Pullan's Pieces #152
Pullan's Pieces #152
September 2019
BD News and Analysis for  Biotech and Pharma
Dear --FNAME--,

We are officially in FALL.  We are getting ready for what always feels like a race to the end of the year.    I'm planning to attend BioEurope and will teach a course at the EBD Academy there just before the meeting.   Also planning a webinar panel on cancer vaccines, date TBD.  



1. Companies almost in the top 20
2.  Premium for differentiation
3. Jessica:  Orphan designation- understanding the value.  
 4.  Trevor: Early stage deals and preclinical exits 

Almost top 20 companies
We all pay a great deal of attention to news from the top 10 or top 20 global pharmas.  I thought it would be fun to profile the next tier, companies with revenues of  $3B to $18B (just under the revenues of the top 20).  

Who is below the top 20 with $3-18B in revenues?   The top of the list includes Allergan (to be acquired by Abbvie) and Celgene (to be acquired by BMS).  Geographically, 5 companies are in each of US, Japan and Europe (counting the UK as Europe). 1 is in Australia.  

The biggest therapeutic area for the revenue drivers for each is diverse, with CNS surprisingly topping the list with 7 of the companies in the group.  Oncology is 2nd with 2 of the group.  Aesthetics, respiratory, GI, immunology, metabolic, infection, CV all get 1 company. 
The clinical stage pipelines are not quite in the order of revenues but Celgene has the most compounds in Phase 1, 2 and 3.  

If we look at the clinical pipelines of the group, oncology is the area with the most compounds from Phase 1 to 3, followed by CNS, immunology etc.  
If you look at the pipeline in each therapeutic area by company you see oncology has many companies as does CNS and Immunology, while GI, musculoskeletal, ophthalmology and genetic show only 1 or 2 companies with clinical programs.   
If you look company by company, you see the oncology (in blue) and CNS (in orange) across most companies.  Regeneron is pretty balanced in its diversification.  CSL is missing oncology.  Alexion, Menarini, Mallinckrodt look to be in only a few therapeutic areas.  
Celgene and Eisai have been the most active in licensing deals in the past several years.  
For preclinical in-licensing deals, Celgene, Astellas, Shiongi and Biogen have been the most active.  
From a partnering perspective, there is opportunity with these companies across many therapeutic areas.  They have money, expertise and commitment to certain therapeutic areas.  It is good to pay attention to the 2nd tier of big companies, below the top 20!  
How much premium for differentiation?   An antibody deal analysis

Deal comps are always hard as it is hard to really know what is comparable!  But it does seem that exceptional differentiation should result in premium deal terms.  While summarizing contracts for my talk in the Advanced EBD Academy just ahead of BioEurope, I considered the Amgen Cytomx deal in comparison to the median preclinical antibody deal. 

Median Preclinical Antibody Licensing Deal Terms
A search on GlobalData identified 19 recent non-academic preclinical deals for a single antibody asset with global rights and with disclosed total value. 
  • The median upfront was $39M
  • The median total was $365M.    
Bioscience Advisors reports that the effective royalty rate for preclinical assets with global rights in 2017 and 2018 was 6%.  Antibodies are typically a bit higher.  And typically, big pharma pays more than the average terms.  

So how does creating a masked BiTE for Amgen stack up? 

Amgen and CytomX 
Ab Masking Technology on BiTEs – Oct 2017

To apply CytomX Probody technology to Amgen T-cell engaging bispecific (BiTE) against EGFR and 3 other targets

  • $40M upfront and $20M in Cytomx stock (share purchase agreement)
  • Up to $455M in development, regulatory and commercial milestones for 1 or more BiTEs against EGF
  • Royalties to be reduced for IP reasonably necessary to exploit Product

  • CytomX to lead and pay thru Phase 1expansion study for EGFR product
  • Amgen develops and commercializes.

  • Cytomx, by x days after Phase 1 expansion, can opt into a profit share (% redacted) in the US, with tiered double-digit royalties outside the US

  • Amgen gets worldwide rights to develop and commercialize up to 3 additional, undisclosed targets (Gatekeeper to see if available).
  • Should Amgen ultimately pursue all of these targets, CytomX Therapeutics will be eligible to receive up to USD950 million in additional upfront and milestone payments and high single-digit to mid-double digit royalty payments on any resulting products.

  • CytomX  will also receive the rights from Amgen to an undisclosed preclinical BiTE
  • Amgen is eligible to receive milestones (maximum $203M) and royalty payments on any resulting products from this CytomX program.

