Strategic Planning and Licensing Biopharm Products

1. Strategic Planning and Licensing Biopharm Products Prepared for LES Annual Conference By Donna Hackett

2. When to license • “Partner early and often” – Corixa Inc • As late as you dare

3. What do you need? • 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

4. Information Memorandum • Outline of technology • Market overview • Details of technology • Outline development plan • Competitive position (including IP) • Ballpark value

5. The Licensing Process • 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

6. Selecting Target Licensees • Therapeutic Focus • Licensing/Acquisitions Focus • Tailor presentation to Target

7. 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)

8. 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”)

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. Due Diligence • Make it easy – impressions count • Availability of people and data is important

20. Licence Negotiations

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

22. 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

23. 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

24. 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

25. ‘Claw-Back’ Clauses Reasons: • To ensure development of out-licensed technology • To ensure adequate prosecution of assigned or licensed intellectual property

26. ‘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

27. 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

28. 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

29. 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

30. 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

31. 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)

32. 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

33. 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”

34. 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

35. 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

36. 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

37. Don’t Forget to Party