The DiagnoFirst Opportunity
John Mason, a principle at Oldwell Partners, was facing a decision of whether or not to invest in DiagnoFirst, a molecular diagnostics firm. DiagnoFirst's key product was a genetic test that identified a subset of prostate cancer patients with a high risk of clinical progression and death. DiagnoFirst had applied for patents, in both the U.S. and EU, for the sequence of 40 genes, the new methodology for gene amplification, and the specific mechanics of the genetic tests. Mason's decision to invest in DiagnoFirst was based in part on the likelihood of obtaining patents and in part on the projected cash flows of the business under various scenarios. This case examines issues of intellectual property in science, international differences in patent law, and the decision-making process of venture capital in biotechnology deals.