Posted on March 16th, 2016
by Jeffrey Bacha
Let’s face it: Drug development can be wildly expensive. Licensing partnerships are commonly seen as the only viable option for smaller companies lacking the capital of Big Pharma to get their first treatments to market.
In many cases this perception is justified. Many indications require huge clinical trials prior to approval. And, for a product lucky enough to gain regulatory approval, a significant sales and marketing infrastructure is often required.
The cost of capital to fund large clinical trials together with the cost of building a sales and marketing team would likely require such massive dilution that the trade-off of a royalty versus getting to direct sales would favor a partnership as the better return on investors’ capital.
The other side of the coin is that in an efficient market, investors would not give a new entrant the capital required for the clinical trial and commercial infrastructure if there is existing capacity in Big Pharma – which there is.
Going it alone may be the brave move with the ultimate payoff, but that route implies shouldering enormous development costs with the added risk of failing to be able to market a new treatment successfully even if it gets approval. Does it really have to be this way? The surprising answer is actually no.
History has shown that going it alone is possible, provided the path to market is structured meticulously. In my mind, three key elements create a viable ecosystem for a “go-it-alone” approach: First, clinical development requirements must be able to be met by relatively small and efficient trials; Second, the product itself must be characterized by a low cost of goods; Third, the product needs to be tailored to a well-circumscribed market covered by a limited number of key opinion leaders.
It has been done before. Celgene bravely reopened the book on thalidomide and determined that it could be used to treat certain rare disorders. In 1998, Celgene’s Thalomid® was granted FDA approval for the treatment of erythema nodosum leprosum, a rare complication associated with leprosy. Celgene’s beginnings with Thalomid® satisfied all three conditions for going it alone, and from there, it amassed enough capital to transform itself from a chiral chemicals business to one of Big Pharma’s most active players.
Early in its life cycle, biotech behemoth Amgen demonstrated that the choice between partnering and going it alone isn’t all or nothing. As a young company, Amgen retained the rights to sell erythropoietin (EPO) strictly to dialysis patients in the US, but licensed Johnson & Johnson exclusive rights to all other markets including cancer chemotherapy. Focusing on the smaller well-circumscribed dialysis market allowed Amgen to build its initial product in a manageable niche while accessing larger markets through partnering. This was a major factor in enabling Amgen to establish its independence and build into the company we know today.
At DelMar, that’s exactly how we view our opportunity with VAL-083.
As a potential product in refractory GBM, VAL-083 satisfies the three conditions for investment in internal development and marketing. VAL-083 is a small-molecule cytotoxic, and as such, is characterized by relatively low cost of goods. Refractory cancers, particularly with no viable alternative treatments, can be targeted with relatively small and efficient clinical trials and our initial target patient population of GBM patients who have failed bevacizumab is generally treated at leading NCCN cancer centers: a tightly circumscribed market of 26 leading cancer centers that are likely to be included in our registration-directed clinical trials. In other words, through our clinical trials, we will build a business relationship with our primary customers.
Of course, our ultimate goal is not to have a single product for a niche product such as post-Avastin GBM. As we’ve stated in our public filings, we believe that based on the drug’s unique cytotoxic mechanism, VAL-083 is positioned as an alternative to standard chemotherapy in newly diagnosed GBM, non-small cell lung cancer and potentially other solid tumor patients whose tumors exhibit features that make them unlikely to respond to standard-of-care. Clearly, these indications would position us to partner for commercialization; however, we also believe that having an internally developed revenue-generating product to offset these costs in larger indications creates a very interesting value proposition.
While most young pharmaceutical companies are acquired, having a realistic opportunity to seek independent commercialization not only can unlock billions in value for shareholders, but it also creates a fair dynamic in any acquisition or partnering discussion.
For sure, getting to market independently will be a significant challenge; however, history has shown that under the right circumstances it is possible. Our goal is not merely to be an interesting licensing conquest. Our goal is to build a sustainable company with its own products that will not only benefit patients, but also maximize value to our shareholders.
Forward Looking Statements
Any statements contained in this blog that do not describe historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein are based on current expectations, but are subject to a number of risks and uncertainties. The factors that could cause actual future results to differ materially from current expectations include, but are not limited to, risks and uncertainties relating to the Company's ability to develop, market and sell products based on its technology; the expected benefits and efficacy of the Company's products and technology; the availability of substantial additional funding for the Company to continue its operations and to conduct research and development, clinical studies and future product commercialization; and, the Company's business, research, product development, regulatory approval, marketing and distribution plans and strategies. These and other factors are identified and described in more detail in our filings with the SEC, including, our current reports on Form 8-K.
This Blog is official and sanctioned by DelMar Pharmaceuticals, Inc.