Offloading a $300 Million Annual Revenue Stream: Are You Crazy?

Medical Patents Broker Inc.
By Kenneth Pearce, President

Most businesses believe that selling off a proprietary medical technology platform that is currently generating an annual $300 million revenue stream is “mad as a hatter.” Did you really drink the mercury?

There is business. Right? Then there is extraordinary business!

SOME POTENTIAL STRATEGIC APPLICATIONS OF THE $300 MILLION OFFLOAD

1. Cashing Out at the Peak of the Medical Patents Lifecycle Every patent has an expiration date, and as that clock ticks down, the asset’s value decays. The sales price can drop dramatically during the last few years of the monopoly. A competitor has been casually communicating that it wants your company’s market footprint. Depending on how anxious the buyer is, this offload can generate 5 to 10X or more. Accountants and lawyers are necessary to minimize taxes, and potential government intrusion because of the divestiture of medical patents.

2. Flipping from Pharma to Biotech As an example, the next real growth sector is biologics with carriers and dissolvable microcomputers where the first to the market could generate a ROI of 60X. FDA and CMS teams are already in place, and the risk of being the king of the next frontier appears feasible. The Board is onboard, and the average shareholder cannot understand the technology, but they like dividends. If it’s a win, the president becomes a star and is an adjunct professor at a school of business. If not, there is always the golden parachute.

3. Competing in a New Market with Less Regulations The company can leverage the net offload price to buy a professional sports franchise. Since the 1860s the value of professional sports franchises have increased. Americans seem to love sports. Media shows lots of sports, and pays big bucks to do so. In the long term, few investments do better than professional sports teams. No FDA, no CMS, no CDC, and very little government interference. The quasi-monopoly limits competition which increases profits. The sports remain the same: they still use balls, bats, baskets, clubs, gloves, helmets, shoes, rackets, skates and uniforms. Fans come and go, but overall, the fanbase for each franchise continues to increase with time, and so does the value of the franchise.

🎽 The President’s Viewpoint

Selling a valuable revenue stream can be a brilliant strategy, or a colossal failure. For decades, some companies have excelled because of their offloads.

Being risk-averse, it’s not my kind of deal. However, I do believe it would be fun to own a professional sports franchise. Still, if I had to decide, I do not know if it would be baseball, basketball or football. I like all three. I also like golf and tennis, but thy offer no professional franchises.