By Dr. Gareth Williams
The context in which life sciences organizations operate is changing. With fundamental shifts in the way IP is protected in key markets occurring, and regulatory and economic challenges persisting, the life sciences industry is finding new ways to do business.
Against this backdrop, Marks & Clerk produced its 2013 Life Sciences Report. In order to explore the issues facing the industry and provide insight from IP professionals, our analysis was not only informed by the many different biotechnology and pharma companies and associates that we work with worldwide, but also by a targeted research survey of over 330 life sciences sector representatives that we conducted in March 2013.
With only 1 in 5 respondents to our survey seeing some kind of improvement in the overall ﬁnancial climate faced by the sector over the previous 12 months, and almost 9 in 10 stating that the global economic climate was going to be a very or quite signiﬁcant factor for the life sciences sector over the next ﬁve years, the last ﬁve years' economic events continue to cast a shadow over the industry.
Although in our 2010 study nearly two-thirds of participants felt there had been an improvement in the economic climate over the preceding twelve months, these opinions were expressed in the aftermath of the severe economic contractions following the financial crisis. The decrease in the number of respondents citing an improvement this year is, therefore, more an indicator of stagnation than of increased hardship.
In slight contrast to the assessments of the previous year, the sector showed a small increase in optimism with regard to the coming twelve months, with 30 percent predicting an improvement in the general financial climate. However, one quarter of respondents felt that smaller ventures' access to funding and R&D pipelines would further deteriorate, and 21 percent were pessimistic as to investor appetite for the sector.
The Changing IP Landscape
The parallel reforms of the European and U.S. patent systems taking place with the implementation of the America Invents Act (AIA) and the creation of the Unitary Patent and Uniﬁed Patent Court are transforming the two continents' IP systems, and, in some respects, bringing them closer together.
The industry's reaction to the changes brought about by the different reforms was somewhat mixed. Forty-seven percent of respondents considered the changes brought in by the AIA positive for the U.S. life sciences industry. The principal effect of the AIA on life sciences organisations will be a shift in patent filing strategy, with the introduction of a first-inventor-to-file (FITF) system for patent protection (as opposed to the first-to-invent system previously in place).
Meanwhile, nearly two-thirds of respondents expect the European reforms will have a positive impact on the European life sciences industry, and over two-thirds feel the changes will go some way to addressing the historical problem of a fragmented marketplace. Currently, patents in Europe are obtained centrally through the European Patent Office (EPO), but enforced on a national basis. This means that courts in different countries can, and often do, disagree on infringement and validity cases, increasing uncertainty and costs for the industry. The purpose of the Unitary Patent and the Unified Patent Court is to create one patent that covers all contracting states, and one court system whose decisions on patent infringement and validity will be binding across all contracting states.
The Attraction of Asia
Over the last 10 years or so, we have become used to headlines about the potential offered by the growth economies of Asia. With a rapidly growing middle class consumer market, an increasingly skilled workforce and various reforms being brought in by Asian governments, the markets are becoming more and more inviting.
Seventy-six percent of our research participants found China an attractive or very attractive market and just seven percent considered it unattractive or very unattractive. This places it just behind the United States (84 percent attractive or very attractive, and three percent unattractive or very unattractive). Meanwhile, Europe's comparatively mediocre result, with only 65 percent of respondents deeming it attractive or very attractive in terms of market opportunities, was comparable to the 65 and 63 percent that found India and South East Asia to be attractive or very attractive.
Reflecting the enthusiasm for Asian markets, participants predicted an increase in life sciences investment in the continent over the next five years. A significant majority foresaw an increase in Asian marketing, sales and advertising spend (84 percent) and Asian production capability (80 percent) over the coming half-decade. However, the investment in Asian R&D capability was forecast to lag behind marketing and production investment, with a slightly lower 69 percent predicting an increase over the next five years.
Despite China's undeniable allure, questions of training levels, infrastructure and, perhaps more fundamentally, regulatory regimes mean that Asian states, including China, still have quite some way to go before they catch up with the two traditionally most important life sciences markets. When we asked survey participants about the attractiveness of territories specifically in terms of their regulatory regimes, while no country performed particularly well (the United States gained the highest level of approval, with 47 percent considering it attractive or very attractive), China fell back behind Europe, with just 38 percent finding the regulatory regime of the world's most populous country attractive or very attractive and 25 percent (the highest of all scores) finding it unattractive or very unattractive.
This is a time of change for the life sciences industry, and in particular its use of IP. Legal reform coincides with concern regarding the economy, and a shift in the relative importance of key markets. Companies will need to tread carefully to navigate the new landscape which is emerging. Asia and especially China are, as in so many other fields, rapidly becoming far more significant. Concern regarding the suitability of the regulatory and IP regimes in China remains, and this factor combined with optimism regarding patent reform, particularly in Europe, may help the United States and Europe retain their dominance for some time yet.
Dr. Gareth Williams is a partner and European patent attorney at Marks & Clerk LLP (Cambridge, UK). Email Gareth at email@example.com.