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What are pharmaceutical companies looking for in a licensing deal?

10:10 am by | 0 Comments


Big pharmaceutical companies strike licensing deals with small companies in hopes of finding new, highly profitable medicine without the cost of buying a whole company.

Small companies get funding other ways, such as venture capital firms, but the money from licensing arrangements can mean the difference between continuing operations and closing shop.

Sometimes these deals work, sometimes not. Last week presented four examples, three starting and one ending (badly), involving the drugmakers GlaxoSmithKline, Johnson & Johnson, Pfizer, and AstraZeneca, all of which have significant Philadelphia-area operations.

Every deal is different. But, generally, Big Pharma pays an amount up front to Small Pharma, then pays more if the compound reaches milestones in clinical trials, gains approval from national regulatory agencies, such as the Food and Drug Administration, and then generates revenue from sales.


"We're looking for access to a special asset or special expertise that can support assets we have and can develop into future drugs," said Miguel Barbosa, leader of immunology research and scientific partnership strategy at Janssen Research & Development L.L.C., a subsidiary of Johnson & Johnson.

Following the Human Genome Project, the National Institutes of Health has a Human Microbiome Project, which seeks to study the trillions of bacteria living in the normal human stomach.

Second Genome, of San Bruno, Calif., is a small private company working in the microbiome field. The company and Janssen will focus on ulcerative colitis, a form of inflammatory bowel disease afflicting 700,000 Americans. Part of the trick, Barbosa said, will be identifying bacterial differences in healthy humans vs. those with ulcerative colitis, and then identifying drug targets that play nicely with the other bacteria but also relieve the ulcerative colitis better than current medicine.

Neither company would reveal figures, but Barbosa suggested the financial arrangement was also "novel," because it might not be a one-and-done deal. By collaborating through J&J's new California Innovation Center in Menlo Park, Calif., Second Genome might be able to generate other profitable products beyond a drug for ulcerative colitis.

"We might take one project into the pipeline, in the standard sense, but we'd like them to continue working," Barbosa said. "We're looking for truly transformational products."

Scientists hope to find in the microbiome solutions for cancer and autoimmune disorders, which are caused by the immune system's inability to distinguish between good and bad bacteria. Those disorders include multiple sclerosis, type 1 diabetes, and rheumatoid arthritis.

Pfizer signed a deal with South San Francisco-based CytomX Therapeutics, with $25 million paid right away and potentially $610 million later. CytomX does early research on cancer and inflammatory problems.

The GSK and AstraZeneca licensing deals were aimed at drugs for rheumatoid arthritis.

GSK paid about $29.5 million up front to a small German company called MorphoSys AG and will pay up to $552.5 million if various milestones are met with a compound now called MOR103. It has no fancy marketing name yet. Another sign of the early status and the Big Pharma-Small Pharma difference was the handling of the announcement. MorphoSys assembled investment analysts for a conference call. "This transaction is a major milestone for MorphoSys," CEO Simon Moroney said in the statement.

GSK barely acknowledged the deal happened, before a spokeswoman said via e-mail, "We've already got partnerships with other companies (ChemoCentryx, Galapagos and Janssen Biologics) and this deal continues our efforts towards the goal of developing new treatments for autoimmune and inflammatory diseases."

AstraZeneca, which has about 85 licensing deals, only wishes it was at the start of its deal with Rigel Pharmaceuticals, also of South San Francisco. In 2010, AstraZeneca paid $100 million up front to develop and sell a pill called Fostamatinib.

Rigel could have gotten $800 million more if the drug reached certain sales targets. Instead, AstraZeneca last week pulled the plug on clinical trials, without applying for FDA approval, because the drug did not show enough benefit. It gave the rights to the compound back to Rigel and will take a charge of $140 million against earnings in the second quarter.

While this was not good news for AstraZeneca, it was really bad news for Rigel. Fostamatinib was its only product. The stock price fell to its 52-week low of $3.35 before closing Friday at $3.56.

Contact David Sell

at 215-854-4506, dsell@ phillynews.com, or @phillypharma. Read his blog at www.inquirer.com/ phillypharma. ___

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