FEATURE: Palatin Technologies finds a hot market for licensing deals


A hot market for licensing deals

By John Carroll

When AstraZeneca decided to make obesity one of its prime targets last fall, the change in strategy drew the attention of Palatin Technologies.

And Palatin drew the attention of AstraZeneca.

Last week the mutual attraction led to a rich licensing pact for Palatin, which gained $10 million up front and up to $300 million in potential milestones in exchange for its preclinical melanocortin receptor program for an obesity therapy.

For AstraZeneca, the deal offered an opportunity to fatten its early-stage pipeline as it restructures and concentrates more on new drug development work. For Palatin, it was a chance to gain a new source of revenue as the company turned over its intellectual property for a target that was better suited for a major league pharma player to advance.

"Obesity offered an ability to leverage clinical development and science into a potentially large product," says Palatin CEO Carl Spana, PhD. "To do it right, get the right compound with the right profile, is hard for a small company to do."

Unlike Palatin's '04 joint venture deal with King Pharmaceuticals for an ED program--which gives Palatin an ongoing role in development and a stake in its commercialization in North America--AstraZeneca is taking over full responsibility for development work regarding obesity.

AstraZeneca, like other major pharma players, was more than willing to jump in at the preclinical stage. And Dr. Spana says the rapidly evolving field of drug licensing is opening up a lot of new opportunities for emerging biotech companies.

"One of the changes I see occurring is the shift for larger pharma to early stage programs; the willingness to access external science and projects when it's seen as a strategic fit," says Dr. Spana. "In the summer of last year preclinical data started to shape up to the point where compounds were apparent. At that point other major pharma also got interested. They'd see me present at science meetings and would call in for updates."

Dr. Spana likes the deal he got for the company's obesity work. For an early stage product, it's important to weight the deal so that there's a significant amount of revenue built in to the early stages of development.

"In a deal like this the upfront is important and you have a couple of early, relatively low-risk milestones you should hit. The first two or three should hit in the first 12 months, it may double the up front." The milestones then dip in the middle of the pact and swing back up at the end.

Other biotech companies are likely to find the same kind of market waiting for their preclinical candidates as well, he adds, provided they have strong IP backed by good science and strong contenders for a lead therapy.

Dr. Spana has more deals in the works. His arrangement with King covers the U.S. market, giving him an option to license markets outside of the U.S. With a compound in Phase III, he adds, there are more companies interested in paying larger sums "where the probability of success is really quite high."

It's clearly a good time to be a seller in this market.

"My feeling is that (values) are much higher," he says. "There's more demand. We're seeing not just large pharma but second tier pharma in Asia and Europe getting much more aggressive and looking for these types of compounds. I'm surprised that they want to look at the whole portfolio to build their pipeline as well."

Japanese drug developers have been looking across the gamut of experimental therapies, possibly looking at adding a few compounds in Phase I, for example, as they negotiate to fill gaps in their pipeline.

Significant data from a new trial on its ED program for female patients is expected in the second quarter, says Dr. Spana, leading him to believe that a new deal to license the program outside of North America can be worked out in the second half of '07 or early '08.

He's betting that he can get good terms for that, too.