ProPharma Partners Limited
Strategic Planning and Licensing
Biopharm Products
Prepared for LES Annual Conference
By
Donna Hackett
June 2003
ProPharma Partners Limited
When to license
• “Partner early and often” – Corixa Inc
• As late as you dare
June 2003
ProPharma Partners Limited
What do you need?
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Intellectual Property (Patents, know-how)
Proof of concept (plus defined development plan)
Detailed Information Memorandum
Outline valuation (including cost of development)
Patience and Persistence
Access to Experience
June 2003
ProPharma Partners Limited
Information Memorandum
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Outline of technology
Market overview
Details of technology
Outline development plan
Competitive position (including IP)
Ballpark value
June 2003
ProPharma Partners Limited
The Licensing Process
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Prepare Executive Summary (usually from IM)
Contact likely targets
Arrange CDAs
Send Information Memorandum
Follow-up calls and visits
Due Diligence
Negotiations and Close
Party
June 2003
ProPharma Partners Limited
Selecting Target Licensees
• Therapeutic Focus
• Licensing/Acquisitions Focus
• Tailor presentation to Target
June 2003
ProPharma Partners Limited
Due diligence - what is it?
• Process of information gathering and
evaluation
• Includes confidential and public domain
data
• Two-way process, although buyer
(licensee) frequently more thorough than
seller (licensor)
June 2003
ProPharma Partners Limited
Due diligence - when?
• To be valuable, must be completed before
conclusion of deal
• Typically, formal process begins when
– parties showing serious interest
– confidentiality agreement in place
– outline commercial terms have been discussed,
or even agreed (“subject to due diligence”)
June 2003
ProPharma Partners Limited
Due diligence - why?
• No current or reasonably foreseeable
blocks to commercialisation exist
• The price is fair in relation to the risk of
failure and the potential return
June 2003
ProPharma Partners Limited
Due diligence - pre-visit
• Assemble list of key issues
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CMC (Chemistry, Manufacturing and Controls)
Preclinical
Clinical
Regulatory
Financial
Commercial
Legal and administrative
• Key issues will vary according to project
June 2003
ProPharma Partners Limited
Due diligence - CMC
• Can a product be made
– Which complies with all relevant requirements FDA, MCA, etc
– At an economic price
– With secure, validated sources of raw material
– With a robust, preferably simple, validated
process
– With acceptable capital investment, if required
June 2003
ProPharma Partners Limited
Due diligence - preclinical
• Is the product safe and what effects does
it have in animals?
– Acute/subacute/repeated dose toxicity
– Carcinogenicity
– Genotoxicity
– Reproductive toxicity
– ADME, pharmacology safety studies
June 2003
ProPharma Partners Limited
Due diligence - clinical
• Is the product safe and effective in
humans?
– Full details of clinical trials, completed, in
progress and proposed
– Pharmacodynamics and pharmacokinetics data
– Safety data
– Dose ranging
– Side effect profiles
June 2003
ProPharma Partners Limited
Due diligence - regulatory
• Are the Regulatory Agencies likely to
grant Product Licences in the territories
of interest?
– All of the above plus:
• Full details of submissions to Regulatory Agencies
• Planned labelling
• Contacts/meetings/communications with Regulatory
Agencies
June 2003
ProPharma Partners Limited
Due diligence - financial and
commercial
• Can we make a good profit from the Product
and for how long?
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Detailed materials/manufacturing costings
Market data, sales forecasts and price projections
Sales and marketing costs
Exclusivity
Competitors, current and future
June 2003
ProPharma Partners Limited
Due diligence - legal
• Could patent or other legal issues prevent
development and sale of Product?
– Does the licensor have:
• all the necessary rights to the Product/process
• all necessary governmental/other
permits/authorisations to make the Product
• any current or pending litigation which might block
production or sale of Product
June 2003
ProPharma Partners Limited
Due diligence - legal cont.
– Are the patents strong?
• If not, do other factors reduce risk of competition
eg. know-how, orphan drug status
• Does their exercise require licences to other IP
• If so, could such licences be obtained (and for how
much)
• Are there any oppositions to the patents
June 2003
ProPharma Partners Limited
Due diligence - legal cont.
