Integrating Alliances on a Global Basis(this article talks about early stage research partnerships, no mention of Procept, just for info. only.)
Geron flouts alliance trend that early bird gets the world
When biotechnology and pharmaceutical companies ink early
stage research project partnerships, the deals typically assign
comprehensive worldwide marketing rights to the larger partner.
Of 114 discovery, lead compound and preclinical stage alliances
commenced since 1994 and analyzed by Recombinant Capital,
87% involved worldwide licenses. In fact, the trend toward global
deals has increased recently, with 94% of early stage alliances
commenced over the past 18 months involving worldwide rights.
By contrast, a ReCap analysis of clinical stage-level alliances
found that only 60% entailed worldwide rights, and there has
been no appreciable change in this rate over the past three
years.
A biotech's largest prospective pharma partners set their
research priorities globally, and so, the thinking goes, for a
biotech to offer less than worldwide rights at this stage is to risk
falling short of a pharma's hurdle rate for interest and
participation in a potential deal. Plus, a big, comprehensive deal
better leverages the considerable time and expense associated
with the negotiation.
There is, however, a case to be made for regional deals.
Strategically, going regional increases a biotech's total number
of prospective partners and may increase the odds of its finding
partners who are optimally positioned and/or motivated to
develop the project in each major market. In practical terms, a
research project will usually be developed through early clinical
trials in a single regulatory jurisdiction. Then, assuming positive
results, the biotech can command premium payments from
subsequent partners.
Menlo Park-based Geron's strategy for partnering its telomerase
enzyme project for the treatment of cancer runs counter to the
"go global" trend. Telomeres are the DNA at the ends of
chromosomes, and telomere shortening during cell division has
been shown to be an important component of the normal aging
process in humans. Telomere shortening, in turn, is blocked by
telomerase, and telomerase activity has been shown to be
absent in most normal cells but present in virtually all tumor
cells.
Geron's April 1995 alliance with Kyowa Hakko Kogyo, and its
March 1997 alliance with Pharmacia & Upjohn, have created a
hybrid of global and regional approaches that retains the best
features of each.
The company's alliance with Kyowa Hakko was limited
geographically to an Asian Territory, consisting of Japan, China,
the Philippines and twelve additional countries. The deal was
typical of most screening agreements, in which Kyowa Hakko
sponsored Geron to develop screening assays and test
compounds for their ability to inhibit telomerase activity. The
alliance was atypical, however, in two respects:
1) The parties determined that Kyowa Hakko would include
certain of its compounds in screening for telomerase inhibitory
activity and thereby as Products under the agreement, subject to
either royalties payable by Geron or Kyowa Hakko's right to
access the chemical library of a third party with whom
Geron
entered into an alliance covering all or part of the Non-Asian
Territory; and,
2) Geron retained the right to request that Kyowa Hakko fund all
or a portion of Phase II and/or Phase III trials in the US, in return
for co-marketing or co-promotion rights to Kyowa Hakko for such
Product in the US and participation in the profits therefrom.
Geron's full strategy became apparent in March of this year,
upon the announcement of a worldwide alliance with Pharmacia
& Upjohn (P&U) for the sponsorship of its telomerase research
project. How was Geron able to announce a global alliance when
two years earlier it had licensed away Asian rights? In essence,
P&U traded co-promotion rights in Germany and the U.K. to
Kyowa Hakko, in exchange for co-marketing rights in Japan and
elsewhere in the Asian Territory. One can surmise that this
favorable outcome was at least tacitly associated with Geron's
trading away the right to use Kyowa Hakko as financier of US
clinicals in favor of an integrated marketing arrangement which
included Geron itself as the co-promoter in the US.
Secondly, utilizing its Kyowa Hakko relationship both as foil and
as backstop, Geron obtained from P&U the commitment that
Kyowa Hakko had sought for inclusion of P&U compounds in a
three-way screening effort. Better yet, Geron obtained for itself a
royalty interest in both Kyowa Hakko's and P&U's compounds,
since each partner agreed that, for the purpose of royalty
calculation, the other pharma's technology should be deemed to
be Geron Technology.
So, Geron got a research project funded by two major pharmas,
with access to both partners' compound libraries, availability of
the pharmas' combined marketing capabilities in multiple major
markets and royalty or co-promotion participation in any
successful outcomes.
Kyowa Hakko got a coordinated worldwide research and
development program, with principal focus on its Asian Territory
but also a marketing opportunity in two major European markets.
And P&U got a worldwide research project with the benefit of
two-plus years of prior pharma sponsorship.
Geron is not the first biotech to parlay a regional alliance into a
stronger bargaining position with a second corporate partner. For
example, a compound-specific regional deal was struck between
Kirin and Amgen in 1984, and then followed by another
relationship between Ortho and Amgen a year later. That
compound was erythropoietin, and the result was the emergence
of biotech's largest and strongest independent company. More
recently, in the HIV protease area, Vertex has followed a similar
strategy with Kissei Pharmaceutical and with Glaxo Wellcome,
while Agouron has done likewise with Japan Tobacco and with
Hoffmann-La Roche. But Geron's twist was motivating its second
partner (P&U) to offer direct and valuable inducements to its first
(Kyowa Hakko), en route to negotiating a coordinated and
integrated approach to drug discovery and development on a
global basis.
Posted: August 8, 1997
By: Mark Edwards
Managing Director, Recombinant Capital
medwards@recap.com |
