IP Architects - Latham & Watkins

THE NEW DEAL
Ultimately, Genentech’s scientists concluded
that Agensys occupied significant IP real estate
in a technology area they wanted to enter. This
new technology dealt with cancer targets—
sites on the surface of cancer cells—and monoclonal
antibodies that attack those sites, zeroing in on them like
a guided missile. Genentech’s scientists set the second deal with
Agensys into motion, bringing in Genentech’s in-house business
development team.
Initially, Genentech officials did not think Agensys would
be able to get patents for “the proteins in which they
were interested. They were telling me that in their experience,
the allowances wouldn’t be issued,” says
Murashige. But Murashige was tenacious, and
spent a great deal of time at the patent office,
working on getting Agensys’s patent applications
approved. Finally, about four months
before the deal was inked, Murashige received
notice that the patent applications had been
accepted. She called Agensys, and the deal
pace accelerated.
Mendelson wasn’t involved in deal negotiations
or license drafting. “Once the ball started
rolling on the transaction, Alan play[ed] a counselor’s
role in a global sense to the company,”
says Hoyng. Drafting the license fell to Hoyng,
an organic chemistry Ph.D. and IP transactional
specialist. A former Genentech in-house scientist,
Hoyng heads Latham’s licensing practice
and has been working with Mendelson since
arriving at the firm in 2001. Because the agreement
with Genentech covered some technology for which
patents had not yet fully issued, one of Hoyng’s most important
tasks was defining, in contract language, just what the term
“patent rights” encompasses. Biotech patent prosecution can
take years, and very often licensees make a leap of faith that the
patents will issue, says Hoyng.
David Kuiper, of counsel at Latham’s Costa Mesa, California,
office did much of the face-to face negotiating with Genentech’s
lawyers and business-development people. MoFo’s Murashige
and her team, did some patent analysis in the deal, along with
Agensys’s sole in-house patent counsel Shane Popp.
Since Agensys already had a thorough understanding of
the technology, the bulk of the IP analysis fell to Genentech.
Daniel Hung, Genentech’s patent counsel, read patents and
researched scientific literature to look for prior art. According
to Hoyng, in such transactions, particularly those in which
unissued patents are being licensed, this due diligence
often involves signing a confidentiality agreement, and then
Initially, Genentech
officials did not
think Agensys
would be able to
get the patents,
Murashige says.
Finally, about four
months before the
deal was inked, the
patent applications
were accepted. And
the deal pace
accelerated.
reading documents tracing the unissued patents’ prosecution
history, often termed the “file wrappers.” (Genentech didn’t
use outside counsel.)
Under the terms of the contract, Genentech gains worldwide
rights to two Agensys cancer targets and monoclonal
antibodies specific to those targets. If Genentech develops any
cancer treatments or diagnostic products using the technology,
Agensys receives a share of the profits. Agensys is keeping the
rights to some diagnostic and vaccine uses.
As part of the deal, Genentech took a small undisclosed
equity in Agensys. But this isn’t a prelude to a takeover.
Genentech doesn’t typically buy out other biotechs, says Anna
Hall, the company’s senior business development
director, who negotiated the financial
side of the transaction. Genentech took equity
to signify its commitment to Agensys,
Mendelson says.
In its press release, Agensys claimed that the
agreement with Genentech is potentially
worth $90 million. That may be unrealistic.
“One tends to discount much of what you hear
in biotech press releases” from privately held
companies, says Mark Edwards, managing
director of subscription biotech database
Recombinant Capital. Agensys will only recover
the $90 million if Genentech develops several
products with Agensys technology.
In any case, payments in biotech deals tend
to be weighted toward the back end, when it
looks like an actual product will emerge, says
Gregory Wade, a research analyst at San
Francisco’s Pacific Growth Equities.
Even so, Agensys has more than just this deal to fall back on.
While the transaction with Genentech is the company’s biggest
deal, Rice says that down the road, Agensys hopes to commercialize
some of its other technology itself. Agensys even hopes
to get one product into stage one clinical trials next year.
“Many drug-development companies have taken it on the
chin in recent years because they’re one-trick ponies,” says
Stephen Bent, who heads the life sciences practice at the
Washington, D.C., office of Milwaukee’s Foley & Lardner. “Their
prospects are so ephemeral or risky. But it sounds like Agensys
is doing the sort of thing a successful drug-discovery company
has to do, keeping at least three balls in the air.” ■
This article is reprinted with permission from the November 2004 edition
of IP LAW & BUSINESS. © 2004 ALM Properties, Inc. All rights reserved.
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