It initially appears the value Amgen paid for the differentiation of an EGFR antibody was pretty much aligned with the median preclinical antibody deal.  There was not any apparent premium for the Cytomx extra value.  However, in part, this may be because the Amgen BiTE is itself differentiated from EGFR monospecific antibodies.  And Cytomx is only providing part of the molecule that is the drug and the molecule did not exist at the time of the deal.  So with this perspective, the deal terms may indeed be recognizing the premium for Cytomx.  
Jessica:     US, EU and Japan Orphan Designations – Understanding the Value (Part II)
Last month we delved into the value of regulatory designations and found that Fast Track Designation may correlate with more lucrative licensing terms for both antibody and cell therapy assets.   In reality, all of the designations are valuable as they can enable faster and/or more efficient interactions with the FDA through drug development.  This month we will focus on the Orphan Drug Designation since this was the “original” unique regulatory designation. The Orphan Drug Act (ODA) of 1983 was passed into law by the US Congress with Japan following suit in 1993 and the EU in 2000.  In 2007 the FDA and EMA agreed to a common application process though each agency grants their own approvals.

Whereas the other programs were designed to help developers navigate regulatory guidelines that can be inflexible for certain drug development plans, the ODA was originally passed in order to help entice developers following desperate pleas to Congress in 1982 by families through the National Organization for Rare Diseases .  Without the ODA there would be little to no investment into markets that would otherwise be unattractive due to projected high development costs and/or lower ROI due to smaller market size.  And it has worked!  Over 500 drugs to address orphan diseases have been approved since the implementation of the ODA which is excellent news for patients and their families.
Breakdown of Drugs with Orphan Designation:


Global Data Drug Search – 23 Sept 2019

Half of the drugs with Orphan Designation (Pipeline and Marketed) in the US are small molecules with cell and gene therapy combined totaling nearly 15% and antibodies comprising just over 10% of all orphan drugs.  The remaining drugs are a mix of synthetic peptides, vaccines, and other types of molecules. 

Deals for Drugs with Orphan Designation

Using the 2 technologies used last month, antibodies and cell therapies, it is clear that the total number of deals for drugs with Orphan Designation is small compared to the total deal count for these technologies while the deal dollars are higher:

Global Data Deals Searches – 23 Sept 2019
The Orphan Designation can bring considerable value to an asset compared to similar technologies without the designation, in deal value and in other forms.  For many developers the Orphan Designation allows sponsors to test the proof of concept for a treatment regime in a “lower cost” path to market which may enable them to leverage the learnings to address broader markets.  An attractive strategy, for instance, for the lead product candidate from a platform technology.  Furthermore, the waived PDUFA fees, tax incentives, and market exclusivity enable sponsors to commercialize the designated therapies themselves.  Essentially, this can lead to a viable commercialization strategy that is not dependent on partnership with big pharma. 
Trevor:  Early Stage Deals and Preclinical Exits
At Pullan Consulting, our client base is largely comprised of preclinical to Phase II companies seeking deals and/or financing.  We’re primarily “sell-side” consultants.  As such, we’re always on the lookout for potential partners – whether financial or strategic – and spend a considerable amount of time representing our clients at various conferences. 

While scanning the website of one such regional conference, the insistence of an “exit strategy” in company presentations struck me as particularly troublesome (to be fair, most of the conference presentation applications I’ve reviewed for clients include an emphasis on providing an “exit strategy”).  But let’s think about that for a moment…  should entrepreneurs raising Series A/B rounds of financing be looking for the exit?  Aren’t they really just getting going?  Surely a sense of the market your drug is intended for and, in particular, the unmet need you hope to meet can provide assurance that your hoped for “exit” is an entrance into a clinically and commercially valuable indication.  And, if that’s indeed the case and your preclinical and clinical development supports and proves that end, it’s not a stretch to imagine that liquidity events (i.e. exits) will be in play along the way.

To put some color to prematurely looking for exits, I thought it might be interesting to look at early stage financings (e.g. Series A/B financings) and early stage licensing deals (i.e. preclinical).  But first, a couple charts on the Top 10 therapeutic areas for early stage financing and partnering over the last several years (all data from GlobalData).

It’s interesting to note that some therapeutic areas are more attractive to strategic partners than investors in earlier stages of development.  Take hematologic disorders for example, it’s not in the Top 10 for Series A/B financing yet it’s #6 in preclinical licensing activity (below).
What’s interesting is the correlation (or lack thereof) between early stage financing to early stage “exits”.  There are a lot more early financings than preclinical partnerships in any given year.  The chart below shows a diverging trend as Series A/B investment continues to increase yet the number of deals getting done at preclinical slopes downward. 
This data, at least, appears to reinforce that entrepreneurs out raising capital to advance their thesis through preclinical development should not concern themselves too much with finding the exits but instead should focus on building the best business they can in relentless pursuit of meeting the unmet need their program hopes to address.
www.Pullan Consulting.com

Pullan Consulting (www.PullanConsulting) provides advice and execution for biotech partnering and fund raising, with outreach to partners and investors, help with shaping of presentations, evaluations and market analysis, preliminary valuations and deal models, and negotiations from deal prep to term sheets to final agreements. 
We have extensive scientific and financial experience, with many deals signed. 

Send us an email or set up a call if you want to explore how Pullan Consulting might be of help!

Linda Pullan                     Linda@pullanconsulting.com 
Trevor Thompson             Trevor @pullanconsulting.com 
Jessica Carmen               Jessica@pullanconsulting.com 
9360 W. Flamingo Road, Suite 110-554 Las Vegas, NV 89147