claimed visions from the actual objects (which in this case would be a drug candidate molecule). Even the word “drug candidate” has a normative impact on how we perceive the molecule in question, in the same way as we experience a “patentable invention” more valuable than a simple invention. The article The Seven Deadly Sins of Business Development implicitly uses this way of creating value by stating in the first “sin” that the negotiators should focus on the utilities by discussing the market value and future potential of the drug rather than going into the functional facts about the Science behind. The bundling of IPRs and claims (e.g. of reputation, goodwill) is further emphasized in one of the latest Bioentrepreneur articles Five IP Tips to Spread Your Business Wings.

So do I think that this is wrong? Absolutely not, but I feel that it is important to understand and fully utilize these underlying structures to create tomorrow’s biotech innovations in an ethical way and that is why I will continue this deconstruction in a later blog post.

Tobias Thornblad