thought as we get closer to a deal occurring it was time to have a look at what is required, are we close and what does a Big Pharma look for anyway?
As per usual, do enjoy.
A DEAL DEFINED
There can be many variants of a deal in the Bio Pharma space. It could be a simple agreement to work together, it could be more of a joint venture, it could be assistance in just one aspect of operations, it might even entail some sort of equity swap or options based on future events.
Pharma Distribution deal....not hostile take over!
What we are really after though is a Distributional Deal. This means helping us to get an eventually approved drug out to the masses. It typically would also involve appropriate marketing as well as logistics..At the end of the day we don't really know how it will play out but what we can do is look at the journey we have been on and where we are typically going.
THE STEPS
Lets briefly recap some typically required steps to partner up.1
1. Identify a target, pathway, or platform for looking for a potential new (or repurposed) drug.
Well we have done this a long time ago...we have the repurposed magic juice.
2. Screen or otherwise pick and optimise your candidate molecule (sometimes you can do this with a pharma partner if you have identified a novel, interesting target that will appeal to them).
We have also done this step and have progressed the particular molecule. The best part here is that its not an easy molecule to copy, very complex and very specific.
3. Perform preliminary efficacy studies in appropriate animal models
A number of animal model studies have been covered by PAR to date.
4. File IP/patents for protection.
Again we have this area covered through the specific patents of BMLS for OA as an example.
5. Perform early PD and PK/ADME/toxicity testing.
Important to get this work done early...All of this has also been covered to get us to the all important P3 gateway.
6. Perform preclinical IND-enabling studies with cGMP compound under GLP conditions.
Ahh this is good for us, the fact that Bene are already GMP certified saves us a lot of time now and after NDA...its all certified and they can scale.
7. Network and present your findings to Big Pharma or smaller biotechs (occasionally this can be attempted at an earlier stage—see above—but, in general, the later the stage the better, as this de-risks the deal for pharma).
So we are in a good spot here as we have de-risked the proposition significantly. In some regards P2 was one of the biggest hurdles, proving the drug works and safely in 100 or so patients. The big hurdle of filing a successful IND is now also done. The great thing for us here is that P3 really is a copy of P2 at scale.
8. Formulate a compound development or licensing deal.
Yep, that's where we are at ....Could be months away...maybe a year away?
There will be lots to talk about, lots to flesh out....but when you think about it, we have just about everything we need now. Yes we need to wait for 008 data...but finally a smart Pharma will know what the results are going to be ...it will be the final percentages that are to be determined. We investors already have valuable clues as to where this should go.
BIG PHARMA IS NO LONGER WHAT IT USED TO BE
In addition the large guys (Pharmas) are no longer what they once were. I mean they no longer are the huge R&D units they used to be....in an investigation on 2017 annual reports three researchers found that just 10 of the 44 of Pfizer's products (23%) were conducted in-house.2 How about J&J? Just 11%. There is a shift here to reliance, acquisition and working with smaller Pharmas.
Again I must state here for the record, we don't necessarily want AQUISITION here...we want DISTRIBUTIONAL PARTNERSHIP. What's the difference Mozz? Don't we just want the shares to go up? Well yes...but if its a take over, acquisition, well we will surely get the 80%..the 100% premium to our current share price but there is one problem......that's all we will get. Once you sell that olden Goose...its gone mate.
DO NOT SELL THE LOVELY GOOSE (Not advice).
What we want here in our specialised circumstance is a Distributional deal. There are large Pharma's that already have the Marketing clout, that already have the vast network (Yes I'm kinda also thinking of that vascular network that feeds the sub chondral bones and in which iPPS helps to feed it! But that's more a sciency post for later some time)....There are much bigger potential partners that can feed the enormous OA patient population quicker and more efficiently than we can...Some of us cry that this story is taking too long...that we have years to go before things really accelerator. Mate, if we were to go it on our own..it would take a lot longer!
We need a Big Distributional partner to warp speed us to the next level...yeah I'm talking massive overnight revenue generation and sheer ARG...(Aggressive Revenue Growth..). Do not entertain a hostile take over if that ever happens. Yes you will get your 100% share price increase but think of all those future baggers you will leave on the table, that you will forgo...think of all the lovely dividends, gone. The massive revenue growth on yearly revenue growth...the acceleration of multiples and the super bagger we may one day obtain.... ALL GONE.
Worse than that? There can be nothing worse than that...well yes, there could be...
NO MORE MOZZ POSTS!
*Gasp*
A Mozzless word is not a fun place....and anyway, what the heck would I do? I'd have to find another stock....To date, I haven't been able to find one quite as lucrative....(My spec views)
Ok enough soap box stuff...lets get back to the gist of this here post...
So what do they look for?Well the criteria for an acquisition (not what we want., remember?)...and a Meaningful mass distributional deal (now you are talking my language)..is actually fairly similar.We know the steps (see above)....but what makes us attractive? How do we improve our chances of success?
1) Improve your chances pre launch.
Big Pharma's expertise lies in launching...Not just a backyard rocket for the entertainment purposes of a few cousins and family members...nah..think globally.... Lonnie Moulder, founding partner at Tellus BioVentures "suggested that Biotechs that rush through clinical development to sell the drug off will definitely be in a weaker position".3
Par ain't rushing...they are in fact building their foundations to make it stronger to think about what is needed in the future and to broaden that all important label to drive sales via massed uptake....Yeah sure I'm talking patients but as importantly, Docs and Medical associations.
2) Big Pharma likes exclusivity.
