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Revenue Structure & Contract Models for Transgenic Manufacturing & Antibody Licencing


Publication Date   January 2004
Publisher   CredoLegal
Product Type   Strategic Report
Pages   27
ISBN Number   not applicable
Product Code   CRE007
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Price £175.00

approximately: $347 | €222

Summary


Antibody companies have entered into contracts covering numerous antigen targets with the aim to use their customers' core technology to generate and/or develop fully human antibodies. We expect that, for the foreseeable future, substantially all revenue models in the field will be built based on payments under these and other contracts. For example, Genzyme Transgenics Corporation has produced 45 proteins through collaboration with various commercial and academic organizations and 15 independently. Therefore it is important to know the key elements and the main triggering events of these agreements.

The main financial terms in an agreement consist of the following components:

- Equity;
- Initial upfront payments;
- Milestone payments;
- R&D payments;
- Cost of supply (clinical transfer price and commercial transfer price);
- Royalties (and minimum royalty).

Antibody companies derive contract revenues from target sourcing contracts, proprietary product development agreements and technology out-licensing contracts. Generally, contract revenues consist of license, option, milestone and royalty payments. However, the amount and timing of these payments is uncertain because they depend to a large extent on the success of the research and development efforts of the parties. To date, many of these companies have received license, option and milestone payments from various parties but have yet to receive any royalty payments.

According to our survey, interviews and the literature, the revenue structure for a product or technology will depend on:

- The strength of the intellectual property;
- The exclusivity of the rights granted;
- The territorial extent of the rights granted;
- The uniqueness of the technology transferred;
- The duration of the license;
- The stage of development of the technology;
- The risks associated with the product.

Transgenic manufacturing companies commonly enter into manufacturing deals with antibody discovery, genomics or Big Pharma companies at the R&D stage (preclinical manufacturing deals or feasibility studies) and thus receive proportionally higher equity payments than traditional manufacturers that engage in clinical manufacturing deals.

Content


Chapter 1. Summary of contractual arrangements used by antibody discovery companies


Chapter 2. Antibody contract types

Antigen target sourcing contracts
Proprietary product development
Technology out-licensing
Technology in-licensing

Chapter 3. Qualitative and quantitative analysis of financial terms for Transgenic Manufacturing (TM) agreements (summary)

Introduction
Equity payments
Upfront and milestone payments
R&D payments
Cost of supply

Chapter 4. Royalties

Strength of the intellectual property
Exclusivity and territorial extent
Uniqueness of technology
Duration of the license
Stage of development and risk associated with the product

Chapter 5. Intellectual property factors

Royalty stacking
Duration and mode of payment
Net sales value
Exchange rates
Tax
Audits

Chapter 6. Other factors affecting royalty rates

Sales targets
Hardship provisions

Chapter 7. Risk analysis

Overview
Potential risks associated with transgenic manufacturing
Regulatory approval
Reimbursement
Acceptance
Dependence on alliances and licenses
Intellectual property
Competition

List Of Tables

Table I. Average pharmaceutical industry royalties

Table II. Average royalty rates according to development status