Pharma deals 2012

Last month Pharmaceutical Executive published a summary based on its annual panel of heavy hitters in business development on best practices in licensing and M&A for the year ahead. The discussion was built around the latest findings from Cambell Alliance's 2012 Survey of Dealmaker Intentions. The survey had many interesting conclusions, and I thought that I would summarize a few of their thoughts here - I recommend reading the full article.

Most attractive in-licensing therapy areas

In-licensors expects most deals to be made in oncology, cardiovascular, CNS, metabolic and respiratory drugs. Oncology has a unique characteristic in that interest is high at all levels of the development cycle, including early stages. In fact, the interest in doing deals in pre-clinical, Phase I and II was found to be higher than for those in Phase III. All other major therapeutic segments (except immunology) showed a preference for candidates in phase III. An interesting side note from David Thomas (BIO) was that oncology, CV and CNS have the lowest success rates (less than one in 10 compounds make it from phase I to commercialization). 

Trends within individualized treatments

FDA has approved 3 drugs in the last 12 months whose mechanisms are intended for a specialized target sub-population. Because the ability now exists (in some disease areas) to target and individualize therapies for patients, the per patient costs can be higher but it is also more likely the payers will support price premiums for some guarantee of better performance among a defined patient group. J&J did a deal with the UK NICE, to obtain payer buy in, in which it guaranteed that if Velcade did not work in a patient, it'd pay back the NHS. 

About asset valuation

A decade ago the approach in valuing a target incorporated a lot of material that frankly is irrelevant, such as the number of patents on file, the number of employed scientists, or the square footage of lab space. R&D is not a numbers game. Pfizer consistently spent the most money on R&D and employed the most scientists, yet the return from its effort was poor. Nowadays companies are valued more on the basis of their strong cash flow, and little credit is given for development stage assets. The early 1990s saw enormous valuations for "ideas" with early stage IPOs, but with investors unable to sort through the good from the bad and value assets appropriately. Many companies subsequently failed.

Deal-making with academia

Universities have been empowered and push very hard on the IP front, taking a major interest in leveraging intellectual capital to generate profit. The IP and know-how from academia is important in drug development but often represents a small piece of a very complicated value equation, currently there seems to be little understanding that their contribution may only be a small part of the very long and expensive process to bring products to commercialization. Data packages from academia are rarely done to industry standards. Negotiations have on the other hand started to change. For a long time, academic partners insisted on terms that were entirely one-sided: take all the patent rights, refuse exclusivity in partnering, and reimburse them for 75 percent of the overhead costs. Today, the approach is more similar to those made with small biotech partners: with upfront payments plus royalties linked to milestones. Many TTOs now hire people with background in venture, biotech or Big Pharma - this could be a sign of an improving relationship.

Tobias Thornblad

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The role of the university - in the Future of Early Innovation

Ulf Petrusson opened up the second day of the Early Innovation and Knowledge City/Region track at CIP FORUM, on Tuesday afternoon. The theme of the talk was about how innovation and openness can be safeguarded in research platforms. The full panel included;

Arundeep Pradhan, President, AUTM and Oregon Health Sciences

Boo Edgar, Chairman, MedCoast Scandinavia and Director, GIBBS

Karen Hersey, fm Senior Counsel IP MIT and Professor, Franklin Pierce Law Center

Michael Cleare, Director TTO, University of Pennsylvania

Philippe Cupers, PhD, IMI European Union

Ulf Petrusson, Professor of Law, University of Gothenburg and Director, CIP

IP as discussion topic is often focused on the commercialization aspect on the underlying technologies but this was a discussion focused on the ability to use instruments such as IPRs, policies and technology transfer functions to stimulate research and knowledge dissemination. Universities face major challenges as increasing complexities of new technologies demands more extensive developments before research results can be readily utilized and provide societal benefits. In order for universities to not being risked to be blocked further down the line of the collaboration, there is an increasing need for intellectual asset management capabilities (e.g. for managing research processes, research collaborations, contract research, research funding, development processes, project selection, etc.).

A model was also presented where the role of the university was tracked over time from being a pure educational platform based on solely contributing to the public domain. Over time, this has also started to incorporate an increasing licensing and collaboration model where its responsibility has also started to include supporting the industry and society by transferring its research. As the importance of providing societal value has increased the university has also engaged in more entrepreneurial activity through a venture creation model. As all of the functions above have been incorporated, a new role for the university has emerged - the Intellectual Asset (IA) platform university.