This means they don't really want to share markets....fair enough...that's why a Global deal will be so lucrative...yes there might be scope for regional type deals...but the ability for a Big Pharma to concentrate on what they are good at will spell value for them and for us.
3) Slow it down, take your time.
We are actually the ones in power. We have forged the relationship with Bene, we are the ones taking the risk...and we are the ones demonstrating the:
- Efficacy
- Functionality
- Power
- Durability potential
- Ability to regress
I give you one word that propels us.
Novel
And one more if you could entertain me....
Safety
So as Justin and Paul recently commented, no need to take the first deal that comes our way...wait a bit longer and we may just find ourselves at multiples...
4) Speaking of cash cash....
When discussing the trends of major asset transactions and acquisitions of the last few years, Moulder observed that the same 20–25 Big Pharma companies look to do at least one deal north of $3B a year.3 We know there have been attempts of mutli billion dollars in this very space...
"Notably, he advised that the projected sales of the lead asset being acquired “really should be above $1B peak sales to matter,”
The fun part of this is that our peak sales will potentially be many times this...we are talking10 Bil. per annum revenue Paradigmers, this is a conservative figure.
5) Take your time
"Biotechs that rush through clinical development to sell the drug off will definitely be in a weaker position when the time arises for due diligence and to be chosen by an acquirer ".3
The more time you take to find an adequate suitor, the better it is for us shareholders, as Justin (CFO) said just recently...we ain't going to take just the first offer.Yes I know the SP doesn't reflect it such a massive deal yet...but hey, you know what we have...I know what we have...later, many more will learn...they are slow learners,...we are a bit quicker...who loves the science and why it works?...not many...but that's the important stuff.. and that's the clue!
We know this before literally MILLIONS of people.
6) Timing?
As far as timing goes, we know that there are some Big Pharmas that have a wallet full of cash....Covid Cash....A distributional deal in the order of perhaps $3 B upfront...maybe $5B with DM and a meaningful ongoing royalty is not impossible....Not saying in the next few months,,,I'm saying in next few years.
Do you have the tenacity to be able to wait?Is a double in the next 12 months ok or is it when you might be able to have a 25 X in four years?(spec comments).
7) In Person is different to impersonal.
"I think that’s a critical step to have that face-to-face meeting between principles and I’m not sure how a big deal can occur without that."
Don't forget, our current CEO is in NY! Use this attribute to our advantage. There is nothing like meeting reps of such large Pharmas if its possible, maybe its till too hard but eventually this will become easier to do....Bene and PAR have already met...it strengthens the relationship to a huge degree.
8) Sweet tooth?
Nothing like pampering one's partner...In terms of PAR's dealings?
Notably, he advised that the projected sales of the lead asset being acquired “really should be above $1B peak sales to matter,” stressing the importance of this when Big Pharma looks for which Biotech to acquire from, and advising that projected peak sales between $1–10B was the “sweet spot.”. 3
Mate..Peak sales? Jeepers I'm thinking min 20% market penetration, but get DMOAD and we are talking more...at peak..I can't even do the maths...Sure we may only garner a percentage of royalty ...but even that could be fairly awesome....
LOOK BACK TO GO FORWARD
One can definitely argue its been quite a journey so far. At the same time you could easily make a case for the real exciting stuff is yet to come. When the SP goes against us, specially from a peak, its easy to get frustrated but don't forget, since IPO, and it has been some time, we have made some decent strides. In fact, what has our ROI been?
@ceviche recently posted a nice simple spreadsheet of where we may be heading if we take a certain share price. This lead me to think about where we have come from and where we are today. I too think we are oh-so undervalued right now...but does this mean we have faired poorly so far? I mean since IPO....should we actually be crying in the streets?
Would we have been so much better off having our money invested elsewhere ?
Two words here... Opportunity Cost?
If I were to guess I would've been quite conservative and said around 15% PA is typically what we achieved every year since IPO.....lets check...
Mate...I'm no where near it and you'd have to say I'm fairly enthusiastic AND a proponent of the product! This is how it played out if you amortise back over the last 6 years....
I give you 33.5% per annum....Ceviche, check my figures.
So if you had bought in at IPO, you'd have averaged a massive 33.5% per annum though it would've been fairly lumpy....but at the end of the day that's where we are at TODAY despite the share price coming back AFTER we are further de-risked. What does this mean...well it means we have wound the spring back even more tightly...we have entered the business end of the journey....while I'm not saying there is NO risk....I am saying that from where I stand, it looks at least as bright as 35% per annum per year from the next x years is entirely possible. (DYOR)
Just because we got such a stellar performance so far doesn't necessarily mean it will be the same for the next 6 years...though between you me and the Dispensary down the road....I reckon its going to be north of these percentages, specially when you amortise it back over the years....(my views).
CONCLUSIONFinally a big Phama wants exclusivity...they want number of regions...preferably global.
They will pay up big for a lucrative drug and a first time drug but it needs to bet efficacious and safe. You get those two ducks in line and you have something compelling... Now add durability, length of effect and the magic ingredient of possible regression or halting of the disease and I'm talking multiples of where we are now...Yes even now we are under the radar...this will not be forever....but you also need patience in this game...
A global match is very possible....don't sell out...keep at least some for the long term, its not a take over that we want...we have too much sheer potential.... yes, in my views.
REFERENCES1]
https://www.sciencedirect.com/science/article/pii/S00928674163041232] https://www.statnews.com/2019/12/10/large-pharma-companies-provide-little-new-drug-development-innovation/
3]
https://www.pharmaceutical-technology.com/comment/big-pharma/
(20min delay)
