St. Louis Patent Litigator Doug Robinson spoke to Bloomberg Law about a new trend in the pharmaceutical industry that could help to stoke innovation and even offset some financial risks.
Large pharma players are making agreements with smaller companies in which they make up-front payments as well as payments for reaching specific milestones. Milestone deals are particularly attractive for pharma leaders who do not want to sink all of their money into new products that won’t necessarily clear the FDA. They are also an attractive choice as competition remains intense for COVID related treatments.
“Bioproducts are an all or nothing proposition,” says Robinson. “Products that work and receive approval from the FDA can be very lucrative, while failed products lead to sunk costs.”
The high number of start-ups and growth companies in the biopharma sector — as well as the ongoing pandemic and global need for treatments — will help this trend continue well into 2021, Robinson adds. “COVID-19 presented a problem that this industry exists to solve,” he says.
The IP aspects of these milestone deals involve both the commercial and R&D rights. In addition to the initial payment and additional milestones payments, the larger company can also acquire the smaller outfit if it chooses.
“I’ll pay you X amount now, but if things go well, I promise to pay you an additional amount,” Robinson explains. Such milestone deals provide certainty to both parties — smaller companies receive a cash infusion and larger companies receive rights to the innovations but can limit their costs if the product later runs into roadblocks.
Even as COVID-19 helped the biopharma industry achieve stellar earnings in 2020, it has slowed clinical trials and development timelines for some new products. Creative IP agreements will provide a buffer against similar slowdowns in R&D pipelines, and not just for COVID related innovations. As such, the trend could easily become the norm as big pharma companies begin to look past the pandemic and start thinking about 10 to 20 years in the future.