On March 31, 2011, 150-200 prospective buyers will gather in a Beaux Arts ballroom in New York City for ICAP Ocean Tomo’s Spring 2011 Live Auction. After having attended a welcome dinner the previous night featuring keynote speaker Malcolm Gladwell, the attendees will get down to the business of buying intellectual property amid the Corinthian columns and marble mosaic floors of Capitale. Among the items offered for sale will be exclusive licenses for a number of proprietary inhalation formulations and devices.
The ballroom at Capitale where the auction will take place
Six of the IP portfolios offered feature technology owned by Aradigm, including intellectual property related to formulations, devices, and packaging. Three other inhalation portfolios are up for auction: a portable nebulizer from Tidal Air, a dry powder inhaler from Britannia Pharmaceuticals, and a collapsible MDI spacer from inventor John Vito.
According to Cameron Gray, Senior Vice President in ICAP Ocean Tomo’s Silicon Valley office, Ocean Tomo began conducting live auctions of intellectual property about five years ago, mostly selling technology in the areas of consumer electronics, data storage, and networking. After UK inter-dealer broker ICAP acquired the company in June 2009, it expanded its focus to life sciences and added a private IP brokerage business.
About a year ago, says Gray, they entered into the inhalation technology market and are beginning “to understand a little bit more about why people want to invest in inhalation delivery, what the obstacles are, etc.,” At the same time, he explains, they have been developing a network of potential buyers “so that we develop an appropriate audience of people that are specifically looking for deals in inhalation.”
“We have been intrigued by the number of people in the space,” Gray notes; “From our perspective, pulmonary delivery is a promising area. We think it’s an attractive space that is highly innovative, so we hope to continue to do more in this area.”
Capitale
Offering IP in areas for which they see “clusters of technology,” points out Gray, “makes sense because now you start getting to a critical mass of deals, so it’s easier for someone to shop for deals with us than to have to go and hire a bunch of finders to try to identify targets and to negotiate each one of the deals.” They have also sold some inhalation-related technology through their private brokerage and are on the lookout for more, he says.
According to Gray, this type of auction attracts three types of buyers. The first type consists of large companies looking to expand their existing respiratory drug pipelines. The second type of buyer involves institutional investors that see opportunities in the inhalation area. And the third segment comprises what he terms “a pretty healthy amount” of public sector money, sometimes directly from governments, sometimes in the form of public/private partnerships.
In these cases, Gray explains, often “a government has felt as if it is lagging” in the industry and would like “to fast track that as a national development priority.” Currently, the most active area for this type of buyer is the Asian Pacific. with some European countries involved, but he anticipates growing participation from Latin America and the Middle East.
Aradigm President and CEO Igor Gonda first met representatives from ICAP Ocean Tomo at one of the 2010 BIO conferences and found the concept of the live auction interesting, At that point, the auction company had already sold some medical devices this way, and the Aradigm team was impressed with the business model.
For Gonda, participating in the auction in addition to pursuing one-on-one discussions allows Aradigm to explore ways to “reach wider audiences to monetize the non-strategic assets, and particularly so when it comes to non-exclusive licensing.” He cites an IP portfolio related to “flow focus methods of formation of small structured and unstructured particles for inhalation which has a wide variety of applications” as an example.
Although the ICAP Ocean Tomo web site lists all of the Aradigm IP portfolios as available for exclusive license, Gonda says that, “the nature of the deal coming out of the auction is finalized once someone wins the bid, i.e., the final licensing agreement or asset sale is not predetermined either in nature, or in value. For the right price, we could modify a non-exclusive license to an exclusive one, or just retain the rights to the technology for specific applications.”
He suggests that their portfolios related to delivery, to nozzle manufacture, and to packaging will likely result in non-exclusive licenses. The formulation technology related to pulmonary delivery of recombinant human alpha interferon, testosterone, and polynucleotide drugs, however, “are likely to end up as exclusive licenses or outright sale.”
Limited information is availlable on the available IP listing for most of the inhalation-related portfolios available at the spring auction. Gray explains that companies wanting to know more about the property available for sale must sign confidentiality agreements in order to access complete descriptions of the lots.
Companies determined to acquire a specific technology, Gray says, can make a pre-sale purchase if they so desire, taking the IP off the market prior to the live auction. Portfolios that fail to sell during the live event may also be sold afterwards. He estimates that approximately half of the portfolios available will sell during the live auction, with deals for another 15-25% of the properties taking place afterward.
Buyers have a relatively short amount of time to examine the available IP, as the company does not typically begin to post the list of portfolios more than 45-60 days prior to each of its auctions. The next event will take place on November 17 in San Francisco, so the list of property up for auction will be posted sometime after Labor Day.
