Biotech Financing: Why Strong IP Is The Currency of Collaboration

By Ken Dow and Weihong Hsing

Biotech always has been a challenging realm. The science is innovative, its technology makes it capital-intensive, and the related risks are unpredictable. When funding, if partnerships and intellectual property (IP) protection line up, the result can be transformative, both financially and for patients. But when one of those pillars falters, the entire business model is undermined.

Today, biotech is in such a moment. After the exuberant peak of 2020–2021, when capital seemed limitless and initial public offerings (IPOs) rolled out weekly, the industry has now entered a much tougher cycle. Venture capitalists are more selective, pharmaceutical partners are choosier, and at the very same time, the legal landscape for patents — the lifeblood of biotech value — has grown more challenging.

This collision of forces has created a kind of “legal friction” that every biotech leader now must manage. The good news is that with the right strategies, it is still possible to collaborate and attract investment. But doing so requires recognizing how the ground has shifted, and adjusting accordingly.

From Boom To Bust

The pandemic era created a historic surge in biotech funding. Breakthrough sciences, combined with urgent global needs, sparked a flood of capital. Companies went public early and often, valuations soared, and many startups raised money at record speed.

Today, however, the pendulum has swung in the other direction. Rising interest rates, worries about biotech’s risks and profitability, and the sheer number of unproven companies from the last wave have left investors cautious. Many of the firms that went public in the boom years now trade far below their IPO prices. Some have been forced into hasty sales while others simply shut their doors.

In this new climate, capital has not disappeared, but it has become more selective. Venture capitalists are still interested, especially in therapeutic areas like oncology, immunology, neurology, metabolic disorders, and rare diseases. Investors want de-risked assets with clear clinical data, realistic commercial plans, and credible paths to exit. The days in biotech of betting big on an exciting story with little proof are over, at least for now.

Partnerships Are Still Possible — But On New Terms

When traditional financing tightens, biotech firms often turn to partnerships with pharma as a lifeline. There is still appetite for deals. Pharma needs innovation to fill pipelines, and collaborations remain one of the most efficient ways to access them.

However, here, too, the rules have changed. Pharma is allocating dollars more carefully. Deals are tilting toward later-stage assets backed by strong data. Programs that look incremental are at a disadvantage; data-supported transformative innovations stand out.

For smaller biotech companies, that means the bar is higher than ever. A good story is not enough. Partners are asking tougher questions: Can you prove differentiation? Can you sustain exclusivity? Will this program survive scrutiny in a competitive landscape?

At the heart of all these questions is IP.

Why Intellectual Property Is The Currency of Collaboration

In biotech, IP is not just a legal asset — it is the foundation of commercial value. It is time-consuming and costly to bring a new small molecule drug to the market, and more so for biologics. A strong patent portfolio reassures investors that significant market share can be captured and defended. It tells potential partners that their investment of time and money will not be undercut by competitors racing to copy the same innovation.

In today’s funding cycle, IP strength is often a make-or-break factor. A company with concrete patent protection and a clear path of freedom-to-operate can still raise money and strike partnerships. Without it, even the most exciting science may stall.

And here lies the friction: just as IP has become more critical than ever, securing it has grown more difficult.

The Rise Of Legal Friction

Recent shifts in patent law have made broad, durable life sciences patents harder to obtain and easier to challenge. Three trends stand out:

1.Stricter Written Description And Enablement Requirements

Courts now demand more detail to prove inventors “possess” what they claim. For biotech companies, this often means that broad patent claims—for example, covering a class of antibodies—are harder to obtain and sustain unless backed by a wealth of experimental data. The result is narrower protection and more vulnerability to competition.

2. Uncertainty In Biotech Patent Law

In the United States, uncertainty concerning patent eligibility, obviousness-type double patenting (ODP), and patent term adjustment (PTA) creates challenges for the biotech industry. Certain types of biotech innovation, like diagnostics or technologies tied too closely to natural phenomena, are increasingly difficult to protect with patents using meaningful claims. What once seemed protectable now risks falling into a legal gray zone. Patents with a PTA may be invalidated by ODP over another patent with an earlier expiration date. This creates confusion and risk as to the patent term and validity.

