Patent‐backed securities in pharmaceuticals: what determines success or failure?

Abstract

Recently, there has been growing interest in new financial tools that leverage on intellectual property assets, such as patent‐backed securitizations (PBSs). In this paper we study the potential determinants leading to the success or failure of securitization deals having patents as underlying assets. We develop a conceptual framework that we test on two well‐known US patent securitization deals in the pharmaceutical industry, by using a fuzzy set approach. Results highlight that factors related to the market size, level of competition and expected market life of the assets underlying a PBS can reasonably increase the probability that a deal will succeed. Moreover, a higher quality of the underlying invention and longer patent residual life are likely to reduce the risk of technical obsolescence and sales losses. Finally, the strength of the credit enhancement mechanisms, the flexibility of the deal architecture and the adoption of a diversification strategy are other key factors determining the success of the securitization.

The Drivers of Patent Transactions: Corporate Views on the Market for Patents

“…Especially in certain industrial sectors (such as pharmaceuticals), a key time point in a product's sales life cycle is the year of patent expiration. Products with substantial market shares are expected to face strong generic competition and sales losses after a patent expires (Odasso and Ughetto, 2011). For this reason, in certain cases (e.g., drugs and active principles protected by patents), firms attempt to completely exploit the value of the patented invention by renewing maintenance fees until the last allowed year.…”

Patenting and the early‐stage high‐technology investor: evidence from the field

“…We began this research with the aim of trying to understand whether or not the existence of patenting Patenting and the early-stage high-tech investor drives the venture capital investor to support a hightech company (e.g. Odasso and Ughetto, 2011), and if so how that investment value is derived (cf. Sherry and Teece, 2004).…”

“…A number of previous studies have attempted to verify whether the number of patents is a measure that attracts financing (e.g. Odasso and Ughetto, ). Most of these studies, with the exception of some carried out among European firms, are based on North American data (e.g.…”

“…Ernst, 2003). Odasso and Ughetto (2011) also discuss the use of patent-based securitisations as a financial tool that might be leveraged on IP assets (cf. Holgersson, 2013).…”

The drivers of patent transactions: corporate views on the market for patents

“…Especially in certain industrial sectors (such as pharmaceuticals), a key time point in a product's sales life cycle is the year of patent expiration. Products with substantial market shares are expected to face strong generic competition and sales losses after a patent expires (Odasso and Ughetto, ). For this reason, in certain cases (e.g., drugs and active principles protected by patents), firms attempt to completely exploit the value of the patented invention by renewing maintenance fees until the last allowed year.…”