Thanks to the Yahoo thread for the link. Lots of nuggets we can chew over on this one. First inklings of strategic views on royalties. What says the crowd?
news.ft.com
Incyte to put future royalties into new business
By David Pilling
Published: May 17 2000 19:24GMT | Last Updated: May 17 2000 21:10GMT
Incyte Genomics, one of the US's best-known biotechnology groups, is planning to be the first company in its field to hive off future royalty streams into a separate business.
"We may do a David Bowie," said Roy Whitfield, chief executive officer, referring to the $55m bond issued by the rock star on the strength of future song royalties.
"Almost certainly we will want to separate it from our base business because it is not strategic," said Mr Whitfield. "We want someone else to manage those issues."
Incyte earns revenues from selling databases and other services that help clients discover genes and their possible connection with disease. Clients pay subscriber fees for that service. But if genes supplied by Incyte lead directly to development of a drug, the client would pay royalties on sales of that medicine.
David Leathers, director of Abingworth Management, a UK venture capital company, said it was the first time such an idea had been floated in the biotechnology industry.
"There's a lot going on at Incyte and they're frustrated that people can't see the wood for the trees," he said.
Mr Whitfield said Incyte should start earning its first royalties next year or in 2002. At that point it would be easier to persuade investors of the value of such an asset, he said.
Given that it takes at least 10 years to develop a new medicine, royalties would continue to rise until at least 2010. Mr Whitfield estimated annual royalties of $200m-$1bn, depending on how many leads were turned into drugs and how fast the $350bn global pharmaceuticals market grew.
Incyte had "literally thousands of licences out there" and many of its partners were basing half their drug discovery projects on genomic data, he said.
Incyte would receive royalties of 1 per cent or more on the sale of any medicines, he said. Payment of royalties was based on contractual obligations and was not dependent on controversial gene patents, he said.
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