Size Matters for Specialist Drugs, Too

Sales force size, that is. ZymoGenetics’ ex-US commercialization deal with Bayer HealthCare on lead recombinant human thrombin didn’t come as a huge surprise: the west-coast biotech had always said it would seek a partner ex-US.

But what was interesting about today’s deal was that Bayer also gets to co-promote rThrombin in the US for the first three years post-launch, in exchange for up to 20% sales commission plus bonus payments up to $20 million. Now, this is a specialist drug, sure—it was filed in December 2006 as a safer alternative to bovine thrombin for use in helping control bleeding during surgery, and the entire US market is today worth only $250 million or so.

But ZymoGenetics isn’t the only one going after it (which, incidentally, says much about the growing competition even for niche products). It shouldn’t have too much trouble displacing King Pharmaceuticals’ bovine-derived product Thrombin-JMI, given the recombinant drug’s superior safety and convenience. Bovine thrombin has a black box warning due to immunogenicity, which doesn’t affect rThrombin; the Zymo product can be stored for two years at room temperature, unlike some plasma-derived drugs.

But Johnson & Johnson is also on the loose, thanks to a 2004 deal granting the Big Pharma European and then North American rights to Omrix Biopharmaceuticals’ human blood-plasma derived thrombin, which, like rThrombin, is due for approval later this year.

Zymo argues that surgeons don’t like human plasma derived products either, and that the Omrix drug will also likely carry a warning. But a battle pitting Johnson & Johnson versus Zymo's planned 50-strong US sales force looked too one-sided, whatever the products. That helps explain why Zymo’s share price has remained so muted this year.

It also helps explain why Zymo agreed to the three-year US co-promote--even though it was earlier firm in its intention “to commercialize rThrombin in the US on our own”.

Zymo will still be in charge of US pricing and commercialization, and will book US sales. But Bayer’s added muscle will allow Zymo to quickly penetrate the market, converting a maximum number of hospitals to recombinant thrombin as fast as possible, and also countering any threat from J&J. With the support of Bayer’s 70 US sales reps and 25 scientific liaisons, “we’ll have the largest field force in the hemostasis market,” Zymo's president and CEO Bruce Carter said on the conference call following the deal's annoucement, “as well as what we believe to be a superior product.”

As for Bayer: it has long abandoned global, Big-Pharma style ambition in favor of a more specialist focus. Like other mid-sized pharma, it has tried to position itself as a flexible partner that’s willing to consider ex-US rights only—and let’s face it, that’s increasingly all that’s on offer in today’s sellers’ market, as we've discussed in previous IN VIVO articles.

But the Zymo partnership offers a glimpse of how mid-cap pharma may now be able to leverage the size they do have—relative to many a biotechs, anyway—to secure what are effectively global product deals for products with (relatively) low risk.

And the cost isn’t bad either: Bayer pays Zymo $30 million up front, $40 million on approval, and up to $128 million in milestones, most of which are sales based. Ex-US, it’s in charge, and pays Zymo double-digit royalties.