A study titled “Effective Royalty Rates in Biopharma Alliances” analyzed approximately 1,350 unredacted biopharma licenses and related agreements completed between 1997 and 2016. The analysis centered on utilized effective royalty rates (EFRs) as the basis for evaluating post-commercialization terms of biopharma alliances. The data was derived from a proprietary drug discovery and development proprietary license and alliance contract database.
Published by BioScience Advisors Inc.’s Mark G. Edwards, the author first introduces the reader to the concept of EFR: the application of a biotech alliance agreement’s specific royalty rate provision to three assumed yearly revenue tiers including 1) $200m, 2) $500m and 3) $1bil. The data for this analysis was derived from the “BioSci deal database” (BiosciDB.com), which is based on material contracts published with the U.S. Securities and Exchange Commission (SEC). In many cases, the author needed to file FOIA requests for unredacted versions.
Some Interesting Findings
For those interested in this sort of topic, there are a number of interesting takeaways from this analysis for drug discovery and development entrepreneurs, financial, corporate development professionals and executives.
1)The average EFR declined by 2-3% of annual product sales from 2007 to 2016 as compared to the period 1996 to 2006. This drop was the case for all but discovery stage and regional licenses.
Interestingly corporate and university EFRs continue to slide despite deal sizes increasing. In a more recent deal cohort (2013-2018), EFRs were 2 to 3% lower than in the decade ending in 2006 and in the same period average deal size increased except for lead stage deals.
2) Phase I/II and Phase III regional deals continued to experience higher EFRs in later analyses while preclinical stage regional deals fell by 2% and preclinical stage worldwide alliances dropped 3%. Worldwide alliance EFR overall dropped in the latest batch.
3) Big pharma doesn’t pay the same EFRs, on average, as does mid-tier pharma, major biotech, Japanese pharma and other licensees for both preclinical and late-stage deals.
A Resource for University Deal Makers
For those professionals working to structure alliances and licensing agreements in the university/academic medical center or other research sites developing discovery, preclinical or clinical-based intellectual property, this database could be of tremendous use—and potential value. TrialSite News suspects there could be tremendous value in this data base should individuals know what they are looking for.
BioSci Advisors was founded in January 2011 as a consulting database firm focused on biopharma alliances. Their founder, Mark Edwards, is a seasoned negotiating and licensing executive involved with life science deal making since the mid-1980s.
Their BiosciDB client database could be the most comprehensive, peer-reviewed reference database tracking biopharma alliances. They have combined a collection of 8,500 unredacted SEC-filed contracts, the majority of which come from FOIA requests, with never-before-seen system of tools, queries and “crowd-sourcing.”
Call to Action: If you want to learn more about this database, follow the link for a trial run.Source: Licensing Executives Society International