– Are current patent applications likely to be
granted
• If not, what are the commercial implications
– Do third party patent applications have the
potential to block ours
– Environmental issues/ liability/ H & S
June 2003
ProPharma Partners Limited
Due Diligence
• Make it easy – impressions count
– Availability of people and data is important
June 2003
ProPharma Partners Limited
Licence Negotiations
June 2003
ProPharma Partners Limited
Points to Consider
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Breadth of licence
World-wide vs. Regional
Claw-back (diligence clauses)
Co-promotion rights
Equity vs. cash
June 2003
ProPharma Partners Limited
Breadth of Licence
• Determine what licensee really needs
• Indication-specific licence
– Not always acceptable to licensee even if he
only intends to develop one indication
– Consider a “develop or sublicense” clause
• Dosage-form specific licence
• May be more acceptable as market is
protected
June 2003
ProPharma Partners Limited
Ensuring Optimal World-Wide
Marketing Coverage
• Very few companies have genuine global
marketing strength
• Some therapies have major market outside
US/Europe, e.g. Hepatitis
• Consider regional deals for Japan, Pacific
Rim, Eastern Europe, Latin America
• No longer possible to sub-divide EU
June 2003
ProPharma Partners Limited
Ensuring Optimal World-Wide
Marketing Coverage
Factors to Watch when Constructing Regional Deals:
• Who will ‘police’ the Territories?
• Watch for parallel imports
• Not a problem if there is little price differential
• Price cannot be controlled but supply can
• It is necessary to keep control of the supply chain for
this licensing strategy to work
June 2003
ProPharma Partners Limited
‘Claw-Back’ Clauses
Reasons:
• To ensure development of out-licensed
technology
• To ensure adequate prosecution of assigned
or licensed intellectual property
June 2003
ProPharma Partners Limited
‘Claw-Back’ Clauses
Creation of ‘Claw-Back’ Clauses:
(a) For IP - monitor prosecution
- return on abandonment of any
coverage
(b) For technology
- first option
- matching offers
June 2003
ProPharma Partners Limited
Co-marketing & Co-promotion
• Co-marketing vs. Co-promotion
• Retention of limited Co-promotion rights is
usually of interest to Biotech companies and
often helps to secure the deal
June 2003
ProPharma Partners Limited
Co-promotion
• Does the size of the market and margin
warrant a large-scale marketing effort?
• If so, share revenues in proportion to
marketing effort
• If not, consider limiting number of reps,
share revenues after deducting marketing
costs
June 2003
ProPharma Partners Limited
Equity instead of Up-Fronts
• Pharma
– Wants asset to back payment otherwise considered too
high
– Potential for double gain
– Favourable PR
• Biotech
– wants validation of (and usually premium on) share
value
– No obligation to repay
June 2003
ProPharma Partners Limited
Biotech v. Big Pharma
The Growth Paradox
• As big pharma companies grow and
consolidate they increasingly become
specialist development and marketing
organisations which outsource innovation
• This usually puts biotech in a strong
bargaining position
June 2003
ProPharma Partners Limited
Advantages of Licensing to Big
Pharma
• Perceived greater validation
• Important if large sales force required
e.g. GP or OTC product
• High standard of product development
(not necessarily fast)
June 2003
ProPharma Partners Limited
Advantages of Licensing to
Smaller Companies
• Usually greater focus on project
• Usually speedier decisions and greater
transparency
• Often leaves some rights with licensor
- allows selling the project several times
June 2003
ProPharma Partners Limited
Closing the Deal
• Focus on what the parties need, not what
they say they want
• Build valuations around real market data
and agreed forecasts
• Don’t rely on “industry norms”
June 2003
ProPharma Partners Limited
Ensuring the Deal is Closed in a
Timely Manner
Reasons:
• To beat competitors to the deal
• To maintain momentum in the development
programme
• To maintain internal momentum in favour of the
deal
June 2003
ProPharma Partners Limited
Timely Closing of the Deal
Factors for Achieving Timely Closing:
(a) Get lawyers involved early - at least at
‘Draft Heads’ stage
(b) Keep negotiating teams fully
empowered and small (2-3 people)
(c) Set aggressive timetable for completion
(d) Set calendar of negotiating days at the
outset
June 2003
ProPharma Partners Limited
Summary
• Consider what product is
• What is needed for Information Memorandum to ensure
interest
• Have all people and information necessary for due diligence at
hand
• Know what your most favoured deal is and be willing to
negotiate
• Timely closing secures the deal
• Others, e.g. Training, R&D funding, Improvements can also be
important
June 2003
ProPharma Partners Limited
Don’t Forget to Party
June 2003