Tobias Thornblad

(Contact via Twitter)

Transactional Norms in the Agricultural Biotechnology Industry

As some of you are aware, I am currently working with intellectual capital management in Agbiotech in the US. One of the most difficult things when working in different industries, in my opinion, is to grasp the implicit structural norms that build up an industry. The major reasons for this, in my opinion, is that the norms are 1) intellectual, meaning that they are hard to "see", 2) taken for granted by the people in the industry, since they are actively shaping these just from partaking in business on the arena, 3) a competitive advantage, for those who understand them. I thought that I would share with all Intangitopia readers some of the norms that I have understood as being the skeleton of the agbio industry and hopefully initiate some discussion (and future blog posts) about norms. The focus I have chosen to describe is how transactions, highly dependent upon IPRs in this industry, can be seen as the structural building blocks that is and creates this market.

Overview
This is a dynamic industry characterized by rapid turnover of small and medium sized firms, while a few large companies dominate, with the top four patent holders, between 1990-2000, being Monsanto, Pioneer, Novartis, and DuPont. Large investments in research and development in attempts to differentiate products by developing new and better products is likely to be responsible for the high importance of patents in this industry. Hence, a major driver in this industry is successful objectification of knowledge. It should therefore not come as a surprise that one of the drivers for the function of small and medium sized firms in this industry is the availability of expertise (with the other driver being available funding).

Two Categories of Transactions
Transactions of enabling technologies in plant biotechnology, from an agricultural biotechnology actor’s perspective, can broadly be divided into several types, but I will be covering; Transactions of 1) enabling tools, and, 2) genes or traits.

1. Transactions of Enabling Tools
Enabling technologies transacted at this level are so-called upstream technologies, which mean that they provide important building blocks (often in the form of information and knowledge) and tools for the intellectual value network to provide many of the experienced utilities adding up to finalized products. Examples of enabling tools include elements in vector constructs, transformation protocols, statistical tools for genotype/phenotype selection, selection markers, and so on.
Contractual examples:
• Material Transfer Agreement – Donald Danforth Plant Science Center
• BiOS Open Source License (v1.5) - Plant Enabling Technologies

Norms: Transactions of Enabling Tools
Upstream enabling technologies are often preferred by actors to be protected by patents, or as trade secrets (if they are not going to be used primarily for transactions), either as a way to objectify know-how and information to enable transactions, or as a way to ensure freedom-to-operate within a given technology field. These transactions would normally be utilized as value propositions towards other actors by universities, SMEs, quasi-public and public actors, rather than between large vertically integrated seed companies (e.g. Monsanto Technology, Pioneer Hi-Bred Int, Syngenta, etc.), since they provide inhouse competitive advantage.

However, it is important to realize that certain types of technologies, where transformation protocols is an optimal example, require advanced capabilities and skills in order to work. This means that such technologies are extremely dependent on efficient knowledge transfer of not only the protocols and intellectual property rights, but more importantly the know-how held by the researcher that knows how to perform it. Transactions of this sort, where the knowledge is difficult to objectify, therefore often is more effectively supplied under service agreements where the know-how holder can perform the invention (e.g. transforming cells) itself and return the results (e.g. transgenic cells/organisms) rather than the tool. Hence, one evident norm at this level to adapt to, as an actor, is that all available tools in the market may not be readily useful to be used as stand-alone objects and likewise to ensure that efforts are made to ensure efficient utilization by knowledge transfer when offering such technology. Moreover, this may be one of the reasons why the biotechnology industry is highly collaborative in its nature.

2. Transactions of Genes or Traits
The two major types of objects at this level are either genes or traits. Characterization and patent protection of a gene sequence can be seen as the ‘best case’ scenario, whether it is to be used for commercial transactions or to ensure freedom to operate, where the intellectual object is claimed in combination with a function. Successful claiming of a gene sequence can result in broadscope applicability where the sequence may be used as a value proposition, often through licensing, to a number of actors simultaneously by offering exclusivity of usage in different crops. ‘Next best’ scenario is the occurrence and identification of a particular performance enhancing genetic trait (most commonly caused by a genomic mutation) in a germplasm/variety. In this case, the intellectual claim will be made for the profile of the phenotypic property instead and the claim will be narrower in scope since the applicability scope of the trait will be limited to the organism in which the trait was exemplified. Examples of traits, or genes where the sequence to the traits has successfully been isolated and characterized, may include yield performance (e.g. photosynthesis, seed development, plant structure, nutrient utilization, harvest ability), pest (e.g. disease, insect) resistance, quality traits (starch/carbohydrates, lipids/oils, proteins), nutrient conversion, or stress (heat, cold, drought) tolerance.

