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Spring
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EMBA, 2014- Marketing
EMBA, 2014- Marketing
Licensing Recommendation, Amicon Blood Filtration Technology Licensing Recommendation, Amicon Blood Filtration Technology 08
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08
Fall

To: Mr. Jacobs
From:
RE: Licensing Recommendation, Amicon blood filtration technology
Date: May 10, 2014

Introduction:

As a leader in the field of blood filtration technology Amicon has created a competitive advantage by being first to market in the disposable membranes technology, which enable the separation of blood, the filtration of extraordinary large molecules, cleansing of impurities and proteins in order to obtain a more concentrated form quickly. This superior device is capable of separating blood & plasma quickly, efficiently and safely. The key challenge is formulating the right Product Form Strategy (PFS) to turn these new inventions into profit yielding endeavors.

Recommendation:
To maximize profitability, and ensure that Amicon remains at the forefront of innovation and development we recommend an Exclusive but for Amicon licensing venture with Jackson. This will allow for Amicon to capitalize on the market share that Jackson holds in the industry, while allowing for Amicon to remain viable in R &D of new products.

Further we would recommend a 15% payment of royalties on sales made by Jackson. Structuring the payment based on sales rather than revenue would enable us to avoid problematic determination of licensee profit.

Analysis & Support:
While Amicon’s patent is ground breaking, there are several factors that make profitability difficult including: * Length of patents * Competitive development * FDA agreements * Mergers & Partnerships

The further Amicon delays in capitalizing its patent, the higher the risk of competition developing their own VI/VC to capture that market; profitability needs to be maximized while Amicon remains in control of the patent. It is important for Amicon either to enter the market directly but at steep financial costs, or partner with existing entities to maximize potential market positioning.

The risk for competitors to develop “around” the Amicon patent could surface once Amicon announces plans to market. Thus by leveraging relationships with larger companies Amicon would secure first entrance, plus acquisition of new market share; this could be a barrier of entry for competitors as the risk and investment would be much greater.
Within the field of blood collection the blood filtration device is Amicon’s optimum negotiating leverage, as it is superior device to anything available; it reduces donation times from two hours to 45 minutes, eliminates the potential for blood contamination as it reintroduces donors blood simultaneously and allows for people to donate up to two times per week.

If Amicon should sell its license, the delay of FDA approval would restrict it from immediately capitalizing on revenue within the United States; this restriction would not apply Internationally. Amicon sales of ultrafiltration products to hospitals, pharmaceutical companies, science & research laboratories and other businesses Internationally has made them a top provider in their field. Domestically however Amicon remains vulnerable, with royalties for only 51 membrane sales and none on equipment produced. A critical factor of Amicon’s PFS is garnering a partnership that would gain relatively quicker FDA approval to launch into market.

Issuing limitations of field of use would be a difficult and potentially costly. Drafting language that would capture all potential uses of the device could result in litigation for anti-trust violations. As such we would not recommend a field of use restriction.

Lastly, should Amicon chooses licensing as its PFS, it has to decide between the various VI/ VC options present in the market. Amicon must consider the growing potential of mergers or partnerships of competitors. Jackson is a large supplier of disposable kits, the partnership with the National American Red Cross could result in a complete market lockout for Amicon. Forming a licensing agreement with Jackson would yield potential profitability as Jackson has the market dominance Amicon requires. As patents are already in place the timeframe of exclusivity for licensees to be first to the market with the most innovative product available is critical. This gives any licensee a competitive advantage over others in the market. The device will yield greater profitability once available to a larger market share.

Jackson comprises approximately 75% (65% of the independent commercial blood collection centers and 10% of its own blood collection centers) of the current market. At 35% royalty, we estimate that Amicon’s revenue from this licensing partnership stands at a gross profit of $2.05 million(see exhibit 2); This far exceeds the estimated revenue from its partnership either with Maynard-Smith ($500K) or Behrstein ($1.4 Million)
(see exhibit 2). Additionally the investment Amicon would have to make through licensing with Jackson is significantly less than if they entered the market directly. While the net profits with going direct in the US markets would yield Amicon more than double its revenue ($4.7 Million), due to FDA regulations, commercial development may be many years away which would cause Amicon not to realize the full potential of its patent. Our recommendation is to pursue an Exclusive but for Amicon licensing agreement with Jackson, allowing Amicon to earn considerable profits from the patent of the filtration device while remaining agile enough to continue extensive work in R &D.