strategic planning and licensing biopharm products

June 2003

ProPharma Partners Limited

Strategic Planning and Licensing Biopharm Products

Prepared for LES Annual ConferenceBy

Donna Hackett

June 2003


When to license

• “Partner early and often” – Corixa Inc

• As late as you dare

June 2003


What do you need?

1. Intellectual Property (Patents, know-how)2. Proof of concept (plus defined development plan)3. Detailed Information Memorandum 4. Outline valuation (including cost of development)5. Patience and Persistence6. Access to Experience

June 2003


Information Memorandum

1. Outline of technology2. Market overview3. Details of technology4. Outline development plan5. Competitive position (including IP)6. Ballpark value

June 2003


The Licensing Process1. Prepare Executive Summary (usually from IM)2. Contact likely targets3. Arrange CDAs4. Send Information Memorandum5. Follow-up calls and visits6. Due Diligence7. Negotiations and Close8. Party

June 2003


Selecting Target Licensees

• Therapeutic Focus• Licensing/Acquisitions Focus• Tailor presentation to Target

June 2003


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


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


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


Due diligence - pre-visit• Assemble list of key issues

– CMC (Chemistry, Manufacturing and Controls)– Preclinical– Clinical– Regulatory– Financial– Commercial– Legal and administrative

• Key issues will vary according to project

June 2003


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


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


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


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


Due diligence - financial and commercial

• Can we make a good profit from the Product and for how long?– Detailed materials/manufacturing costings– Market data, sales forecasts and price projections– Sales and marketing costs– Exclusivity– Competitors, current and future

June 2003


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


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


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


Due Diligence

• Make it easy – impressions count

– Availability of people and data is important

June 2003


Licence Negotiations

June 2003


Points to Consider

• Breadth of licence• World-wide vs. Regional• Claw-back (diligence clauses)• Co-promotion rights• Equity vs. cash

June 2003


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


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


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


‘Claw-Back’ Clauses

Reasons:• To ensure development of out-licensed

technology• To ensure adequate prosecution of assigned

or licensed intellectual property

June 2003


‘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


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


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


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


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


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


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


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


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


Timely Closing of the DealFactors 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


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


Don’t Forget to Party

strategic planning and licensing biopharm products

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