In Praise of Patent Plays
By John Rubino
Special to TheStreet.com
8/25/00 9:38 AM ET
In his classic cyber-punk novel Neuromancer, William
Gibson depicts a place called Night City as "a deranged
experiment in social Darwinism, designed by a bored
researcher who kept one thumb permanently on the fast
forward button."
When you think about it, that's a pretty apt description of
the tech side of today's economy. Things are changing so
fast that whatever you're selling, it's got to be continuously
better/faster/cheaper if you want to survive. Resting on your
laurels is not an option.
Unless, that is, you own a patent controlling some crucial
part of your industry. Then you can let the other guys fight it
out while you kick back and watch your licensing fees
accrue.
I'm oversimplifying here, but only a little. The reality is that
companies with key intellectual property (or IP, as the
digerati refer to it) tend to be worth a lot....<snip>
Guilford Pharmaceuticals (GLFD:Nasdaq - news) is a
relatively safe bet in biotech, a market where patents are
the dominant form of asset. Go through any drug
company's recent press releases and half the stories will be
about this or that breakthrough compound, which, of
course, has a decade or more of patent protection. This
torrent of wonder drugs is great news for all of us, but a
problem if you're trying, for instance, to decide which of 20
new Alzheimer drugs will actually sell. And then there's the
specter of drug-price controls under a Gore administration
that might make such patents a lot less valuable.
Guilford is interesting because it's in the process of buying
Gliatech (GLIA:Nasdaq - news), the developer of a line of
compounds that inhibit scarring in various kinds of
operations. They're not as glamorous as cancer cures, but
they clearly work, and post-op scarring is a problem across
all forms of surgery. The first of the series to be introduced
-- ADCON-L, for back surgery -- has met with a great
response, according to the company. Other versions, each
targeted at a specific kind of surgery, are in the pipeline.
Meanwhile, Guilford has a potentially important cancer drug
in late-stage tests.
Anyhow, I could see making the search for hot patents a
regular, maybe monthly, topic for this column. So send in
your picks and I'll check them out.
John Rubino, a former equity and bond analyst, is a
frequent contributor to Individual Investor, Your Money and
Consumers Digest. His first book, Main Street, Not Wall
Street, was published by William Morrow in 1998. At time
of publication, he had no position in any stocks mentioned.
While Rubino cannot provide investment advice or
recommendations, he invites your feedback at
jrubino@thestreet.com.
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