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Contents

Foreword

Preface

Acknowledgments

Part One: Creativity and the Roles of the Inventor, Innovator, and Entrepreneur

Chapter 1: Creativity and the Entrepreneurial Process

Getting That Bright Idea

From Idea to Invention

Distinct Roles of Inventor, Innovator, and Entrepreneur

Closing Thoughts

Chapter 2: Protecting Your Invention

What Is Intellectual Property?

How Intellectual Property Law Works

Basic Forms of Intellectual Property

International Treatment of Intellectual Property Law

Innovation Process: Diffusion and Adoption

Appropriating the Profits of Innovation

How to Decide Which Intellectual Property Tools to Apply

How to Identify Intellectual Property in Your Organization

Developing an Effective Invention Disclosure Process

Chapter Takeaways

Appendix 2.1: Remmey's Granted Patent

Part Two: Building Business Models

Chapter 3: Understanding Strategy Basics

From Strategy as Plan to Strategy as Direction

Introduction to the Strategic Management Process

Why Is Strategy Important for Any Enterprise?

Strategy in a Rapidly Changing High Technology Environment

How Often Should You Change Your Venture's Strategy?

How Do Managers Formulate a Strategy?

Three Levels of Strategy and How They Interrelate

Basic Tools for External Analysis

Internal Analysis and Organizational Design

Understanding Organizations and Their Cultures

Challenges of Organizational Design

How Organizations Survive Turbulence and Change

Reflections on Strategy in the Entrepreneurial Context

Chapter Takeaways

Chapter 4: Strategies to Grow, Restructure, or Harvest Your Business

Growing

Restructuring

Harvesting

Diagnosing the Situational Context of the Industry

Closing Thoughts

Chapter Takeaways

Chapter 5: Key Elements of a Business Model

What Is Your Business Model?

Creating the Business Model Step by Step

Chapter Takeaways

Part Three: Crafting Strategic Alliances

Chapter 6: Introduction to Strategic Alliances

What Is An Alliance?

Strategic Alliances

Forces of Deconstruction on the Value Chain

Vertical Integration Decisions

Strategic Alliances with a High Component of Technology

Chapter Takeaways

Appendix 6.1: Comparison of Main Alliance Modes and Their Contractual Features

Chapter 7: Managing Alliances

Filling the Strategic Gaps

Doing It Better

Step 1: Decide on the Strategic Logic for the Collaboration

Step 2: Select the Right Partnering Candidates

Step 3: Design, Structure and Negotiate the Alliance

Step 4: Managing the Alliance Step 5: Measure and Assess Performance

Step 6: Check the Merits of Continuing the Alliance, Either Adjust or Exit

Step 7: Start the Cycle Anew: Strive to Create a Connected Network of Alliances

Closing Thoughts

Chapter Takeaways

Chapter 8: How Alliances Complete the Value Chain in Biotechnology and Pharmaceutical Business Models

Risks and Uncertainty Associated with Drug Development

Value Chains in Pharmaceuticals and (Bio)Pharmaceuticals

Completion of the Biotechnology and Pharmaceutical Value Chain through Alliance Formation

Business Models in Pharmaceuticals and (Bio)Pharmaceuticals

Recent Trends and Emerging Business Models in Healthcare

Alliance Formation Crucial to Biotechnology and Pharmaceutical Business Models

Chapter Takeaways

Part Four: Understanding Legal Agreements

Chapter 9: Contract Law, Key Legal Agreements for Business, and Incorporation

Elements Constituting a Contract

Form of the Contract

Cross-Cultural Differences in Contractual Agreements

Nondisclosure Agreements

Shareholders' Agreements

Incorporation Issues: Choosing the Appropriate Legal Structure

Sole Trader (Sole Proprietorship)

Corporations

Partnerships

What Is the Right Choice of Vehicle?

