Wednesday, October 10, 2007

$80 million upfront? About Average

So Synta’s PR firm were pushing today’s deal with GlaxoSmithKline at us as “one of the biggest product deals this year” and indeed “among the largest in the industry”…and it’s true, the $80 million cash up front deal for an anti-cancer compound that’s entering Phase III isn’t at all bad.

But $80 million up front isn’t off the scale, either. In fact, it’s looking about average these days for an asset on the cusp of Phase III—Merck in July paid Ariad $75 million up front for its cancer compound, Novartis put the same on the table for Antisoma’s similar-stage oncology asset in April, and outside of cancer, GSK paid $75 million for XenoPort's Phase III RLS compound in February, Shire that same magic figure for Renovo’s late Phase II wound care treatment in June.

Indeed, $80 million even begins to look measly alongside the $102 million that GSK forked out for Genmab’s Phase III antibody, or the $165 million that Johnson & Johnson coughed up for ex-US rights only to Vertex’s then-Phase IIa Hepatitis C gem.

Ok, so these were outliers. Genmab’s contained the antibody premium; Vertex’s was special, too. But the point is, three-digit up front payments for late-stage assets will soon be common, so don’t waste the hyperbole.

And don’t forget to look behind the curtain, either. Milestones: “Up to $1.01 billion in potential payments," our PR friends say. We all know this trick, though. That’s the if-everything-goes-to-plan-across-all-indications-and-the-moon-goes-blue (or biodollar) figure. Think $135 million in pre-approval milestones.

This, according to Synta’s CEO Safi Bahcall, is more than enough to cover the costs of the compound’s Phase III trials and US submission, which Synta stays in charge of.

And that—control—is the bit that’s interesting in this deal; more interesting than the amount of cash that’s changing hands (most of which GSK can capitalize, incidentally--so it doesn't immediately hit the P&L and thus crimp any R&D budgets). Synta will pay for and finish Phase III, and take the compound past the US regulators for metastatic melanoma. That allows the biotech to boast about the “confidence GSK has in our ability to conduct a pivotal trial and register the drug,” as Bahcall explained. But it also allows GSK to hedge risk and be absolutely sure the compound gets past regulators in the first indication before committing any of the $300 million of potential commercial milestones, or much of the $450 million in potential development and regulatory milestones in other cancers.

Still, Bahcall’s right in saying that “it’s unusual, given GSK’s experience, that they allow us to take the lead” in development and regulatory. Typically Big Pharma would want to take the reins, re-do the Phase III trial design and start talking to regulators. (Especially, you might think, given recent biotech casualties at FDA like the one that hit GPC Biotech when it tried to get satraplatin past.) Not this time—no doubt the compound’s fairly straightforward clinical trial design, with an objective end-point of progression-free survival, helped.

And if Synta gets the drug past regulators, it gains credibility in the next stage of the relationship: co-commercialization. That feature’s about average, too, for deals these days—many biotechs want to have their own sales forces, despite all the future problems and complexities and costs those forces bring.

In reality, pharma-biotech co-promotes are usually a nightmare, as we discussed in this IN VIVO feature. But Bahcall’s confident that the partners have learnt from what’s gone before, with specific prescriptions and conditions for how the co-promote would work, plus measures to ensure that Synta doesn’t lose out on the tiered profit share, thought to start at 40% and rise to 50%, based on annual net sales. (Profit shares can bite small partners if pharma ramp up their cost of sales to reduce what’s left to distribute.)

There are also provisions in the deal, according to Bahcall, allowing for Synta to assume more responsibility for commercialization in the future—once the drug has been out there for a couple of years, for instance (IN VIVO Blog speculation, not his comment). In other indications, the partners will share development in and outside US, with Synta eligible for double-digit royalties on ex-US sales.

Don't get us wrong: for all our talk of 'average', Synta’s got a good deal, all the more so given it’s the company’s first. Shareholders started celebrating earlier this week on deal speculation. They needed a party; Synta’s shares have done very little since its February IPO.

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