Trends in life sciences alliance agreements

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• Trends in life sciences alliance agreements
• extending the traditional structure of the
  alliance

LES Annual Meeting in Vancouver, October 17,
2007James Hatton
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Farris, Vaughan, Wills Murphy LLP
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Experienced advisors on collaborations
Development and License Agreement
License Agreement
Joint Development Agreement
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Trends in life sciences licensing

• systematic attempts to analyse how alliance terms
  are arrived at have been made, e.g.
• Intra-Alliance Performance, Control Rights, and
  Today's Split of Tomorrow's Value Adegbesan, T
  Higgins, MJ 2007
• "The Control of Technology Alliances An
  Empirical Analysis of the Biotechnology Industry
  Lerner, J Merges, RP
• For a list of presentations and papers,
  seehttp//del.icio.us/JamesHatton/papers

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Trends in life sciences licensing

• idiosyncratic look (from the biotech perspective)
• focus on recent important and innovative
  collaborations
• some deal points and implications for structuring
  life sciences alliances

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Sources of exceptional collaborations

• Recombinant Capital's 2007 Breakthrough
  Alliance nominees
• Scrip Awards 2007 Licensing Deal of the Year
  nominees andPartnership Alliance of the Year
• Recombinant Capitals recap.com

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Breakthrough Alliance nominees

• Janssen Vertex of 06/2007
• MedImmune Infinity of 08/2007
• GlaxoSmithKline Epix of 12/2006
• Takeda Affymax of 06/2006
• Novartis HGS of 06/2006

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Scrip Awards nominees (publicly disclosed)

• ARYx PG of 06/06
• Halozyme Roche of 12/06
• Vertex Janssen of 6/06
• Pharmacopeia Organon of 02/07

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Sources of alliances of 2007
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Source of the full text
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Definitive list of alliances of 2007

• 40 agreements - full text
• text of all agreements linked athttp//del.icio.u
  s/JamesHatton/LES2007

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Environment trends

• environment for pharma and biotechs
• expectations regarding trends
• trends the reality
• some drafting points

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Environment pharma

• empty pipeline - drugs coming off patent faster
  than new drugs coming on to market
• rising development costs
• research productivity down declining number of
  NDAs
• increasing uncertainty regarding regulatory
  treatment

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Environment biotech

• competition for programs
• tighter money
• biotechs want to build the company through
  vertical growth
• biotechs seek higher returns by bearing more of
  the risk
• court decisions hard on licensors

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Expected trends

• more biotech involvement in development and
  commercialisation
• co-development
• retention of some commercialisation rights
• increased biotech input into alliance
  decision-making during development
• the rise of the option
• more profit sharing deals
• reaction to court decisions

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More biotech involvement in development

• co-development rights and agreements
• conduct of development by biotechs
• input into alliance decision-making during
  development
• options

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Development rights co-development agreements

• biotech may have conduct of development to an
  endpoint
• biotech may fund part of the development
• biotech may have some meaningful decision rights
• biotech may have options on funding or conduct of
  development

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Co-development agreements
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Co-development agreements with options
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Co-development agreements with options

• Archemix Merck of 06/07
• ARYx PG of 06/06
• Cell Therapeutics Novartis of 09/06
• Cytokinetics Amgen of 12/06
• Exelixis Genentech of 12/06
• InterMune Roche of 09/06
• MedImmune Infinity of 08/06
• Pharmacopeia Organon of 02/07

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Biotech may have conduct of development to an
endpoint

• proof of concept (MedImmune Infinity)
• lead selection (Pharmacopeia Organon)
• phase I (Exelixis Genentech InterMune Roche)
• phase II (CytoKinetics Amgen)

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Biotech input into alliance decision-making
during development

• typically, in the end, the licensee decides
• exclusions from JSC process
• conduct of development to endpoint increases in
  effort above specified level (Archemix Merck)
• breaches, achievement of milestones, diligence or
  money disputes (ARYx PG)
• disputes to arbitration all disputes research
  plans achievement of milestones trial? design

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Rise of the option in co-development opting in

• opt in to fund development (Archemix Merck ARYx
  PG Cytokinetics Amgen)
• opt in to co-promote (Archemix Merck ARYx PG
  Cell Therapeutics Novartis Cytokinetics Amgen
  Exelixis Genentech InterMune Roche)

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Rise of the option in co-development opting out

• ability to opt out (Archemix Merck Exelixis
  Genentech InterMune Roche MedImmune Infinity
  Pharmacopeia Organon see also Altus Genentech)
• milestones may not apply (Archemix Merck)
• royalty rates vary based on timing of the opt-out
  (MedImmune Infinity)

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More biotech involvement in commercialisation

• co-marketing
• co-promotion
• input into alliance decision-making during
  marketing
• biotechs building supply capability
• retention of rights to some markets more
  regional deals
• more profit sharing deals

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Co-marketing agreements
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Co-promotion agreements
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How biotechs opt in to co-promotion agreements

• new agreement based on material terms as listed
  (Archemix Merck ARYx PG Cell Therapeutics
  Novartis Exelixis Genentech InterMune Roche)
• if the parties cannot agree
• arbitrate (Archemix Merck)
• option expires (ARYx PG)

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License agreements with supply terms
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Biotech input into alliance decision-making
during commercialisation

• typically, limited information rights and perhaps
  consultation rights
• no consultation on price (Cell Therapeutics
  Novartis)
• if joint commercialisation team cannot agree, go
  to CEOs and then arbitrate (MedImmune Infinity)

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More biotech involvement in commercialisation
continued

• more regional deals
• profit sharing deals

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Regional deals world-wide rights on the wane
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Regional deals Asia and America on the rise
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Profit sharing 50/50 deals
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Reaction to court decisions

• MedImmune v. Genentech
• Licensees can now seek to invalidate licensors
  patents without breaching the license
• 'No challenges to IP' language in licenses
• KSR v. Teleflex
• More patents will be found to be invalid due to
  obviousness
• Royalties that dont rely on or 'survive' the
  patent

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No challenges to IP language in licenses

• Targacept GlaxoSmithKline of 07/07
• licensor may terminate by focus area if patents
  challenged
• Archemix Merck Archemix Takeda
• 90 days prior notice disclose of prior art
  initiation of discussions
• licenses may become non-exclusive
• if challenge fails, royalty rates increase
• if challenge succeeds, new royalty rate

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'No challenges to IP' continued

• Micromet Nycomed
• Micromet may terminate Agreement if Nycomed
  challenges any patent
• If Nycomed challenges sublicensed patents,
  Micromet may terminate the sublicensed technology
• Licensors right to terminate for challenge to be
  passed through in Nycomeds sublicenses if not
  exercised, Micromet may terminate head license

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Royalties that 'survive' the patent

• longer of the life of the patent and (usually) 10
  years
• 15 years Archemix Merck
• 12 years Epix GlaxoSmithKline
• while regulatory exclusivity in effect
• Adnexus BMS
• Isis BMS
• ZymoGenetics Bayer

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Summary

• co-development deals and options on the rise
• biotechs retaining more marketing rights, but
  little decision-making authority
• profit sharing development deal is giving way to
  deals exploiting options
• approaches to no challenges to IP developing
  quickly

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• For an electronic copy of todays presentation
  and the full text of all background licenses,
  please contact
• James Hatton Farris, Vaughan, Wills Murphy
  LLP jhatton_at_farris.com
• or visit
• http//del.icio.us/JamesHatton
  orwww.jameshatton.com/public