Tuesday, November 13, 2007

Co-Promotes are Out. Extra Royalties are In

Heave a sigh of relief, Big Pharma. Co-promotes are on the way out. At least, according to Ben Bonifant, VP at consultants Campbell Alliance, who was speaking on a panel at Bio-Europe in Hamburg on Monday.

Co-promotions with small biotech partners have been a bug-bear for Big Pharma ever since they’ve been forced to concede them—or at least options for them—in what remains a sellers’ market. As we reported in depth in this IN VIVO feature, Big Pharma hates the thought of sharing promotion with their (usually inexperienced) licensing partner. Launching a product is hard enough, goes the argument. We don’t need the distraction of trying to coordinate with and train relative novices.

Small wonder, perhaps, that many past examples of co-promotes—like the Eli Lilly/ICOS joint venture on erectile dysfunction drug Cialis—have turned into acquisitions. Indeed, Lilly got a good deal. Poor old ICOS put so much resource into its share of promoting Cialis that it wasn’t able to build up a supporting pipeline. The stock fell and Lilly struck. (No need to spell out the lessons in there.)

Nowadays, acquisitions may pre-empt a co-promote being put into practice at all. One of the last things Abgenix was doing before being snapped up by Amgen was preparing to trigger its co-promote option on panitumumab (Vectibix), according to Gayle Mills, former SVP Business Development at Abgenix, now EVP Business Operations at Roxro Pharma and the panel moderator. “I believe that this was the straw that broke the camel’s back,” she told the audience in Hamburg. (The original deal, which included a manufacturing component, was signed between Abgenix and Immunex in 2000.)

In future it may not get to that. Many newer generation biotechs are embracing a ‘let’s get to proof-of-concept and no further’ model, wherein co-promotion rights aren’t relevant anyway. Returns from Phase II deals are good enough, say their investors; why take on further cost, and risk?

Indeed. But no biotech should forget that relinquishing a co-promote—whatever the likelihood that it would be exercised—is a bargaining chip these days in any deal negotiation. What’s it worth? A couple of royalty points, at least, according to panellist Rob Wills, VP Alliance Management in Johnson & Johnson’s pharma group.

How does he know? Well, because when a smaller partner’s taken over, that’s about what Big Pharma might typically agree to give back in return for cancelling the co-promote. It’s all in the change-of-control clause, in other words.

As the panel pointed out, though, some biotechs may not want to wait for royalties (lovely as they are, falling straight to the bottom line, ‘n all that). They want earlier rewards—like some more upfront money, or beefier milestones. For now, “we don’t see situations where, if a co-promote is taken off the table, the biotech gets X more dollars,” noted one panelist. That could soon change.

Now granted, co-promotes—real, exercised ones--aren’t going to disappear completely. But there are other ways to share commercialization besides straight co-promotes. “It would be wiser to abandon the traditional view of a co-promotion and call it something else—such as a co-sell--taking away the idea that you’re co-launching the same drug,” proffered panellist Louis Scotti, VP Marketing and Business Development at Arena Pharmaceuticals. What he meant was, there’s scope for a smaller partner to come in later, a couple of years’ post-product launch, for instance. The partner can then add to the commercialization effort, perhaps by targeting a specific customer group, and avoids the costs and risks associated with setting up a sales force ready for regulatory approval--whose timing is notoriously uncertain.

There’s a good precedent for this model, pointed out Wills, albeit an old one. In Alza’s deal with Janssen on opioid patch Duragesic (before Alza became part of J&J), Alza came in three years’ post-launch, making incremental calls to a specialist audience. Look out for similar set-ups in future, remarked panellist Timothy McBride, SVP Business Development for Cerimon. “We envisage promotion based on specialist markets, with Big Pharma going to the broader audience,” he said, although without commenting on timing.

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