Commercialisation of biotech assets – learning from the pioneers: part two

In the second part of his critical assessment of the options open to biotech companies to commercialising their assets, Dan Heapy considers the partnership building route.

(Continued from “Commercialisation of biotech assets – learning from the pioneers: part one“)

Partnering with a larger, established pharmaceutical company, either handing over the whole commercialisation and taking royalties, or retaining some rights to commercialisation – is an attractive and most well-trodden route for biotech companies historically; however this option is not right for everyone, as often control of your product / company can be lost.

With cash flow to further their research being a key requirement for all biotech companies, it is easy to see why most take the partnership route – not only does it provide the financial lifeline, but also provides all the expertise and infrastructure required to take a product from conception to the market.

The other attraction of this route is the lack of risk associated with it. In essence the ‘purchaser’ is providing all skills and money, in return for a share of future profits.

One shining example of a company that has used this strategy to full effect is Onyx. In 1994 they partnered with Bayer pharmaceuticals, who agreed to pay full development costs of the oncology pipeline until the point of an investigative new drug (IND) application (which occurred in 1999). This ensured that the pipeline was developed with commercial market needs in mind, and hence products were shaped to meet this requirement.

Onyx and Bayer effectively agreed to share the profits of sorafenib (Nexavar) 50:50, excluding Japan.

This deal has been so successful that Onyx were able to further develop the business following an amendment to the deal agreed in 2006, allowing them to develop a commercial presence by co-promoting Nexavar in the US.

There has since been another agreement for a further compound, regorafenib, under which Onyx receives a 20% royalty on all global net sales of Stivarga in oncology.

The growth strategy (funded by the increased cash flow, and taking learnings from the success with Bayer) was further amended when they decided to shoulder the risk of new development, purchasing Proteolix in 2009 for their drug carfilzomib. Onyx continued the development of the drug, which has recently been approved by the FDA, and is one of the key reasons behind the recent purchase of Onyx by Amgen for over $10 billion.

“Onyx and Bayer effectively agreed to share the profits of sorafenib (Nexavar) 50:50, excluding Japan.”

 

However, for every success story there are numerous failures, with about 60–70% of collaborations failing to achieve their goals – not least Onyx’s own collaboration with Pfizer, which ultimately produced very little.

There are a number of reasons for such failure, with two key ones standing out:

1. The product fails to deliver on Phase II/III results.

This is potentially the most likely reason for failure: the product not living up to its initial promise. If the biotech company has signed all its products over to its partner, the danger is that further development of all pipeline products could be prevented.

One example of this is Praecis, which entered into an agreement with Sanofi in 1997, that was terminated in 2001 leaving Praecis in a difficult situation. Despite several collaboration attempts to save the product (abarelix), it was launched but ultimately withdrawn in 2006, at which point GSK bought the company outright.

Biotech companies have quickly learnt this lesson, and they will now rarely sign over all of their rights, but rather just those to one product or disease area.

2. The decision-making process among the companies does not play to the experience and strengths of the organisations.

Despite entering into the partnership for all the right reasons (to access funding and experience from the partner company), all too often the biotech company can find it difficult to relinquish control of the commercial development, adding bureaucracy and slowing the decision-making process.

 

“This deal has been so successful that Onyx were able to further develop the business…”
 

This can lead to further consequences. When Imclone was given responsibility for the initial FDA approval of Erbitix, the application was rejected, owing to poor evidence, which some have attributed to ImClone’s lack of expertise and experience in the regulatory process. This could have been a terminal mistake even though the data for the drug was excellent, however fortunately with the right people behind it has gone on to become a blockbuster. ImClone was subsequently sold to Eli Lilly for $6.5 billion.

So what are the key lessons we can learn from the pioneers who have gone down this route?

Achieve full value for the product: this may sound obvious, however knowing how best to package (sell) your product to potential suitors could change the nature of the deal. You may be looking for further funding and ultimately a commercial collaboration, but aligning your product to the market opportunity early in its development will maximise its value.

Be clear on your goals and requirements from the partnership: it is essential to know what you want to gain from the deal. Is it just financing, or do you need the commercial expertise? If it is just for finance, then it will probably be best to fully explore other methods of financing first, however if it is for commercial expertise, agreeing the required elements upfront and allowing for each company’s skills to be harnessed will allow for a more harmonious relationship.

Commercial success can be achieved: although most ventures currently end in perceived failure, if you align your drug development against what the market needs, rather than against the potential scientific advances, then product failure rates can be reduced. This approach either requires (as with Onyx) bringing in a partner at an early development stage, or ensuring that you have developed commercial strategy alongside your development strategy.

Part Three: The ‘nuclear option’ of selling the product entirely – or even the company – can be viewed here.

 

About the author:

Dan Heapy is Associate Partner at The MSI Consultancy – a CELLO HEALTH Business. Follow him on Twitter @DanHeapyMSI. He can be contacted at dheapy@msi.co.uk.

Do you think most drug development is aligned against what the market needs?