Intron Biotechnology said the conditions for last November’s deal with a multinational drugmaker to license out SAL200, a novel biologic to combat super bacteria, have been changed. Observers said the size of the deal went up, but the conditions for receiving milestone payments turned against the Korean biotech firm.
Intron Biotechnology said in a public filing Wednesday that the conditions of the contract with Pharmavant1 (currently Lysovant Sciences) have been modified. Pharmavant1 is a new drug developer set up by Switzerland-based Roivant Sciences.
Under the contract signed in November, Intron Biotechnology was to receive $10 million upfront payment within 10 days of the deal signing and get $657.5 million in milestone payments from Lysovant Sciences. The amount includes $30 million if the first patient gets the treatment in a phase-2 trial in the U.S. In total, the deal was worth $667.5 million.
However, the $30 million on the first patient’s treatment in the phase-2 study has been changed to a $325 million milestone payment on sales. Consequently, the total amount of the deal rose to $993.5 million.
Intron Biotechnology had been able to receive $30 million in the phase-2 stage, but the changed contract makes the company wait until the market release of the investigational drug. It can get $325 million only if the company sells the product.
Intron Biotechnology is conducting a local phase-2a study on SAL200 and a repeated dose phase-1b trial in patients with bacteremia caused by methicillin-resistant Staphylococcus aureus (MRSA). The company hopes to get an approval for the phase-2 study in the U.S. If the plan goes as scheduled, it will receive $30 million as early as the second half of this year. At an investor relations briefing early this year, Intro Biotechnology said it anticipated to receive a milestone payment around the second half of this year.
However, the sudden change in the contract terms delayed the timing of the milestone payment indefinitely. The $30 million is larger than the company’s annual revenue of 20.6 billion won ($17 million) last year. With the upfront payment last year, the company was able to turn around to operating profit from losses for two consecutive years. If it fails to receive an additional milestone payment, it could turn back to red this year.
Industry sources said that as the trials on SAL200 progressed, Lysovant Sciences might have turned negative about the possibility of the agent’s successful commercialization and changed the conditions of the deal.
“Offering a milestone payment in the phase-2 stage means Lysovant Sciences had seen a high potential in the substance. If it changed the term to a sales-based milestone payment, the company might have changed its judgment on the possibility of the commercialization,” said an official at a multinational pharmaceutical company involved in multiple licensing-out deals. “If the substance has not entered a phase-2 trial in the U.S., it will take much time to get a milestone payment on sales.”
Another industry official noted that a milestone payment on sales occurs after license approval, and that it is considered as royalties. “Normally, it doesn’t get included in the total size of the deal,” he said.
Such change in the contract conditions could be a risk reduction opportunity for the buyer of the technology but a negative sign for the seller of the technology, he added.
SAL200 is an experimental antibiotic that aims to treat “super-bacteria” that are resistant to existing antibiotics. Unlike conventional synthetic antibiotics that inhibit bacteria from proliferating, SAL200 has a new mechanism that directly destroys bacteria and might become the next-generation antibiotic.
Investors had had high anticipation for the new antibiotic, along with the landmark licensing-out deal. However, Roivant Science has taken a prudent approach to reduce risks as antibiotics are more demanding to develop than other medicines, observers said.
Intron Biotechnology declined to comment.
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