In Search of Guardrails

Section II.A.? License Holder/Type? ?Upon reflection, my recent critique of co-development deal structures, without regard to their commercialization benefits, seems akin to taking down a straw man.? For this reason, I’ll jump ahead to the license element before returning to additional R&D deal elements.

An important caveat:? This entire series of articles is intended to address the what of alliance structures.? For insight into the why and when, I recommend an excellent piece of writing by Steve Holtzman and his interlocutors, found here.

????????????? In today’s parlance, one might view the evolution of post-launch alliance structures as an ongoing search for guardrails.? In the earliest alliances, biotechs retained manufacturing rights, both as a core competency and as a reminder to commercialization partners of the originator’s ongoing role in commercial success.? However, manufacturing of biologics turned out to be capital intensive and front-end loaded, so most early biotechs soon fell back to a royalty-only stake in a positive alliance outcome.

????????????? Regional alliances created an opportunity to follow one’s partner into the clinic, but the absence of stringent diligence requirements often resulted in suboptimal clinical progression.? Into the breach came co-development deal structures – first for clinical stage alliances, then for early stage deals as well.

????????????? Having “skin in the game” post-signing signaled serious intent to prospective partners, and some measure of uncapped upside to investors.? Whereas royalty terms typically disclosed only as “double-digit” could mean anything from 10-40+% of product sales, co-development deals were generally heralded as entailing 25-50% split of profits.?

However, running a three-legged race with a much larger partner is fraught with peril.? Structuring co-development, and especially Co-Co (co-development, co-promotion) biopharma alliances has become a highly valued skill set within the BD&L community.

????????????? Here’s a snapshot of one of my favorite Co-Co alliances – Medivation’s 2008 Phase III collaboration with Pfizer for Dimebon to treat Alzheimer’s and Huntington’s diseases:

????????????? How do I love this structure – let me count the ways!? First, this is the core license:

????????????? The profit share calculation in the US Shared Territory is after deduction of Commercialization Costs as detailed in an Initial Shared Territory Commercialization Plan and Budget.? Significantly, internal FTE costs, such as for regulatory, are excluded, as shown here:

????????????? Additionally, Medivation is paid for specialty co-promotion, and at a Detail rate that’s higher than its partner’s compensation for promotion to primary physicians:

????????????? There’s mutual exclusivity around Competing Products, plus offsetting compensation in the event that a competitive product (“Restricted Product”) is subsequently acquired:

????????????? Finally, the collaboration term, and both profit share and royalty payments, extends for the life of Products:

????????????? I could go on … Diligence, Dispute Resolution, accounting for Combination Products … there’s much to love here.? The bottom line is this – when it comes to co-development, having guardrails in place is crucial.

P.S.? To find the architect of an awesome deal structure, check the notifications section.? For Medivation, it was Barbara Kosacz of Cooley – no surprise there!

You can see the introduction to this ongoing series of articles about best practices in biopharma licensing, or go directly to links to previously posted articles of the series here.