ProPharma Partners Limited

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ProPharma Partners Limited

June 2003

Strategic Planning and Licensing
Biopharm Products

Prepared for LES Annual Conference

By

Donna Hackett

ProPharma Partners Limited

June 2003

When to license



“Partner early and often”


Corixa Inc



As late as you dare

ProPharma Partners Limited

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 Persistence

6.
Access to Experience

ProPharma Partners Limited

June 2003

Information Memorandum

1.
Outline of technology

2.
Market overview

3.
Details of technology

4.
Outline development plan

5.
Competitive position (including IP)

6.
Ballpark value

ProPharma Partners Limited

June 2003

The Licensing Process

1.
Prepare Executive Summary (usually from IM)

2.
Contact likely targets

3.
Arrange CDAs

4.
Send Information Memorandum

5.
Follow
-
up calls and visits

6.
Due Diligence

7.
Negotiations and Close

8.
Party

ProPharma Partners Limited

June 2003

Selecting Target Licensees


Therapeutic Focus


Licensing/Acquisitions Focus


Tailor presentation to Target

ProPharma Partners Limited

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)

ProPharma Partners Limited

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”)

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

June 2003

Due Diligence


Make it easy


impressions count



Availability of people and data is important

ProPharma Partners Limited

June 2003

Licence Negotiations

ProPharma Partners Limited

June 2003

Points to Consider


Breadth of licence


World
-
wide vs. Regional


Claw
-
back (diligence clauses)


Co
-
promotion rights


Equity vs. cash

ProPharma Partners Limited

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


ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

June 2003

‘Claw
-
Back’ Clauses

Reasons
:


To ensure development of out
-
licensed
technology


To ensure adequate prosecution of assigned
or licensed intellectual property

ProPharma Partners Limited

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






ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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

ProPharma Partners Limited

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)

ProPharma Partners Limited

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

ProPharma Partners Limited

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”

ProPharma Partners Limited

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

ProPharma Partners Limited

June 2003

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

ProPharma Partners Limited

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


ProPharma Partners Limited

June 2003

Don’t Forget to Party