Biotechnology and barristers
Emerging industry creates a new field of law

by Rod Belcher
for Virginia Business
September 2007

Biotechnology is a growing specialty for Virginia lawyers. And no wonder. After years of economic development efforts geared toward this emerging industry, biotechnology companies are taking root across the state. Business owners and investors find themselves needing help sorting out the thorny issues that arise when life sciences merge with business.

A biotech product, for example, can take up to 10 years to bring to market. Throw in clinical trials and possible intellectual-property disputes, and it’s easy to see why companies are enlisting the aid of specialized lawyers. Yet this multidisciplinary maze can be so murky that even the lawyers need help.

“You are dealing at the crossroads of corporate law, intellectual property law, and venture capital and securities,” says Michael Drzal, a lawyer with LeClair Ryan who splits his time between the firm’s Charlottesville and Blacksburg offices. “You have to have enough knowledge of science as well as knowledge of what deals are being made in the market. You have to have the bandwidth to span all these areas.”

To bring lawyers up to speed on biotech law, the American Bar Association put together a 1,224-page reference guide. “Biotechnology and the Law” published in January, is the brainchild of the bar’s Biotechnology Committee and Division of Science and Technology. One of Drzal’s colleagues at LeClair Ryan, Hugh Wellons, is the immediate past chair of the Biotechnology Committee. He is co-editor-in-chief of the book and the author of one of its chapters. “Books available at that time were typically too technical to be of use to non-lawyers or lawyers outside a given legal discipline,” Wellons says. “We determined there was a need for a book that was more of a primer, giving a broad overview of the subjects covered.”

Biotechnology covers a huge territory. The growing biotechnology industry in Virginia includes 175 companies, producing products and processes as diverse as plastics and pet food, detergents and drugs. These companies are mostly in Northern Virginia, Richmond, Charlottesville, Norfolk and Southwest Virginia. They tend to have strong presences near universities that focus on research and medicine.

The industry’s growth has attracted an increasing number of lawyers specializing in biotech law, Wellons says. “Many attorneys practice intellectual property law or patent law and end up with biotechnology clients. There are not too many lawyers practicing this kind of law exclusively right now, but we’ve all seen more demand for it.”

Drzal is general counsel to a number of companies that can be grouped under the biotechnology label. They include a bioinformatics company, a pharmaceutical firm and several medical devices companies. “I get bored easily,” Drzal says. “In this field, I’m always learning new things. I find it intellectually stimulating, and I enjoy it immensely.”

Another lawyer in the field is Brian Riopelle, chair of the Patent Litigation Department for McGuireWoods in Richmond. “You can’t be afraid of the science and the technology,” says Riopelle, who has represented several biotechnology companies in patent, false advertising and trade secret cases during the past 12 years. “One of the great things about this kind of work is you are constantly dealing with something that is always new.”

Like other emerging technology businesses, biotechnology companies are trying to make a profit while pushing the envelope of science. “Biotechnology and the Law” points out many of the problems a biotechnology company and its legal counsel may encounter. “From infancy to final, marketable product, you are looking at about 10 years,” Wellons says. “Including the FDA process and the patent process, and that’s if you can get everything started at the same time, it may be as long as a 15- to 20-year process.”

One of the tasks of a biotech attorney is to expedite the regulation process. But even before that is done, the lawyer needs to ensure that the client’s patent and intellectual property are secure. Biotechnology products and processes are vulnerable to being illegally reproduced. Often these knockoffs pop up in overseas markets where “generic” versions of a drug or process may be sold with only minor changes. “You are dealing with producing proteins with a biological model,” Wellons explains. “There are issues where the biological model may be slightly different. If the company is smart, they will try to keep part of the process as a trade secret.”

Tad Fisher knows about the importance of protecting intellectual property. He is managing director and associate general counsel for Third Security LLC, a Radford-based private equity firm that focuses on life science and information technology companies. “One of the keys to success is the intellectual property piece,” he says. “Diligence on the front end of the process can ensure that work-arounds from competitors are minimized.”

Third Security, under the guidance of Fisher’s boss, Randal J. Kirk, sold Radford-based New River Pharmaceuticals in February for $2.6 billion. The deal, which made Kirk the first billionaire in Southwest Virginia, is a prime example of another set of issues that the owners of biotech companies must consider — finding investors and knowing when to sell the company. “With such a long lead time, biotech companies have a different investment profile,” Wellons says. “You are talking eight to 10 years to see a return. Most venture capitalists expect a one- to three-year return.”

Because of the long lead time, few venture capital firms are interested in biotech companies, Drzal says. But some “angel investors” are willing to take the risk and wait out the regulation process for the biotech company with the right product. “These angel investors are bridging some of the gaps,” he says.
Timing is crucial. “The smart companies go after the money when they don’t need it,” Wellons says. “It’s virtually impossible to get it when you do need it.”

In addition to helping company owners attract investors, a savvy biotech lawyer must advise clients on selling the company after the startup stage has passed but before revenues start coming in. “An IPO is one exit strategy for a biotech company,” Wellons says. “New River Pharmaceuticals sold well along in the process, almost 10 years along.”

Besides the issues of intellectual property and venture capital for startups, “Biotechnology and the Law” also covers company formation, the transfer or acquisition of biotechnology from one company to another, employment issues, funding research, research collaborations and liability issues. “It’s a huge subject covering so many different types of companies and so many types of law,” Wellons says.