Intellectual Property Issues Pertaining to Incorporation

Chapter Takeaways

Chapter 10: Investment Agreements

Investment and Finance

Preferred Shares

Transferability of Shares and Exit

Other Terms of the Investment Agreement

Chapter Takeaways

Appendix 10.1: Investment Term Sheet

Chapter 11: The Intellectual Property Landscape

The IP Perspective

Copyright

Designs

Know-how or Trade Secrets

Trademarks

Closing Thoughts

Chapter Takeaways

Chapter 12: Basics about Patents

Patent Facts

Filing Patents - Overview of International Patent Treaties

Patent Application Processes

Trends in Global Patenting Activity

Closing Thoughts

Chapter Takeaways

Chapter 13: General Patenting Strategies in High Technology Industries

Developing a Patent Strategy for Early-Stage Businesses

Questions to Ask When Devising a Patenting Strategy

Defensive and Offensive Patent Strategies

Real-Life Examples

Strategic Patenting - Claiming First to Win the Battle

Strategic Patent Considerations for Generics Drug Companies

Chapter Takeaways

Chapter 14: Navigating Technology License Agreements

Structure of a Basic Technology Transfer Agreement

Outline of the Agreement

Competition Law and Antitrust Provisions

Heads of Terms or Memorandum of Understanding

Chapter Takeaways

Appendix 14.1: Sample Heads of Terms or Memorandum of Understanding

Part Five: Competitive Intelligence and Due Diligence

Chapter 15: Competitive Intelligence and Patent Searching

Asking the Right Questions - Doing Various Patent Searches

Business Intelligence for Benchmarking

Competitive Intelligence

Carrying Out Information and Patent Searches

Searching for Technical and Business Information

Going from Patent Data toward Technology Intelligence

Chapter Takeaways

Chapter 16: Due Diligence

What Is Due Diligence?

Preliminary Issues before Commencing Due Diligence

How Legal Due Diligence Works

Nonlegal Due Diligence

Issues in Cross-Border Due Diligence

What If Due Diligence Uncovers a Problem?

From Innovation to Cash Flows and Beyond: Due Diligence during the Business Life Cycle

Closing Thoughts

Chapter Takeaways

Part Six: Valuing Company Cash Flows

Chapter 17: Valuation Using Discounted Cash Flow

Why Valuation is an Important Skill to Learn

Compounding and Discounting Money: Present Value Techniques

Definition of Net Present Value

Internal Rate of Return

Meaning of Intrinsic Value

Valuing Young Growth Companies with No Dividends

Overview of Discounted Cash Flow Methods

Present Value of an Infinite Stream of Dividends

Zero-Growth Perpetuity Model

Constant-Growth Model

Multiple-Period Dividend Growth Model

Introduction to the Cost of Equity

Capital Asset Pricing Model

Enterprise Valuation Method

Defining the Weighted Average Cost of Capital

Applying the Enterprise Valuation Approach by Discounting Free Cash Flows

Practical Advice on Selecting the Proper Discount Rate

Establish an Estimated Range of Valuation Values

Next Steps for Testing Your Key Assumptions

Next Steps for Practicing Valuations

Chapter Takeaways

Appendix 17.1: Using the Enterprise Valuation Method to Value a High Technology Company

Chapter 18: Valuation Using Market Multiples and Comparable Deal Transactions

Enterprise Value of the Firm Is a Market Value

Putting the Money to Work in the Business

Why Accounting Values Are Not the Same Thing as Market Values

The Economic Balance Sheet Reflects the Capital Market's View

Financing the Business: The Pecking Order of Finance

Important Characteristics of Equity Markets

Who Sets the Market Price of a Stock?

Measures of Value Used in Appraisals under a Variety of Circumstances

Relative Valuation by Comparing Similar Companies and Transactions

Typical Ratios and Multiples Used in Relative Valuation

Case Study: Determining the Technology Value of a Sample of Comparable Biotechnology Firms

Selecting the Right Multiple for a Given Situation

Chapter Takeaways

Chapter 19: Venture Capital Method of Valuation

Activities of Private Equity Investors: An Overview of the Industry

Financial Intermediaries versus Principal Investors

Buyout Funds

Megafunds

Venture Capital Funds

Typical Venture's Life Cycle of Development

Creating a Venture Capital or Private Equity Fund

How Venture Capitalists Improve Their Chances for Success

Special Case of Life Science Ventures: Recent Exit Trends

Venture Capital Method of Valuing Young Fledgling Firms

Case Study: TSP Enterprises Seeks Venture Financing

Applying the Venture Capital Valuation Method

Adjusting the VC Method for Multiple Rounds of Financing

Summary of Two Financing Rounds for TSP Enterprises

Multiple-Round versus Single-Round Financing

Questions When Applying the Venture Capital Method

Closing Thoughts

Chapter Takeaways

Chapter 20: Valuing and Structuring High Technology Strategic Alliances

Valuing Licenses as the Present Value of the Future Benefits of Ownership and Development

Basic Licensing Models - Sharing the Economic Pie

Case Study: Advanced Dermal Delivery, Inc. and the Launch of the New Transdermal Patch

New Product Opportunity

Licensing Deal

Upcoming Licensing Negotiations

Constructing the Financial Forecasts and Licensing Model

Comparing Spreadsheet Results

Next Steps: Sensitivity Analysis

Developing Scenarios to Quantify the Risks of New Product Failure

Developing Other Likely Scenarios and Negotiating Points

Final Tips on Negotiation Preparations for Structuring the Deal

Chapter Takeaways

Chapter 21: Conclusion

The Basic Broth of Business

Building the High Technology Business Venture

Notes

References

About the Authors

About the Contributors

About the Web site

Index