Our company hinges on it's supply deal with bene pharmaChem (bene-Arzneimittel GmbH).
I don't think that's a statement which is bold, or rash, or exaggerated. I think it's absolutely true. The genius of what Paul has achieved lies in cornering the supply of iPPS from the one single company who have a drug masterfile (DMF) with the FDA. Paul, with others, noticed that this drug had the potential to be a frontline treatment for a blockbuster indication (OA/BMEL) but before setting out to prove it via clinical trials - he had to get Bene to agree to an exclusive supply deal. Otherwise, it would all be for very little.
The first supply deal was signed back in 2014. Information on this agreement was published in PAR's prospectus when it first listed on the ASX two years later. The prospectus can be downloaded from the Paradigm website, but the passages relevant to the 2014 supply arrangement are screenshot below.
There were different contingencies and, truth be told, Bene held all the aces at this point. They were perhaps naturally tentative at this upstart from Australia and his wild dreams. For the large marketplaces (incl US and EU), Bene retained the right to supply to anyone, and not to supply to PAR at all no matter what they could prove via clinical trials. I still chuckle when I think back to when I first bought into PAR at around 70c. I don't think I had any idea the agreement was so flimsy "Outside the Territory". "Within the territory" included only Australia, NZ, and some Asian marketplaces. These represented the only geographical regions in which PAR could command that magic word....exclusivity. All holders should burn into their brain the "Within the Territory" section. Specifically "and bene pharmaChem has agreed to supply exclusively to Paradigm, PPS (in bulk ware form) for use Within the Territory...(and) Within the Field". "The Field" is defined as a number of indications, the one most relevant i'm sure you will all agree....is BME. Bone Marrow Edema. The lesions that accompany Osteoarthritis, and are visible via MRI.
Now, come with me to September 2020, six months into Covid19. By this stage I was well aware that - despite the pleasantries and assumptions about 'exclusivity' of Bene supply on this forum, and in PAR presentations - we had little or no guarantee of any such thing "Outside the Territory". Bene still held those aces, and PAR had scaled the dizzy heights on an almost A$1bn market cap, then crashed down to one of A$250m. I had my worries, of course I did. However, holders were treated to some very important news.
It wasn't so much the extension of timeframe for me that made this a special day (although that was a wonderful surprise). No, as you can tell, the real result for holders was "Expansion of the Territories". Our "Territories" now included all major Pharma markets except Japan. That's right....the USA, and the EU were now "Within the Territory". Remember what was burned into your brain earlier? That magic word. Exclusivity.
This was a great day for me. I was delighted. PAR also announced that they had extended indications for supply exclusivity.
So, who is this company, Bene? What do we know about them? Since our company hinges on an agreement with them - I need to know that they will honour that agreement? Are they some fly-by-night cowboys who might be hoodwinking our founder-CEO? Well, lets take a glance...
Bene are a family company started by the first man to synthesise sodium pentosan polysulfate. They also introduced Paracetemol to Germany. Yeah, they are basically the Panadol guys for Germany with their product ben-u-ron. The company is now run by the founders two sons, one of whom is Dr Harald Benend.
That tells you something about a company, in my experience. Family companies, run by the children of the founder, tend to be proud of that kind of legacy and their company's success. They really tend to take reputation seriously. At Bene, that reputation is a tribute to their father, and that tends not to be something people toy with, or risk.
As PAR investors, we first heard from Bene via their co-MD Dr Harald Benend in the September 2020 announcement. What stands out here for me is how happy he seems to be with how Paradigm have performed. Obviously, a pharma company proving that their drug should be a frontline treatment for a blockbuster indication is massive for them. This could be another chapter in the storied history of his fathers company. He speaks of their confidence in Paradigm passing Phase III trials, and mentions extensions to the exclusive supply agreement. This was actually the first verification of that language from the other side of the agreement investors had ever seen.
September 2020, to me, represented Bene handing over some of their aces to PAR. They didn't have to. There was plenty on the table already to show that this thing works for OA. Had they wanted to, they could have kept the same agreement in full knowledge that they could deal with Pfizer, with J&J, with whomever they wanted for sales in the USA and the EU. They could have just kep the existing agreement - but instead....instead Paul got them to the table again, and they believed in him enough to sign. This was clearly the start of a beautiful relationship. Paul had their trust.
We then heard from Dr Harald Benend again some 6 months later, when the two companies decided to expand their agreement even further.
Now....i've sat on my computer reading on HotCopper that some people think the agreement with Bene is not worth the paper it's printed on. The reason? "Within the Field" includes only BME, not OA.
I admit, I don't really fully understand the reasons why this was written in in this way? Can someone shed some light, because i'm not a great help to the reader here i'm afraid.
In that (wild) theory, however, Bene could watch PAR pass Phase III and get registration for their drug, but - while theoretically somehow honouring the agreement with PAR for BME - also supplying someone else for OA.
3 things to address that:
1. Firstly, consider how dastardly that would make bene pharmaChem and the son of it's eminent founder, Dr Harald Benend?! That's some Evil Genius stuff.
2. Bene could have done that rather easily when the US and EU were "Outside the Territory". If that was part of the plan, why sign the September 2020 agreement expansion?
3. Go back up and read his comments at the bottom of the March 2021 announcement. Does he talk about BME? Does he mention PARs BME trials? 3 times he mentions - in a PAR announcment - that these trials, the registration, and the commercialisation of Zilosul which Paradigm are undertaking - is for Osteoarthritis.
Now some Aussie fundies have been to Germany to check Bene out and make sure they're real. 51Capital was one, and i'm sure you can find their report somewhere.
I've always liked this page from a Bell Potter report on PAR from April 2020 which I just don't appear to stop posting on the PAR Forum - but since the recent Phase III news might bring some new eyes - here it is again....
Lastly, i'll leave you with Baker Young who appear to have spoken with Dr Harald Benend themselves as part of their research....
I think as things develop there will be a greater appetite to know more about the contract with Bene, and how watertight our positions are etc. However this thread represents some of the thought i've given it. Investors can judge for themselves if everything is above board, if Bene are to be trusted etc. I'm happy with my investment and I reckon a great many others are too.
I mentioned recently that I emailed Simon White to ask if we might hear more from Dr Harald Benend at the upcoming PAR AGM. I really hope that happens, and I appreciate Mozz suggesting he'd follow up.
Onwards and upwards team. The next few years should defginitely provide us with plenty to talk about.
(20min delay)