Legal Forum: Putting the "Co" in Development and Promotion: The New Biotech-Pharma Collaborations - Companies considering partnering arrangements must do financial and operational due diligence to ens

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Legal Forum: Putting the "Co" in Development and Promotion: The New Biotech-Pharma Collaborations
Companies considering partnering arrangements must do financial and operational due diligence to ensure the success of the collaborations


BioPharm International
Volume 19, Issue 8

PDL's relationship with Roche dates back to 1989, when it licensed to Roche worldwide rights for Zenapax, the first humanized monoclonal antibody approved by the FDA for the treatment of acute kidney transplant rejection. Over the years, PDL continued to conduct investigator-sponsored trials to test Zenapax's potential in autoimmune diseases and asthma applications. In 2003, PDL paid $80 million to Roche to buy back the rights to Zenapax, except for use in kidney transplant patients. Following the announcement of positive Phase 2 data in asthma, PDL approached Roche to negotiate a collaborative deal for Zenapax use in asthma and other respiratory disorders. Key features in the asthma collaboration include equal representation and decision-making on development and commercialization decisions, a 50–50 cost-profit split, and a copromotion arrangement in the US. Prior to agreeing to the deal with Roche, PDL committed substantial resources to the diligence process, with a focus on: the potential product market share in asthma; the need to track sales in multiple indications, including transplant, asthma, and multiple sclerosis; development costs and risks, including the costs of developing a new high yield antibody manufacturing process; estimated approval and launch dates; and post-launch marketing and promotion costs.

DEVELOPMENT CONTROL

In today's deal environment, biotech companies find that it is possible to obtain development funding from a larger partner without ceding control. An illustration of this is the 2005 deal between Theravance Inc. (South San Francisco, CA)/Astellas Pharma (Tokyo, Japan). Astellas agreed to pay $65 million upfront and another $136 million in milestone payments based on clinical filings and approvals for the Theravance Phase 3 antibiotic Telavancin. Theravance successfully retained significant control over the clinical development and launch of this antibiotic.

As with a copromotion arrangement, successful negotiation of balanced development terms requires a substantial amount of strategic thinking and planning, along with detailed financial analysis. Some key considerations that must be assessed in a co-development deal include determining how and where clinical studies will be conducted, and which party will assume oversight responsibility over the trials. Responsibility for development expenses and internal FTE rates and costs also must be discussed in detail, and agreed on. A "meeting of the minds" on these key issues, generally through a negotiated development plan and budget, will solve a lot of potential problems down the road.

PARTNER COMPANY RELATIONSHIPS

Whether collaboration will be successful depends a great deal on the often unpredictable component of human capital. Therefore, it is important to consider the following before entering into a long-term collaboration:

  • Management buy-in—Make sure that all major department heads are on board and have input into the deal parameters, e.g. finance, clinical, regulatory, and marketing divisions.
  • Opportunity costs—Everyone—senior management, the board of directors, the project managers—should understand that company capital and resources will be focused on the partnership and that these resources may not be available for other projects.
  • Alignment of interests—Both parties must be willing to negotiate and execute a deal based on long-term 50/50 economics. It is important to confirm with your partner that there is a shared operating philosophy going forward.
  • Service levels and partnering support—Pharma companies typically have several products and therapeutic areas in their portfolio. Key questions here include: What is the pharma company's experience in the relevant therapeutic area? Will the pharma company champion the therapeutic and market potential of the product? Will the pharma partner give the product the appropriate level of attention and resources it will require?


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