Pharming It Out

Clinical trial strategies to support product licensing

By Wayne Whittingham
INC Research

The aftershocks of last year’s economic crisis have created financial challenges for drug developers of all sizes. Young biotech companies face a shortage of venture capital and a virtually nonexistent initial public offering (IPO) window. Funding for smaller public drug companies continues to carry a high cost. Even larger pharmaceutical firms are under relentless bottom-line pressure from shareholders as they struggle to remain innovative.

All of which intensifies the need to out-license drug candidates as part of a cost-control strategy, a financing strategy and/or an exit strategy. This heightened emphasis on development and marketing partnerships has increased competition among sellers, and the ones winning the game are those who design a clinical program that maximizes the attractiveness of their asset to buyers.

Yes, the quality of the asset itself is the meat of the deal, but the supporting clinical trial program is the platter on which that meat is presented. The difference between a clinical program designed for internal advancement of a compound and one designed to support out-licensing can be the difference between serving up filet mignon on a garbage can lid or on a silver platter.

What follows are questions that sponsors should consider when designing a clinical program specifically to support product out-licensing. The earlier these questions are answered, the better. Waiting until a potential buyer asks the question can result in last-minute studies that are both expensive and time-consuming, delaying the deal or even derailing it altogether if the data turn up something unexpected or if external forces change the market while the sponsor is struggling to play catch-up.

Who Are You Targeting as a Partner?

A large pharmaceutical firm with decades of licensing experience will want to see clean fundamentals, but is unlikely to be swayed by a biotech’s market research and launch plans. Chances are, the big company is familiar with the market opportunity. So while marketing preparations are normally made during Phase II, a sponsor can save money by skipping this process if planning to out-license to a major pharma.

If planning to out-license to a holding company or other financial group, however, time and effort spent on IMS data or on bringing in a few key opinion leaders can pay significant dividends. Investment firms tend to be highly focused on market potential and returns, so budgeting additional resources to prove value on these fronts will help talk their talk.

For those seeking to out-license to a mid-sized pharmaceutical or biotech company, managing risk is the name of the game. These companies have far fewer assets in their pipelines, so each one is that much more important. Highly transparent data can improve the asset’s appeal.

Additionally, while some preclinical work — analytical methods validation and long-term animal studies and the like — can be done in parallel with Phase III trials, getting that work started before out-licensing to a smaller company can reduce the perception of risk and position the asset as more advanced. The return in terms of an increased deal price might prove well worth the relatively small front-end investment.

Who Is Your Competition?

The way the product fits into the competitive landscape plays a significant role in determining the back-end economics of an out-licensing deal. Will it be first to market or will it be a fast follower providing marginal improvements over the market leader? The answer to that question is critical to designing a clinical program that highlights the product’s best attributes.

If the drug will play in a competitive field, potential buyers will likely want to see comparative studies. But even if the drug is first-in-class, it is required to show how it interacts with any concomitant medications.

How Much Are You Willing To Give Up?

Will the product be sold lock, stock and barrel, or are you looking to out-license certain rights while retaining others? Who will end up holding the intellectual property associated with the product?

Before those questions can be answered, it must be known what the drug is capable of. Imagine if Viagra had been developed by a biotech company and out-licensed as a therapy for heart disease. Only through patient feedback in clinical trials did its potential in erectile dysfunction become known, which, needless to say, would have altered the economics of any partnering deal substantially. A good licensing-targeted clinical program will identify and address all potential applications of a drug.

If the drug has applicability in multiple indications, it is possible to out-license rights in certain diseases to fund its internal development in other diseases. If such partial licensing strategies are part of the plan, bear in mind that prospective buyers will want to see data that extend beyond the particular niche they are evaluating. They are also likely to request the bones of a marketing plan as proof that the company believes the product will be successful and is truly planning to pursue it, not just wring a little cash out of an unsuspecting partner before ditching its own development.

Are You Thinking Globally?

Regional partnerships in areas like Asia or Europe can provide vital funding to offset the costs of an internal clinical program aimed at supporting FDA approval. Additionally, for drugs targeting multiple indications, the geographic prevalence of certain target diseases may attract regional partners.

As noted above, any partial licensor is likely to want both clinical and marketing data that prove a commitment to the product. However, in many regional deals, health economics research also plays an important role in determining the value of an asset. Although it is not common in U.S. development programs and often does not come up until the end of ex-U.S. licensing discussions, health economics research is best tackled proactively if regional deals are a target.

What Is Your Safety Hurdle?

Drugs to treat chronic diseases must endure more safety scrutiny than drugs that are taken for a limited period to resolve a certain symptom. The same goes for drugs addressing widespread conditions like obesity and prophylactics that will be given to otherwise healthy subjects. Out-licensing of such products can be facilitated by providing extensive preclinical toxicology and carcinogenicity data, as well as broad clinical safety data. Additionally, although the sponsor may plan to out-license its drug before reaching Phase III, the premature initiation of long-term animal safety studies may prove a relatively inexpensive investment in good will with the buyer, setting their mind at ease and even raising the value of the asset.

Do You Have a Back-Up Plan?

In both licensing and drug development, everything takes longer and costs more than expected — so plan accordingly. Additionally, while out-licensing in Phase II or Phase I may be a goal, it might not get the ideal terms until after Phase III or even after approval. So while designing a clinical trial program that specifically supports out-licensing can improve efficiency and enhance a product’s appeal, that program must be flexible enough to adapt to changing circumstances.

In the end, it is not just a question of whether or not it is possible to out-license an asset; it is a question of how sponsors get from here to there. That is where the support of highly experienced strategic and regulatory consultants, with a depth of global industry expertise, comes into play.

Wayne Whittingham is vice president, regulatory affairs and strategic development at INC Research. He can be reached at [email protected]