Life science companies facing a difficult funding environment in the U.S. are finding that one cost-effective way to develop their drugs is through partners in emerging markets. They can gain access to capital to fund development while retaining rights to their products throughout most of the world.
For example, Harbor Biosciences granted Sinopharm subsidiary China State Institute of Pharmaceutical Industry (CIPI) exclusive rights in China to three of its products in exchange for the Chinese government-owned pharmaceutical’s agreement to develop them. CIPI will finance all product development in China to two mid-stage compounds and one preclinical compound for major indications including diabetes, cancer, inflammation, and infectious disease.
Besides being eligible for milestone payments and royalties for sales in China, Harbor retains all rights outside China and can use the clinical data generated by CIPI to seek marketing approval elsewhere. Harbor advances its products through development without having to provide any financial support to do so.
By leveraging the needs in emerging markets, companies such as Harbor can obtain access to nondilutive financing, reduce development risk, and develop multiple compounds at once. For the emerging markets, these deals provide a way for these countries to build their economies, decrease their dependence on drugs produced outside their borders, and increase the high-value skills and technical skills of their workers as they address the health needs of their populations.
Such agreements take on varying forms. Rusnano, for example, often ties its investment in Western biotechs with agreements to develop their compounds and commercialize them first in Russia. Its investment in two Massachusetts-based biotechs, Bind Biosciences and Selecta Biosciences, include providing each company with $25 million to set up wholly owned subsidiaries in Russia to advance the clinical development of their pipeline candidates. They expect Rusnano’s commitment to help them in their partnering efforts, as well as help them access global sources of funding.
In other cases, deals take on the form of more traditional partnering arrangements. Maxwell Biotech Venture Fund, partially backed by the Russian government, licensed Maryland-based Sequella’s experimental antibiotic for the treatment of tuberculosis, which is an epidemic in Russia. Maxwell gains rights to the drug in Russia and neighboring Commonwealth of Independent States countries, where it will assume responsibility for further clinical development and regulatory approval.
Sequella gets a partner that can navigate the product through the local regulatory agencies, an equity investment, clinical supply purchase, and milestone payments worth up to $50 million, as well as royalties. Plus, Sequella retains all rights to the drug in the U.S. and the rest of the world.
In this way, companies can leverage an asset they may be ill-prepared to commercialize in an emerging market, and leverage the needs in those countries to accelerate development, cut costs, and reduce the risk of bringing those products to market in developed countries. At the same time, this global movement of technology and innovation can help boost the economies of the emerging countries and address unmet medical needs of their populations.