CannabisNewsWire
Editorial Coverage: Intangible assets such as patents
increasingly dominate the global business landscape, especially in
the pharmaceutical sector.
- Intangible assets are estimated to be worth trillions of
dollars in the United States alone.
- These assets drive deals as companies acquire smaller patent
holders.
- In growing sectors such as cannabis, smaller companies are
rushing to establish intangible assets ready for expected market
growth.
Lexaria Bioscience Corp. (CSE: LXX) (OTCQX: LXRP)
(LXRP
Profile) is one of the leaders in the world of
cannabis, with applications made for more than 50 different patents
and more to come. Tilray Inc. (NASDAQ: TLRY) is
also focusing on building its intellectual property (IP) portfolio,
including exclusive rights to at least 22 issued or pending
patents. In wake of receiving FDA approval of its Epidiolex®
(cannabidiol) oral solution for the treatment of seizures
associated with two rare and severe forms of epilepsy, GW
Pharmaceuticals Plc (NASDAQ: GWPH) has applied for five
new Epidiolex patents. Recently Canopy
Growth Corporation (NYSE: CGC) announced that it has,
alone or with its subsidiary or joint-venture partners, filed eight
provisional U.S. patents pertaining to the delivery and application
of cannabis and cannabinoid-based therapeutics. And through its
ownership of CanniMed, Aurora Cannabis, Inc. (OTCQX:
ACBFF) has obtained six patents related to cannabinoid
delivery for pain management.
To view an infographic of this editorial, click here.
The Power of Intellectual Property
Intellectual property is now one of the most important parts of
the global economy. Copyrights, trademarks and patents are a vital
weapon in the arsenal of many businesses. For some companies, this
is a secondary consideration, a way to strengthen and protect their
positions within their fields. For others, it’s their entire focus
— a way to dominate a sector or provide valuable returns.
The power of IP means that no part of the economy goes
untouched. New industries often arise off the back of new IP. Even
when that’s not the case, the development of new techniques and
technologies frequently lead to the creation of patents, as
companies work to innovate and control techniques that give them an
edge over their competitors. For relatively new sectors, such as
the cannabis market, this means the sudden flourishing of IP and a
race by companies to stake their claim on these valuable assets. As
a sector matures, so will its IP market.
The Value of Intangible Assets
Patents are a big part of business for companies such as
Lexaria
Bioscience Corp. (CSE: LXX) (OTCQX: LXRP), for whom
developing and protecting new technology is fundamental to success.
Whether it’s underlying technology such as DehydraTECH, the
company’s system for increasing the body’s absorption of chemical
compounds, or specific products derived from DehydraTECH, such as
TurboCBD, Lexaria’s success is founded on its distinctive IP.
IP is part of a wider sector of the economy — intangible assets.
This is the wealth provided not by physical assets and the
processes that directly transform them but by less visible, more
abstract resources. It includes IP, whose value is often examined
and measured, as well as harder-to-pin-down elements such as
business processes and reputation.
These factors have always played a part in business, but their
growing recognition and analysis has led to the growth of companies
whose main focus is on intangible assets, from investment research
firms and reinsurers to patent licensing and enforcement
companies.
Representing around a third of the U.S. economy, intangible
assets are now consciously analyzed and developed by virtually
every business, even if they don’t recognize the “intangible asset”
label. Companies with a solid focus on these areas can place
themselves in positions of great strength.
Patents in a New Sector
The speed at which intangible assets can develop is well
illustrated by movements in the cannabis sector, where many of
Lexaria’s patents apply.
The legal global cannabis market started to emerge only
recently, thanks to a handful of countries allowing medical
marijuana. The market has started to mature through a small but
growing number of territories with legal markets for recreational
cannabis, as well as the separate management and licensing of
industrial hemp. Legal cannabis is now a multibillion-dollar
business. Although Lexaria’s technology has other profound drug
delivery applications, cannabis is where it looks set to have the
most immediate impact.
This has led to a rush to control intangible assets around
cannabis. It’s noteworthy that Chinese companies
own more than half of the cannabis-related patents registered
with the World Intellectual Property Organization, even though the
cannabis trade remains illegal in China. China has a good eye for
long-term developments and is setting itself up to control a
growing global trade.
