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Jack Lu

Partner & Chief Economist

Intellectual Property Market Advisory Partners

Jack Lu, PhD, CFA, is a Partner and Chief Economist of Intellectual Property Market Advisory Partners (IPMAP) in Austin, Texas. An economist & financial analyst with an engineering background & research credentials, Jack specializes in economic study, financial analysis, assets valuation, & strategic advisory for IP transactions & litigation, and for IP-intensive corporate transactions & disputes in financing (VC & PE), M&A, equity investment, & distressed assets investment. He currently serves as the Sr. VP for Economic Analysis & Survey, Licensing Executives Society (LES USA Canada). His recent research in IP economics, patent portfolio valuation, and royalty pricing can be found at his SSRN author page, and he can be reached via email.

Recent Articles by Jack Lu

LES 2021 Royalty Survey Reports: Licensing Market Update, a Look Back, and an LES Royalty Valuation Method in the Making

On September 26, Licensing Executives Society (LES) USA and Canada published the LES High Tech Sector Royalty Rates & Deal Terms Survey Report 2021. In May of this year, the 2021 Global Life Sciences Royalty Rates and Deal Terms Survey results were released. Together, the releases culminated the intense efforts by LES during the COVID-19 pandemic in preparing and launching the Surveys and in analyzing the data, presenting the results and writing the Reports. Not only do LES Royalty Survey Reports provide an update on the licensing market in the past few years, they look into the dynamics of market evolution since the 2000s. The Reports offer benchmark royalty data by various categories, such as technology field and IP type, which serve as invaluable references for licensing professionals. The 2021 High Tech Survey Report is also the only data source in the IP industry that quantifies and publishes royalty rate premiums or discounts such as exclusivity premium and advanced-stage technology premium. Through identifying and quantifying the value contributions of key license parameters such as exclusivity, technology development stage and IP type, among others, the LES team aims to develop a build-up method for royalty determination, analogous to the build-up method in business valuation.

Assessing How Much an Alzheimer’s Drug is Worth

On June 7, 2021, the U.S. Food and Drug Administration (FDA) gave the green light to Aducanumab, a drug developed by Biogen to treat early stage Alzheimer’s, despite the controversies surrounding its efficacy. Biogen stock price increased 38.3% on the day, adding $16.5 billion to the company’s market value. The news rippled across the pharmaceutical industry and lifted stock prices of most Alzheimer’s drug developers. As an example, Eli Lilly stock price jumped 10.2% on June 7, or a hike of $18.6 billion in market cap, because the company also has a similar drug candidate. Subsequently, as the controversies over the Aducanumab approval deepened, Biogen had lost $7 billion in market value by September 9. With all of these multi-billion-dollar numbers, one can’t help but wonder: how much is an Alzheimer’s drug worth? This article tries to assess the market value of an Alzheimer’s drug. It first estimates the implied values of Alzheimer’s drugs by looking into stock market reactions to major events associated with Biogen’s Aducanumab and Eli Lilly’s Donanemab. As a sanity check to the values derived from the stock market, a discounted cash flow (DCF) analysis is conducted to evaluate whether the stock market valuations are rational.

IPR Tax, Alice Shock, and the Dynamics of the Licensing Market as Reflected by the LES High-Tech Royalty Surveys

The Licensing Executives Society (LES) 2017 High Tech Deal Term & Royalty Rate Survey is a milestone event for at least three reasons. First, it was the third survey since the inaugural survey in 2011, and the three surveys fully covered the time period of a decade—from 2008 to 2017. Second, the 2017 Survey marked the fifth anniversary of Inter Partes Review (IPR) procedure and the third anniversary of the Supreme Court’s ruling in Alice v. CLS Bank. Third, at the time of the Survey, a new USPTO Director was nominated by the Trump Administration, bringing a fresh glut of uncertainties, anxieties, and hopes to the already jittery IP market.

Surviving Alice: Signs that the patent market has weathered the Alice storm, at least for now

Alice certainly has dealt a huge blow to patent market, reversing the growth momentum of most market players, big or small. However, the decline in patent sales revenue has significantly decelerated to 5% in 2015, based on the estimated data. Not all segments of IP industry have weathered the Alice storm equally well. Most NPEs have seen their share prices plunging half to nearly 100%. There will be more restructuring and further consolidation in NPE business in 2016.

Patent market dynamics and the impact of Alice and the AIA

The market price plummeted in the second half of 2011, and set off the downward spiral that stormed through the second half of 2013 when the market price reached the record low. There had been no discernible macroeconomic factors to justify the drastic decline in market price during the two years leading up to the end of 2013. As a result, the industry-specific factors might have been the culprit, among which the most prominent is the enacting of America Invents Act (AIA) in September 2011, as demonstrated by the econometric analysis above.

There is No Patent Bubble, Nor NPE Mana

To be sure, all of the concerns over the patent bubble are legitimate, and as always, rational debate is beneficial to the healthy development of patent market. The lack of disclosure leads to the scarcity of data, and what comes with the scarcity are the incompleteness and obscurity, all of which lead to misinterpretation of the data and information. More importantly, misinterpretation, in turn, can lead to mispricing and market inefficiency when the misinterpreted data is applied to value patents for transaction. But is no systematic evidence to prove that NPEs behave differently than other players in the patent licensing market and patent sales market.