A good patent may be a company's most valuable asset. For medium-sized firms with the research capacity to produce innovative and pioneering new products, but lacking the capital to fully exploit and commercialize their inventions, patent protection may be the key to commercial success. The research-oriented Croatian pharmaceutical Pliva is one such case in question.
In the late 1970s, Pliva developed an original antibiotic named azythromycin. From early trials, azythromycin proved to be an extremely efficient antibiotic with the characteristic of staying longer in the body tissue of animals than other similar antibiotics. Many years of research had led Pliva to the development of a valuable drug with huge potential. At the time, however, the Croatian pharmaceutical was a small player relative to the leading global pharmaceutical firms and lacked the necessary capital to commercialize the product worldwide, and reap the full benefit of its successful research.
In 1981, Pliva patented azythromycin worldwide, including in the United States as the drug was still undergoing trials before its final approval by the relevant health authorities. Scientists from pharmaceutical multinational Pfizer Inc. came across Pliva's patent while searching the database of the US Patent and Trademark Office and realized the enormous potential of the antibiotic. As one of the largest drugmakers in America with sales representatives worldwide, Pfizer could offer Pliva an ideal channel to commercialize its antibiotic. Talks between the two pharmaceuticals eventually led to a licensing agreement where both companies, as well as the general public, could benefit from the commercialization of a powerful antibiotic.
Under the agreement, Pfizer has the right to sell azythromycin worldwide. Pliva, however, maintains the right to sell the product in Central and Eastern Europe under its own brand name (Sumamed) and earns royalties on Pfizer's sales. Today, Zithromax - Pfizer's branded version of azythromycin - is one of the best selling branded antibiotic in the United States and produces over US$ 1 billion from sales every year. For Pliva, a pharmaceutical company of small proportions in comparison to its licensee Pfizer, the licensing agreement meant a huge breakthrough in terms of annual revenues and allowed it to expand its research activities. Nowadays, Pliva has become the largest pharmaceutical company in Croatia as well as one of the largest, in terms of sales, in Central and Eastern Europe.
This case clearly shows how even relatively small pharmaceutical companies can benefit from a strong patent protection in conjunction with a sound business policy. Companies investing significantly in research and development find in the intellectual property system an important tool for commercializing the results of their research, opening the way to distant markets which would otherwise seem inaccessible.