Outside of China, Lexaria is one of the world’s biggest holders
of cannabis patents with eight patents already granted. The company
currently holds four patents in the United States
and four in Australia, covering aspects of its work to make
beneficial drugs more palatable and effective. In addition, the
company has further patent applications in process in more than 40
countries as part of a concerted strategy to expand its patent
portfolio. This is made possible by the focused, tangible research
and development being carried out by the company and is ultimately
driven by the need to develop and control intangible assets.
Lexaria has disclosed it expects four more patents to be granted
in 2018, bringing its total to twelve. Of note, all twelve of these
are within a single patent family — and Lexaria expects patent
success across all nine families of its current applications.
Indeed the company recently revealed that it has seven more patent
families in the works. Lexaria’s goal is to have some 200 patents
pending or granted which, if achieved, could turn the organization
into an IP behemoth in the global cannabis industry.
The Value of Patents
The commercial value of patents, even those still pending
approval, can be extraordinary, reaching billions of dollars. In
2011, Nortel sold 6,000
patents and patent applications for $4.5 billion. The following
year, AOL sold 925 patents
to Microsoft for more than a billion dollars. While some
companies develop patents purely to protect their work, others
develop them specifically to be sold.
This focus on intangible assets drives many mergers and
acquisitions. The Craftsy digital network developed online shows
such as “Man about Cake” with a focus on audience rather than
immediate profit, leading to the company’s acquisition by NBC
Universal. The intangible assets of the company’s identity,
reputation and audience had become highly valuable in
themselves.
Similar priorities can be seen on a far larger scale in SoftBank’s $31.4 billion acquisition of chip designer ARM
Holdings, or roughly $7 million per patent or patent
application. ARM’s revenues were only $1.5 billion per year, but
its 4,500 patents cover technology of potentially incredible value.
In just three years, the desire to control patented drugs and
processes in the healthcare sector overall resulted in 58 mergers and acquisitions with values of a billion
dollars or more.
In Lexaria’s field of pharmaceuticals, patents are crucial,
representing both the outcome of years of R&D and also
potential market share and control in the emerging global cannabis
business. Lexaria is attempting to own enough IP in the global
cannabis industry that patent royalty revenues begin to flow
worldwide.
Because patents are among the most valuable assets a company can
own, a small investment in research now may pay off in a huge way
in years to come. In a sector with such huge growth potential as
cannabis, Lexaria’s IP portfolio may generate cash flows regardless
of whether other companies intend to license the technology or not;
by owning core IP, other companies may be forced to pay royalties.
If Lexaria’s goal of owning hundreds of issued patents becomes a
reality, the company’s patent portfolio could have huge
ramifications on its valuation.
Powered by Intellectual Property
Lexaria isn’t alone in its commitment to strengthen its IP
collateral. Tilray Inc. (NASDAQ: TLRY) is also
focusing on building its IP portfolio including exclusive rights to
at least 22 issued or pending patents. Tilray CEO Brendan Kennedy
has observed that if cannabis companies are going to move forward,
they’ll need to develop IP in both
the medicinal and recreation aspects of the cannabis
spectrum.
GW Pharmaceuticals Plc (NASDAQ: GWPH) has
established a leading position in the development of plant-derived
cannabinoid therapeutics through its intellectual property
portfolio, proven drug discovery and development processes, and
regulatory and manufacturing expertise. The company successfully
developed the world’s first prescription medicine derived from the
cannabis plant.
In addition to the eight provisional patents it has filed,
Canopy Growth Corporation (NYSE:
CGC) has updated applications relating to earlier
insomnia patent applications, bringing its total number of U.S.
provisional patent filings to 39. The filings are part of a
concerted plan by Canopy Growth to deliver to patients and
healthcare providers innovative medicines and health products
targeting disease areas with substantial medical needs.
Aurora Cannabis, Inc.’s (OTCQX: ACBFF)
pain-management patents are only part of the company’s commitment
to creating a stronghold in the cannabis market. Aurora has become
one of the fastest-growing cannabis companies, as evidenced by
Aurora Sky, the company's 800,000-square-foot flagship facility; by
launching the world’s only mobile app for ordering medically
prescribed cannabis; and by being the only LP to service two
metropolitan areas with same-day delivery.
With so much value placed on intangible assets, patents are
fueling growth and acquisitions worth billions of dollars. In the
pharmaceutical sector and beyond, patents definitely appear to be
where the big money is.
For more information on Lexaria Bioscience Corp., visit Lexaria
Bioscience Corp. (CSE: LXX) (OTCQX: LXRP)
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