Intellectual property business models using patent acquisition: A case study of Royalty Pharma Inc.

Abstract

In the pharmaceutical industry, companies are currently facing great challenges in developing new products due to patent expiration and decreasing profitability. In particular, the decrease in R&D productivity caused by the constant increase in the development period and cost of innovative new drugs means that the expectations of investors cannot be met. This study examined the successful case of Royalty Pharma's business model, which adopted securitization, a new investment method that makes advance payments of future profits in order to overcome the decline in R&D productivity and enables the pharmaceutical manufacturers (as patent owners) to resolve the issue of attracting investment funds, while also making these funds available for other development projects. It examined the role in the biopharmaceutical sector of patent aggregating companies in providing the competency to analyze patent technologies and to create investment megafunds, as well as the success factors that can lead to a virtuous cycle of product development. From this analysis, the application of a patentbased business model is proposed for small and mid-sized pharmaceutical industries.