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Biotech / Medical : GelTex Pharmaceuticals (GELX)

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To: rkrw who wrote (60)	7/29/1998 3:52:00 AM
From: Robert L. Ray	Read Replies (1) of 127

>>>Please name me one deal where the smaller company licensed a drug to a larger pharmaceutical company and received terms which were better than 50/50. Answer is that you will not find one.<<< Well your right. I didn't find one. I'll keep looking but so far I've not found one. 50/50 seems to be a pretty common agreement. I follow Agouron Pharmaceuticals and they recently did a 50/50 deal with Immune Response for Remune. However even though 50/50 seems to be pretty common it always involves milestone payments and/or partial drug development reimbursement costs going to the smaller company. And also oftentimes stock purchases by the larger company at greater than market value. My thoughts on Cholestagel were simply that quite a bit of the development costs are already incurred, and GELX has quite a bit of cash in the bank, and a drug nearing approval, so the cash from a partner on Cholestagel perhaps isn't critical. I mean if GELX was confident in the product, a better percentage deal than 50/50 should be able to be struck should they forgo the milestone payments/development costs/sale of stock at above market prices. This would seem to be the type of deal that would pay off the most long term benefits by far should Cholestagel gain approval and establish a solid niche in the cholesteral drug market. As an aside do you or anyone else out there have any thoughts on who the Cholestagel partner might wind up being? One thing I find interesting/promising is that it looks like Cholestagel will be useful either alone or in combination with other Cholesteral medications. It has been used in combination with Lovastatin (Mevacor) with excellent results. So one would assume that it would have similiar benefits with the other Statin drugs. The fact that they have been using it in combo with Mevacor would lead one to think a possible partnership with Lilly might be in the works. Mevacor and Zocor have been getting killed in the marketplace by Warner-Lambert's Lipitor. So Lilly might be thinking of getting an exclusive license for Cholestagel so they can sell it both as a monotherapy and in single combo pill form with Mevacor. Such a combo pill might (I can't say for sure) have a superior performance/side effect profile in comparison to Lipitor. If that were the case I would think that Lilly would be salivating at the thoughts of such a drug. Of course even if such a partnership and drug combo came to pass, nothing would stop patients/doctors from independently using a Cholestagel/Lipitor combo taken as two seperate pills. But people do tend to like the convienence of taking one pill as opposed to two. All this is also why I feel that a better than 50/50 deal could be struck. One might imagine that both Lilly and Warner-Lambert would like to partner with GELX on this drug because of the combination possibilities of it. A bidding war on percentages sounds fine with me:) Or on the other hand GELX might be better served by partnering with a company that doesn't have any existing cholesteral drugs. They might feel that Lilly or Warner might excessivly push their existing drugs at the expense of Cholestagel. Of course Cholestagel and Mevacor/Lipitor are different classes of drug so that might not be too much of a problem. My guess would be that the deal that would serve GELX the best would be to license Cholestagel to a comany that has no current Cholesteral drugs except possibly ones in the same class (bile acid sequestrants) for X-percent. (hopefully at greater than 50/50:) Make this deal an exclusive deal for stand alone Cholestagel. Then reserve the right to independently strike deals with anyone it see's fit, to sell Cholestagel in combo form with other drugs. Is getting this type of deal/s realistic? To tell the truth I really don't know. I'm just throwing out some ideas for the thread to comment on, and tell me it's a good idea or that I'm dreaming. I'm really not sure if it would be best to partner with an existing maker of cholesteral drugs or not. Arguements could be made either way. But one thing I'm more sure about is that it would be by far the best if the deal is only exclusive to Cholestagel used as a stand alone therapy. That would free up GELX to independantly strike deals with other companies for Cholestagel used as combo therapy. I mean think about it. For example if GELX signed an exclusive deal with Merck...... Merck would wind up selling Cholestagel as a stand alone medication and probably as a combination pill with Mevacor and/or Zocor. On the other hand if a deal with whoever was non-exclusive for combo drug therapy then Cholestagel could wind up eventually in every Statin type of cholesteral medicine out there instead of just Mevacor and/or Zocor. But on the other hand, that would be precisely what Merck wouldn't want. Merck would not want GELX free to market Cholestagel to other drugs makers for use in combo form. Soooooo.... IMHO Merck might offer GELX a sweetheart deal for exclusivity. If an exclusive deal is struck with Merck then GELX should hold their feet to the fire on percentage of profits. Cholesteral meds have huge sales and Lipitor is killing the Merck drugs. If a combo Mevacor/Cholestagel was in fact superior to Lipitor and Merck had exclusivity for single pill use of such a combo and felt they could regain market dominance over Lipitor once again they sould be willing to strike a deal FAR in excess of 50/50. GELX should play hardball and either demand more than 50/50 or walk away and strike the afformentioned non-exclusive deal with another party. (exclusive only when Cholestagel is used as stand alone therapy with right to strike deals with whoever in regards to single pill combo therapies. So in short given this leverage, I would be very dissapointed to see a 50/50 totally exclusive deal struck with anyone. With the way the field is layed out either a much better than 50/50 exclusive deal or a 50/50 non-exclusive deal is VERY doable if GELX will negotiate properly.

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