3. Global Patchwork Challenges

Different jurisdictions apply different rules, from Europe’s rigorous standards on sufficiency of written disclosure to Asia’s variable enforcement systems. For global biotech companies, this adds cost, complexity, and uncertainty. In short, at the very moment when investors and partners are demanding stronger patents, the legal system is making them harder to obtain, defend, and enforce.

Strategies To Navigate The Friction

While the environment is tough, companies have options. By rethinking IP strategy, leaders in life sciences can reduce friction and strengthen their case with investors and partners, in four key ways:

1. Balance Filing Time And Scope Of Disclosure

• Filing too early brings the risk of the patent being invalidated for lack of supporting data.
• Filing too late risks losing the opportunity to competitors.
• The balance lies in filing with enough experimental depth to support valid claims with meaningful scope while keeping the option for future filings on improvements and follow-ons.

2. Draft Smarter Claims

• Layered protection matters. Draft a mix of narrow claims (most defensible) and broader ones (greatest protection if sustained).
• Be specific. The more detail and exemplification, the better the odds of surviving scrutiny.
• Do not overlook method-of-use claims, which can sometimes provide fallback protection where product claims are vulnerable.

3. Think Globally But Strategically

• Tailor filings to each jurisdiction rather than assuming one size fits all.
• Budget wisely. It may not make sense to pursue protection everywhere, so focus on markets with strong enforcement and commercial relevance.

4. Prepare For Due Diligence

• Conduct internal IP audits before raising money or seeking a partner. Identify gaps early.
• Show freedom to operate. Nothing scares off a partner faster than looming infringement risk.
• Emphasize durability. Investors want confidence not just in granted patents but in their ability to withstand challenges.

The Path Forward

The combination of tighter funding, selective partnerships, and tougher patent law is undeniably challenging. But it is also an opportunity for the most disciplined companies to stand out.

Investors and partners are not leaving biotech; they are simply being more demanding and selective. Companies that can pair compelling science with thoughtful IP strategies will still find capital and collaborators. Those that cannot do so will struggle, regardless of their breakthroughs.

The takeaway is clear: in today’s biotech ecosystem, IP is not just a legal function, but is a strategic business driver that is as central to survival as clinical data or financial planning.

Final Thoughts

Biotech always has been about solving hard problems, and the current cycle is no exception. The industry now faces a dual challenge: securing capital in a tighter market while navigating an IP landscape that is harder than ever.

Leaders must employ a shift in mindset. IP strategy can no longer be reactive or delegated entirely to outside counsel; it must be woven into the company’s core narrative, as well as front and center in discussions with investors and partners.

If there’s one message for biotech executives, it’s that strong IP is what keeps collaboration alive. Get that right and you can still attract capital, strike partnerships, and bring innovations to patients. Get it wrong and the most promising science may never see the light of day.

About the Authors:

Ken Dow is senior counsel at law firm Ice Miller, and brings over 40 years of experience in IP, licensing, and life sciences law. Known for translating complex scientific innovations into actionable legal strategies, Ken advises clients on portfolio development, risk management, and licensing — particularly in biotechnology and pharmaceuticals. His career spans roles as in-house counsel and law firm leader, guiding companies from startups to global corporations through critical IP and regulatory challenges.

Weihong Hsing is a partner at law firm Ice Miller, and provides clients with domestic and worldwide patent portfolio development and management counsel, intellectual property due diligence, IP portfolio evaluations and freedom-to-operate analysis in connection with mergers & acquisitions and investments, opinion work on patent validity and infringement, post-issuance proceedings, licensing representation and technical support for patent litigation. She holds a Ph.D. in molecular biology and genetics and has years of research experience in academic and industrial settings.