Norms: Transactions of Genes and Traits
The underlying object of transfer can adopt a range of forms depending on the technology. Objects of transfer for gene patents are, for instance, the genetic sequence that is commonly transferred in one of the following ways; 1) In digital form, accessed either through the licensor or through a patent database where it is stored, 2) As plasmids, with disclosed restriction sites for cloning, 3) As bacteria transformed with the plasmids. Physical transfers of biological material (i.e. 2 and 3 above) are typically accompanied by a material transfer agreement (MTA) that states terms and obligations for handling the material as well as the license that governs the intellectual elements, e.g. rights to use the invention for certain purposes. Publicly available databases based on genome projects have greatly facilitated transactions of type 1) above, since digital versions of genetic sequences can be readily accessed and downloaded by anyone.
Desired traits can be more difficult to successfully claim in patents to generate strong protection since the intellectual claims are focusing on the effects rather than the actual cause. Commonly the beneficial property is claimed (e.g. higher digestibility) in combination with a seed (germplasm) and often also the use of the beneficial property (e.g. feedstock exhibiting higher digestibility useful in biofuel production). One of the strategies to strengthen the protection of the trait is to bundle it with complementary objects such as selection markers that further define the trait by indicating its genetic “address”. Transactions in the form of licenses for a trait should in theory be rather straightforward since it is patent protected, however, in practice, that specific trait may be an integrated constituent in one of the actor’s inbred parental lines meaning that transfer of that trait would risk disclosing the full genomic profile of a valuable asset providing competitive advantage to the holder that may not have been fully IP protected at that stage (or is considered a trade secret).

Two strategies that can effectively be applied, in this case, include; 1) a restrictive license, or, 2) a crossing strategy where one party is held in the dark. The former (1) can be a license to the trait restricted to producing and using the beneficial properties of the traits, while prohibiting breeding and further development or characterizing of the plant supplied. The latter (2) strategy can be likened to a strategy appearing as a “blackbox” for the in-licensing party; First, the holder of the trait requests and receives a sample from the in-licensing party’s seed (in which the trait is desired to be incorporated). Secondly, the holder of the trait crosses* the received seed with his own seed (containing the trait) and provides the first generation offspring back to the in-licensing party along with a license stating the intellectual rights to the trait-of-interest. This ensures that the licensee never comes in physical contact with the licensor’s asset should the licensor wish to keep it undisclosed. An additional measure to prevent reverse engineering by the licensee is to breed the trait into a publicly available line that is supplied instead of using the licensee’s own seed. This may be useful in cases where it is suspected that a licensee can, by the assistance of his own knowledge about his seed genome (e.g. by the assistance of markers), quickly identify the changes in the genome and the licensor expects the licensee to use this to compete against the licensor.

* In the US, transgenic plants are field tested under the United States Department of Agriculture Animal Plant and Health Inspection Service (APHIS) guidelines; if the innovator considers the trial successful, it can then apply to APHIS for deregulation. The whole process may take a couple of years, but if APHIS grants a deregulation, the transgenic plant may be commercialized in the US, as any traditional variety, with no further regulation to specific transgenic status. Once it is deregulated by APHIS the transgenic plant can be crossed with other varieties to pass on its genetics without further involvement from APHIS.


Well, I hope that you found this interesting, and managed to finish it despite of its length. I am looking forward to your thoughts and comments.

Tobias Thornblad
(Follow me on Twitter)

See this previous post for a visualization of such transactions: http://intangitopia.blogspot.com/2009/04/iamipm-system-in-agribusiness.html

Tough times spur innovation

The current financial crisis has hardly slipped past anyone’s life unnoticed, and the life science sector is certainly no exception. Bloomberg’s article about recent biotech bankruptcies has been a major discussion topic in the biotech blog world lately (e.g. California Biotech Law Blog, The In Vivo Blog, etc). It is probably close to impossible to see any positive effect for those affected by the crisis, but I thought that I would elaborate on the competition question lifted in relation to my last blog post in the context of the current crisis.

Competition over financial resources forces strategizing
Scarcity of financial resources leads to strategy restructuring to gain competitive advantage in an increasingly fierce competitive environment. It seems as innovation becomes the major vehicle for differentiation when the economy goes down while cost-cutting becomes more of a simultaneous norm for the whole industry. Some recent examples include;
Astrazeneca announced, 20 Nov, that it as part of its company strategy, to focus on drugs available on prescription only, will sell a drug portfolio to Glaxosmithkline comprising prescription free drugs such as Alvedon and Reliv. This monetization, providing Astrazeneca with USD 253 million according to the agreement, takes place while the company is announcing closures of plants in Sweden, Belgium and Spain affecting 1400 employees.

