According to an incomplete S-1 filed on Friday, June 22, 2018, Rubius Therapeutics, Inc. is exploring a possible IPO. The self-described “emerging growth company” is developing a series of therapies using genetically engineered red blood cells. However, the prospect of genetically hacked “super-blood” strikes us as far less interesting than Rubius’ intentional obfuscation of seemingly important patent data.
Unsurprisingly, patents play a key role in the value of the business. Rubius attached a copy of their exclusive license agreement with the Whitehead Institute for Biomedical Research as an exhibit to their S-1 filing. However, Rubius redacted nearly every piece of significant data regarding the license arrangement. For example, the agreement calls for a variety of payments owed to Whitehead, including License Maintenance Payments, Milestone Payments, and running royalties. However, the copy filed with the S-1 withholds the amounts of these payments.
The actual S-1 filing itself fills in a few of the gaps. For instance, Rubius acknowledges issuing 366,667 shares of common stock in addition to an undisclosed upfront payment. They mention the annual license maintenance fees but omit the exact amount and acknowledge that the aggregate of the milestone payments is $1.6M. The royalties are described as varying “from low single digits to low double digits.” Deep in their S-1 filing, they state that the annual license maintenance fees are less than $100,000. Dominion Harbor CEO David Pridham has explained on numerous occasions that “Transparency is important. If all companies posted license agreements somewhere, there would be more deals and better, more efficient pricing.” Of course, posting redacted agreements and obscuring specifics with vague language fails to aid in this regard.
However, even more curious, the filing redacts all information that would easily identify the actual patents and applications that were licensed in from Whitehead. Based on the anticipated expiration dates (2034-2038, according to the S-1), the claimed “11 US and foreign patent applications” would have filing dates as early as 2014. While some might point out the possibility of non-publication requests keeping the contents of these applications confidential outside of the 18 month from filing window, the existence of foreign applications strongly negates this possibility. Thus, the reason for the secrecy is puzzling.
Unfortunately for investors, we find ourselves in an era when medical patents are more vulnerable to challenge than ever before. The very eligibility of some medical treatments is far from certain. Evaluation of the patent claims and prosecution history is critical to understanding the strength of the company’s intellectual property protection. While Rubius may update this information prior to the actual IPO, it’s omission here is curious and potentially troubling, if there’s something in those file histories that investors may want to know.