Millennium will retain sole rights to all sales and profits of Velcade in the United States, granting Ortho Biotech (and its affiliate Janssen-Cilag) commercialization rights outside the U.S., assuming the drug's regulatory approval overseas. Millennium will receive royalties on sales outside the U.S., and retains an option to co-promote Velcade in certain European countries.
The deal may be worth more than $500 million in milestone payments to Millennium, the vast majority payable upon completion of further clinical trials, approvals outside the U.S., approvals for new indications of cancer, and upon reaching various sales goals.
Most significantly, Millennium, Ortho Biotech, and J&J Pharmaceutical Research & Development will work together on new worldwide development programs for Velcade. The hope is to prove the drug can treat multiple forms of solid and hematological cancers. In May, Velcade was approved in the U.S. to treat multiple myeloma, a blood cancer affecting roughly 15,000 Americans annually.
Ortho Biotech will pay 40% of Velcade's new development costs through 2005, and 45% thereafter. Costs are expected to reach up to $500 million.
Millennium's shares initially declined on the partnership news. Investors are showing disappointment because future profits on Velcade will be shared, and investors may be frustrated with the $15 million up-front sum the company will receive from Ortho Biotech -- a payment some call "meager" for a drug that has already been approved.
However, the drug hasn't been approved beyond the U.S., and Ortho Biotech only receives a portion of sales outside the U.S. Additionally, Millennium retains a royalty percentage on international sales that is so attractive, management said in a conference call, that the difference between going it alone and co-promoting the drug outside the U.S. will not be substantial to Millennium.
The crux of the deal is that it should significantly reduce costs and cash burn at Millennium, it could result in hundreds of millions of dollars in payments, and it only gives away a percentage of sales outside the United States. The ultimate goal is to have Velcade approved for various forms of widespread cancers, and this deal puts the company in a stronger position to achieve that.
Millennium has more than a dozen drugs in trials and annual sales approaching $500 million. The company models a breakeven performance in 2006. Celgene
Jeff Fischer owns shares of J&J and Millennium. Be sure to return next week to read about the promise of various cancer drugs taking shape.