WSGR Fall 2011 Life Science Report
Wilson Sonsini Goodrich & Rosati (WSGR) recently released their semi-annual report on the Life Sciences (here). Although a bit of an advert, the report is a worthwhile read with interesting insight and analysis on the industry. Three articles in the report are particularly interesting:
1) Analysis of the recently legislated US Patent Reform, the “America Invents Act”. As highlighted by WSGR and others, an important outcome of this act is that the US patent system will change from a first-to-invent standard to a first-to-file standard. The implications of this are significant and will impact how and when companies patent their inventions. Taken from the WSGR report:
“The change from a first-to-invent standard to a first-to-file standard represents a major shift in the patent system. Under the current system, an inventor who files a patent application after another party may challenge the previously filed patent application using what is known as an interference proceeding. During the interference, the later inventor still may prove that he or she is the actual inventor by demonstrating an invention date earlier than the filing date of the first patent application. Changing to a first-to-file system eliminates this option and harmonizes the U.S. system with most other patent jurisdictions in the world. While the proposed new system provides a more clear-cut test for inventorship, critics say that it disadvantages independent inventors and small businesses that may lack the resources to file patent applications as early as organizations with better funding.”
As highlighted in the report, there is significant debate around this change and its impact on small firms and individual inventors. It will be very interesting to see the actual impact this will have to the US system over the coming years.
2) The report gives a comparison of financing deals involving WSGR during the first half of 2011 to those in the second half of 2010. Although only a sample size of all deals and biased to WSGR clients, it is a pretty decent representation and the results are interesting. Here are some highlights:
- Total venture financing increased in the 1H 2011 as compared to 2H 2010, although fewer deals were completed. For WSGR clients: for 2H 2010 83 closings raised $431.3 million; for 1H 2011 77 closings gave $653.5 million
- Series A financing took a larger share of the financing pie: financings increased from 22.2% in 2010 to 31.4% in 1H 2011. This is obviously good news for early stage companies.
- The number of “up rounds” (financings where the pre-money valuations are greater than their post-money valuations from the prior round) has increased from 46.9% to 60.9%.
- Median pre-money valuations for Series A equity financings increased from $4.5 million in 2010 to $6.06 in 1H 2011. Also, good for early stage companies.
If this data is interesting to you, also see the recent analysis by Bruce Booth on the state of early stage financing [here].
3) Lastly, the report has a great article on issues to consider when negotiating corporate strategic investments. This is a must read (also recommended by Jay Caplan) and covers the following 10 issues (read the report for the actual advice):
- Rights of First Refusal, Negotiation, Exclusivity, and/or Notice
- Distribution Rights
- Licensing Rights
- Protection of Intellectual Property, Confidential Information, and Strategy
- Financial Statements, Information, and Inspection Rights
- Voting Blocks over Fundamental Transactions
- Board Membership or Observer Rights
- Pre-negotiated Acquisitions
- Obligations to Deliver without Funding