Regifting is a social faux pas -- especially if you're caught -- but in the biotech industry, it's just something that companies and their investors have to live with.
A pair of biotechs were on the receiving end of some holiday jeers today as their pharma partners appear to be uninterested in the drugs they were given. In one case, the biotech is the one getting regifted to; in the other, the biotech will be compensated for giving its partner the right to regift.
It's not you, it's me
Emergent BioSolutions (NYSE: EBS) regained the rights to its TRU-016 after Abbott Labs (NYSE: ABT) decided it no longer wanted its half of the blood cancer drug. According to Emergent, "Abbott's decision is a result of the company's portfolio prioritization process," which sounds reasonable considering that Abbott is splitting in two. Of course, if TRU-016 looked like it had a lot of potential, perhaps it would have been on the keeping-side of Abbott's prioritization divide.
Emergent isn't dissuaded from continuing on with TRU-016, though. The company is starting a phase 2 trial testing the drug in combination with Teva Pharmaceuticals' (Nasdaq: TEVA) Treanda in patients with relapsed chronic lymphocytic leukemia. The initiation of the trial triggered a $6 million payment from Abbott since the partnership will go through a wind-down phase and won't technically end until March 20.
Who's your partner?
Immunomedics (Nasdaq: IMMU) won't be getting its autoimmune disease treatment epratuzumab back, but it doesn't know who its partner will be either.
In reworking its collaboration agreement, UCB gains the ability to sublicense the right to the drug in the United States and certain other territories to a third party.
As consolation for not getting to pick its new partner, Immunomedics gets $30 million now and another $30 million if UCB goes through with its plan to sublicense the drug. The reworked deal also calls for additional regulatory and sales milestone payments that could add an extra $165 million. As an added bonus, Immunomedics gets to keep rights to epratuzumab as a cancer treatment -- UCB previously had an option to license those rights as well -- but it'll be some time before we know how valuable that is.
As part of the deal, UCB gets a five-year warrant to purchase 1 million shares of Immunomedics at $8 per share, which is an interesting trade-off for both companies. If epratuzumab does well and Immunomedics shares skyrocket, the warrant can help pay for the additional milestones. But why not just reduce the extra milestones and not add the warrant as part of the deal? If Immunomedics needs additional cash at that point, it could just sell shares at the prevailing rate.
All in all, I'd say Immunomedics made out pretty well in the deal, but we won't know for sure until we see who UCB gets to sublicense the rights and how much it's able to get for them.
Big deals?
A resounding maybe.
There are plenty of examples of drugs that are handed back and die with their inventor.
But pharma doesn't always make the right decision (or it's the right decision for them, but it doesn't mean the drug is worthless). For example, Exelixis (Nasdaq: EXEL) got back the rights to cabozantinib. Investors freaked out, but the drug went on to pass a phase 3 trial in advanced medullary thyroid cancer, and looks like it works for other types of cancer, too.
And people often forget that Eli Lilly (NYSE: LLY) had rights to Vertex Pharmaceuticals' (Nasdaq: VRTX) Incivek before handing them back to the then-fledgling biotech. We all know how well that turned out.
Even if a biotech doesn't have the resources to take a drug all the way through development, there's the option of finding a new partner; Vertex kept the U.S. rights to Incivek, but licensed the European rights to Johnson & Johnson. According to data compiled by Deloitte Recap, 26% of biotechs are able to re-regift their drugs to a new sweetheart. And like Immunomedics, the new deal usually comes with new upfront payment.
Sometimes it's better to give and receive.
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