Introduction
Five years ago, we started building Molecule around a simple yet powerful idea: to place patients and researchers at the center of the drug development process. Our thesis is that the fundamental lack of innovation in drug development over the past few decades is the result of a mechanism and incentive design problem intrinsic to the market structure and macroeconomics of healthcare.
At Molecule, we believe this can be achieved by changing the rules of the game — patients and researchers govern intellectual property (IP) related to a drug alongside (or instead of) a pharmaceutical company, they will behave fundamentally differently with respect to pricing, access, and capital management, prioritizing cures and health outcomes as opposed to profit.
With the introduction of IP tokens (IPTs), an evolution of the IP-NFT framework, we are one critical step closer to that reality. IPTs are a new way of turning intellectual property into an incentive for collaboration and funding.
For the first time, governance around intellectual property related to a therapeutic can be freely exchanged for funding, collaboration, and support with the click of a button. This marks the beginning of an era of collaborative, globally interoperable drug development — one where patients, researchers, and funders across the world seamlessly work together to advance drugs to the clinic.
The Macroeconomics of IP in Drug Development
Many talk about prioritizing patients in the drug development process, but few do. Currently, value and innovation in healthcare is driven by ownership in intellectual property that guarantees a 20-year monopoly around a therapeutic innovation. This gives an incentive to innovate, take on risk, and spend the incredibly large amount of capital required to develop a therapeutic and bring it to market. However, this model is not without profound negative implications ranging from anti-competitive behavior to patent trolling and ever-greening, which collectively harm patients. Publicly traded pharmaceutical companies’ primary obligations are to their shareholders, so year-over-year growth in profit tends to be prioritized over all else.
In the context of this model, what is a good drug? Well, it is one that requires many sick people to take a drug chronically, ideally for the rest of their life. Disease management is much more profitable than cures, and a “blockbuster drug” is one that many people need to take often. The market has proven this time and time again, as detailed in the report “Is Curing Disease A Sustainable Business Model”, which chronicles the story of Gilead’s treatment for hepatitis C as an example. We see these stories as intrinsic to the very fabric of the American healthcare system, which indirectly subsidizes healthcare for much of the developed world. We believe that there is a better way, and it starts with IPTs.
What are IPTs and how do they work?
IPTs are IP governance tokens. They are synthesized using IP-NFTs, a digital contract that gives the holder the right to a piece of intellectual property. IPTs govern IP pools: pools of IP and R&D data from scientific research, shared sets of IP-related resources meant to benefit a community by facilitating cooperative management and commercialization of collective IP.
But why is this important and why should you care? As I mentioned earlier, IP is the fundamental value driver in drug development, but is intrinsically monopolistic, often stifling innovation. IPTs represent a marked advance over the traditional model — instead of a single company or corporation controlling a piece of IP, a variety of disparate stakeholders can control IP based on funding, work, or support given to a research project. Similarly, researchers can create bounties that enable other researchers and laboratories around the world to contribute data to their project, and in exchange, own governance over the IP that is being developed by the collective. Our hypothesis is that giving patients and researchers governance over medicines will increase the quality and cost-effectiveness of drug development.
This is a very powerful concept. For years, experts in innovation have been suggesting the need for new innovation and collaboration models in drug development and technology development out of universities. Corporate structures and joint-venture agreements have severe limitations and tend to introduce unnecessary friction, particularly in very early collaborations that are high risk and where low administrative and cost overhead is a requirement. Here, IPTs fill the gap, enabling value creation to be shared from the earliest stages of a commercially-oriented research project.
IPTs represents a bridging of worlds — they enable an open-source level of collaboration without losing the commercial opportunity and value-capture known to incentivize progress in traditional legal entities. Combined with the right stakeholder base — patients, researchers, and aligned supporters — IPTs creates an arbitrage opportunity in biotech: they give more equity to patients and researchers, in turn resulting in a higher quality research for lower cost. We believe patients and researchers are in it for effective cures, not to make a quick buck.
What exactly do holders of IPTs have? Governance — and with it, great responsibility. One major observation we made while developing the BioDAO innovation model is that entity-level incentives (such as BioDAO tokens) are often not enough to power end-to-end drug development. While they can work to incentivize short-term collaboration and actions such as deal sourcing, diligence, and part-time efforts, they are insufficient to push forward individual projects at a high velocity. Whereas BioDAO tokens enable governance over an entire IP portfolio, IPTs enable governance over a single project’s IP and R&D data. This opens up new incentive frameworks for more granular levels of collaboration, incentivizing individuals to govern large stakes in projects in a pre-company state. For BioDAOs, it also means new sources of collaboration and liquidity. BioDAOs now have the ability to synthesize IPTs from their pre-existing IP-NFT portfolios and encourage new individuals, groups, companies, and even other DAOs, to collaborate with them, all the while accessing new sources of funding for the researcher and the DAO treasury. Collaborators could, for example, earn up to 10% of the IPTs supply in an asset for their collaboration and support, creating a strong incentive to move research forward.
What’s Next?
The first IPTs have already been synthesized. Token holders in the VitaDAO community participated in the VITA-FAST crowdsale for Viktor Korolchuk’s project on Autophagy at the University of Newcastle, which was oversubscribed by more than 1700%! More IPTs will be synthesized on additional projects soon!
We will be publishing about the model, first use cases, and all of the new possibilities enabled by IPTs. We are also eager to see what you build with them, and hear your thoughts to strengthen, improve, and iterate the model.
Visit vitadao.com and join their community to see the first IPTs in action.