A great example of how innovation does not only have to relate to products and portfolios is Infinity Pharmaceuticals Inc., which recently entered into an innovative strategic alliance agreement with Mundipharma International Corporation Limited. Mundipharma gains access to Infinity’s entire oncology-focused discovery and development pipeline for an initial (with options to extend for two additional one-year periods) term of three years. Infinity will retain US commercialization rights for all oncology products developed under these programs and is obliged to pay a (double-digit) royalty on US sales of these products to Mundipharma. Commercialization rights outside of the US are held by Mundipharma, which are also required to pay a (double-digit) royalty to Infinity for the sales of these products. As part of the deal, Mundipharma will pay all of Infinity’s R&D expenses until at least the end of 2013.
These are just two examples of how tougher times may spur innovation, it will be interesting to see what strategies other biotech firms will come up with to stay afloat.

Tobias Thornblad

Abbreviated pathways to drug development

Recently a study was published by Teva Pharmaceutical Industries Ltd., where Alex Brill analyzes the article recently written by Duke University economist Henry Grabowski’s which explores the number of years that a biologic drug should enjoy exclusivity before a generic equivalent is introduced. The basis for this analysis is the fact that the US Congress is considering to legislate an abbreviated pathway for the FDA to approve biogeneric therapies, much like the Hatch-Waxman Act in relation to chemical equivalents (ANDA).

Biogenerics
Generic alternative drugs (a.k.a biogenerics, biosimilars) to innovative approved drugs, in the US, are generally not required to include preclinical (animal) and clinical (human) data to establish safety and effectiveness when submitted to the FDA. Hence, the term ‘abbreviated’ pathway. The approval instead relies on data that can prove that the drug is bioequivalent, e.g. by demonstrating that the rate of absorption and the amount delivered of the active ingredients are the same as the innovator drug.

Abbreviated Pathway as Technology Platform
Conclusions suggesting an earlier introduction of competing drugs could certainly be debated when the study is sponsored by the largest generic drug manufacturer in the world (as also indicated in Patent Baristas). Generating productivity and market efficiency through competition is hardly a revolutionizing thought though, albeit an important one. However, I wonder how the concept of an ‘abbreviated pathway’ could be used as a platform for accelerating the innovative drug development process instead of ensuring that market competition is maximized.
An ‘abbreviated pathway’ for generic approval versus a new innovative drug would obviously be different than an accelerated pathway for developing completely new drugs. For instance, there exists reliable reference data for the former but no standardized reference points at all for the latter. This means that the standardization would have to be located in another layer, where in my perspective the actual methodologies and tools used would be a more relevant focus of interest, e.g. by commercializing biomarkers in different ways.

A very interesting approach is taken by the Innovative Medicine Initiative, which focuses on speeding up the principle causes of delays and bottlenecks such as; predicting safety, predicting efficacy, bridging gaps in knowledge management and bridging gaps in education and training. This not only opens up opportunities for big pharma (which optimally would increase the drug/invested R&D ratio), but also provides new markets and business models for biotech actors, small as well as larger ones, based on tools, data, and knowledge management. More exploration of this to come.

Tobias Thornblad

Credit Crunch IP

I have a hard time to trying to hide my obsession regarding the financial situation and the worldwide economic downturn. Here are some IP-related thoughts I have absorbed during the last months from various sources.

Venture Capital
Many start ups get funded on the promise and vision of turning their intellectual assets into valuable intellectual property to enable value extraction or be acquired by bigger fish. The current economic climate seems to restrict the flow of new capital to the VC funds. Moreover the model of VC funding is, according to some, about to change. This will probably change the innovation ecosystem and have an effect on IP generating possibilities for start-ups relying on venture capital. According to Bob Kagle and VentureBeat, about half of all VCs going out of business.

IP (patent) liquidation
The strategic focus of the usage of IP will be to generate money to support the operations. The companies have to turn their intellectual capital management to become a profit center instead of a cost center. This includes increased IP transactions and more focus on alternative costs since money in the bank is more attractive then IP assets with no clear purpose except a potential FTO function. To tie on to Marcus' blog post some while ago, perhaps a increased number of transactions can be a driver for a common market place for IP to reduce transaction costs.

Technology transactions
Is this the time where open source and open platforms gets the formal recognition in the corporate world? I am not completely sure that open source solutions, when speaking of software, is less expensive. However, the cost is distributed in another way to reduce upfront costs.

Moreover, open collaborations or outsourcing could be measures to lower costs in development activities or in day-to-day operations. To what extent this will actually happen is yet to see. To manage relationship and results in open platforms are demanding. My view is that not many firms have developed capabilities in relation to this, but I am too inexperienced and lack some insight to do a proper prediction regarding the adoption level dependent on corporate capabilities.

Strategic research
Less capital and commitment to strategic research. Cost cutting means lay-offs. Lay off could implicate loss of knowledge and research momentum . The impact of this will be hard to predict. Some claims that the societal value of having companies doing strategic research will decline vastly during the downturn period. The


That's all for now. Given the media buzz regarding the economic downturn and the effect on our lifestyle and future this topic will be revised in the future.

Mathias Hellman