After a hard few years, biopharma is as lean as ever, with pipelines shaved down so companies can stay afloat. But what if you could hand off a potentially promising second-tier asset while still maintaining rights?
Turns out there's a Goldilocks deal strategy that's been employed by a few biotechs and even pharmas that could help some assets that don't make the cut for the leading role in the pipeline.
It's a “unique area,” according to Randy Sunberg, chair of the North America Healthcare & Life Sciences Group and partner in the transactions group for Baker McKenzie. This development funding arrangement includes offloading both cost and development activities for an asset to a specialized financial firm.
The offloaded candidate has to be one a biopharma wants to keep financial ties to but also isn’t the company’s first priority, Sunberg explained at this year’s J.P. Morgan annual healthcare conference.
“The pharma company wants to keep it,” Sunberg said. “They just are maybe going to slow it down to next year, and now they don't have to slow down because it fits with this development funding opportunity that some financial firms have.”
One such firm is U.K.-based Avillion LLP, an organization that says its strategy allows pharmas to continue developing assets that otherwise might not be moved forward given financial and resource constraints.
“It’s not just a cost issue—sometimes it's human resources,” Sunberg explained. “They've got their people working on other projects and they're just not available for this one.”
Avillion’s objective is to help partners continue development of drug candidates without increasing their financial burden, according to the company’s website. The European organization will cover 100% of a study’s cost, as well as provide a team of experts to help develop late-phase drugs. In exchange, the pharma must hand over exclusive IP rights to the clinical trial and set up an “agreed financial return” with Avillion.
If the drug doesn’t make it to market, the biopharma partner doesn’t have to pay Avillion, something the U.K. firm calls “risk free clinical development.”
However, Avillion hasn’t encountered such a scenario yet, touting a 100% success rate for developing assets to the commercial stage. Most recent is the 2023 FDA approval of AstraZeneca’s Airsupra, an as-needed or preventive treatment for adults with asthma.
While Avillion offers financing-only deal options, its focus is on leveraging clinical development expertise through site initiation visits, oversight visits of trial sites, directly supporting management of patient care and adverse events and implementing an intensive audit program.
“It's not purely financial,” Oren Livne, a partner in Baker McKenzie’s Transactions Practice Group and Life Sciences Industry Group, told Fierce Biotech. These firms often conduct development or work with CROs to develop the asset, he explained.
“So, that's an interesting angle—for a company to divest all the responsibilities and rights but retain the commercial rights,” Livne said.
Another big name in the space is California-based SFJ Pharma. The company, which also says it assumes 100% of clinical development risk, claims to help accelerate follow-on indication approvals and potentially increase ex-U.S. value. Deals are jointly structured to work for both parties, according to SFJ, which has done deals ranging from the smallest at $55 million to the largest of $500 million.
SFJ has helped several Big Pharmas bring drugs to market, including Eisai’s Lenvima in thyroid cancer, Pfizer’s Vizimpro for patients with lung cancer and Apellis’ Empaveli for a rare disease called paroxysmal nocturnal hemoglobinuria.
The Blackstone- and Abingworth-backed firm also has several partnerships with biotechs, including PhaseBio and Nektar Therapeutics, according to the company site.
A unique sweet spot
Sounds easy enough. So why aren’t these deals everywhere? Due to their Goldilocks “just right” nature, they aren’t very common.
“It has to be in a sweet spot,” Livne explained. “Not great, but good enough.”
“It can't be a me-too product,” Sunberg added, explaining that the candidate can’t have too high or too low of a chance at success. If the success probability was extremely high, the pharma wouldn’t offload it, and if the product is unlikely to ever reach the market, there’s too remote a chance at a return on investment.
Beyond that, the firm must have the right expertise fit. These types of firms typically bring in clinical development execs from pharma companies, Sunberg said. If their expertise is in metabolic disease, but a potential partner is looking to make a deal for an oncology product, the financial firm isn't going to have the expertise to run an oncology trial, he explained.