Dennis, royalties run all over the place, for drugs for instance these can run as high as 8% (in rare cases even higher). For products like batteries, the best equivalent I can find is the GM/Sumitomo lock on Nd-Fe magnets which revolutionized the small motors industry. They charge 3% of sales (sales defined as "wholesale", or first arm length transaction). I would say that a lock on the Li polymer technology should be probably at this level (on end product). If the licensee also uses VLNC's patented powders acquired from a licensed third party, the third party manufacturing the powders probably will pay licensing fees on its product, or have a "profit sharing" type agreement with VLNC. I doubt that the total royalties would be in excess of 5% of end product sold. Since Lev suggested that within two three years the Li-polymer technology will capture $1 B of the total $8 B of that market, you get a pretax potential of about $50 MM annually. For valuations purposes you probably want to take only 65% of that since after few years of such profits, the tax status of VLNC will be "normalized", and the market sets valuations based on after tax earnings.
Of course, VLNC will have to persuade the existing licensees that the non Telecordia technology owned by VLNC justifies changing existing agreements (I think that royalties rates in the Telecordia agreement were depending on the size of the upfront payment and were in the range of 1% to 2%, but that is from memory, maybe someone here knows more details on the Telecordia licenses).
Zeev |
