Seventy percent of Americans participate in at least one customer-loyalty program, according to a July 2012 survey by Polaris Marketing Research. Most of those shoppers are happy to give up personal information in exchange for discounts and special offers. But as retailers grab more data, will customers revolt? That depends on how retailers approach data collection and privacy, suggests Andrew Smith, a partner at Morrison & Foerster who concentrates his practice on retail financial services, privacy, and related issues.
Retailers capture data such as items purchased, items purchased in tandem, and amount and frequency of purchase. If they can associate that information with a particular customer through, say, a frequent-buyer program, they can build a customer profile. If they can link a credit-card number with a ZIP code, they can associate demographic information such as property value or income. If they have an email address, they can use a technique called “reverse append” to purchase a mailing address. And so on.
There are laws protecting specific kinds of information, such as personal data about children, health, or finances. “But in terms of general protection for general commercial data, there is not a single omnibus federal privacy law,” Smith says. Instead, the U.S. takes a “sectoral” approach to privacy, backstopped by the FTC’s ability to prosecute unfair or deceptive trade practices. Continue Reading
Scientific acumen is crucial—but so is an understanding of today’s deal market.
The risks and costs of life sciences product development have become so high that few companies are willing to bear them on their own. As partnerships become vital, skill in dealmaking has become almost as vital as scientific acumen for today’s pharma and biotech firms. Insight into the deal market is crucial for companies seeking to design advantageous deals.
That’s why Morrison & Foerster has launched a quarterly deal report that answers key questions such as: what kinds of therapies are being bought at what development stages, and for how much. The report—dubbed MoFo BioMeter—is also a useful indicator of the health of the biotechnology industry.
“In a time of constrained venture funding for unapproved life sciences products, up-front payments for promising assets still in development are a vital source of growth capital for young firms,” says partner Stephen Thau, who created the BioMeter. “Meanwhile, leading pharmaceutical companies such as Pfizer have increasingly focused on their global sales and marketing capabilities over the last decade. In that time, their partnerships with biotech start-ups have become the lifeblood of the industry.”
The BioMeter is an index that measures transactional data relating to collaboration agreements between large commercial firms and small developers, and can include licensing, joint ventures, acquisitions, and other deals for development-stage assets.
As biotech firms take their wares to market, BioMeter serves as an objective guide for evaluating the potential of assets across individual sectors, categories, and development stages. “If your interest is in testing assumptions about a given therapeutic, identifying pipeline opportunities, managing R&D budget allocation or assessing risk, BioMeter can guide informed decision-making,” says Thau. Continue Reading
All ways of raising capital entail risk. But for life sciences companies, employing credit strategies may be less risky than the alternatives.
Turning to venture capital typically requires giving up a slice of the company and a big portion of projected revenues. Raising capital through issuing shares often prompts shareholders to sell. By contrast, credit-based strategies such as royalty monetization and structured debt preserve shareholder value and owner control.
But loans must be repaid–and repaid on time. “These strategies work best when there is a pathway to generate enough revenue to eventually hit profitability and service their debt,” says Luke Düster, principal at Capital Royalty, which offers credit to life sciences companies.
A whole host of issues can impact revenue streams, including competitive pressures, problems with reimbursement, and manufacturing challenges. Companies that do have trouble with debt repayments sometimes resort to raising additional equity. But CR typically structures its deals so that the debt is manageable even if revenues are 50 percent below forecast, Düster says. (Equity investors typically have much higher performance expectations.) Furthermore, many of CR’s partners plan to be sold or make public offerings within five years, at which time the debt is fully repaid. “We give enough leeway through our long-duration [terms] and our interest-only period to get to that exit point,” Düster notes.
“We decided we needed to get into the world and make an impact.” – LUKE DÜSTER, PRINCIPAL
Nate Hukill and Luke Düster first met in Shanghai, when the city was a boomtown with a skyline that was a forest of cranes. As college students studying abroad, they shared a small room, a tight budget—and a mischievous streak. So one day they snuck into a nearby luxury hotel to relax in its hot tub. There they met a Japanese businessman who regaled them with stories of the deals that moved those cranes. At the time, Hukill was studying language and Düster international affairs, but that night in 1995 they both made a fateful decision to switch to finance. “We decided we needed to get into the world and make an impact,” Düster says.
Since then, Hukill and Düster have etched out a career finding alternative financing solutions in the life sciences arena. It’s a field where long development times and risky product bets can make it difficult to structure deals that both the investor and the company find advantageous. In fact, for early-stage biopharma companies, obtaining financing from traditional banks is expensive or impossible. And raising venture capital often comes at a big price—a piece of the company—when it is available at all.
“There is a distinct need for capital resources given the shrinking universe of VC funds, and we’ve found some success by offering non-dilutive credit-oriented strategies,” Hukill says. Continue Reading
Much of the glamour of technology today rests on the amazing things one can do on the Internet. The Federal Communications Commission plays a big role in deciding how affordable and accessible those wonders will be for Americans.
Case in point: Internet service providers are imposing usage caps and pricing tiers based on the amount of data their customers use. They say these measures help ease network congestion and fund additional investment in infrastructure.
But these measures promise to crush the business models of streaming-media companies like Netflix and Hulu, which claim the measures only serve to stifle innovation and bilk customers. These companies claim that some of these ISPs–some of which also operate cable systems or cellular networks–favor their own content over those of Internet-based competitors.
This year could be a significant one for Internet access issues. A ruling is expected in a case in which the Federal Communications Commission is defending its “open Internet rules” before the U.S. Court of Appeals in Washington, D.C. The FCC argues that the rules have been a boon for investment in both Internet companies and wired and wireless infrastructure.
Some speculate that the FCC will lose, because the D.C. court previously ruled that the FCC lacked authority to stop Comcast Corp. from blocking bandwidth-hogging applications on its broadband network.
Meanwhile, Democratic Sen. Ron Wyden of Oregon introduced legislation last year that would require the FCC to intervene so that data caps were intended only to relieve network congestion. And in February the FCC proposed increasing by over one-third the amount of spectrum available to unlicensed wireless devices. The measure is designed to relieve congestion on public Wi-Fi networks and encourage innovation in wireless devices. Previous unlicensed spectrum has made possible innovations such as cordless phones and garage door openers, The New York Times notes.