Thursday, April 2, 2015

Antibiotic Business Plan



    By Robert Bayless, inventor.

            Following positive Phase III test results for both a new anti-fungal and a new antibiotic, Pfizer, Inc. purchased a tiny company, Vicuron Pharmaceuticals, for $1.9 billion in the fourth quarter of 2005.  Pfizer could justify such a purchase premium because total world-wide antibiotic sales in the year 2000 exceeded $25 billion.  A single block-buster drug can generate $1 billion in sales in the first year, allowing large drug firms to recoup their investment immediately.

     Project Summary:  This project to create, patent and market the patent describing a new antibiotic needs a total investment of $5 million over five years to maximize the yield from the future patent(s). Identification, testing, and patent preparation should take four years, marketing of the patent to mid-level drug development firms should begin in year five. When a drug firm commits to a licensing deal, they normally pay up‑front money, and royalty payments in the range of 5 to 10% of total revenue continue for the life of the patent. If a joint venture between a major drug firm and the drug development firm is set up, participation in ownership by the original investors can result, and the opportunity to go public presents itself. Certainly, the joint venture vehicle increases the prospects of a greater return to the original investors when compared to a license or acquisition.

            Background:  Robert Bayless began researching new antibiotics to treat bacterial infections in 1983.  He and Dr. G.P. Hirsch, Ph.D., established The Lithox Corporation in 1985 to further refine this research.  After five years of work, they were unable to synthesize a stable product which could withstand the rigors of synthesis, purification, and analysis.  They did file, and were granted six U.S. patents disclosing the used of an amino acid as an antioxidant to treat various ailments.  In 2001, while continuing his study alone, Mr. Bayless discovered an original method of synthesis for a new antibiotic.   After considerable research and work, Mr. Bayless filed a series of Disclosure Documents, culminating in the 2014 disclosure (See Attachment “A”).  The disclosed products need to be synthesized and identified using a variety of standard analytical techniques, biological tests conducted both in vitro and in animals, and patent(s) filed describing such products and their uses.

The Industry:

            The U.S. pharmaceutical industry is in trouble.  World-wide branded pharmaceutical sales will exceed $706 billion in 2012.  Approximately 9% of patents expire each year, so that about $60 billion in protected revenues are lost each year to the generic market.  The generic market comprises about $67 billion in sales each year, with profit margins razor-thin compared to that of patent-protected drugs. Global animal pharmaceutical sales average about $14 billion per year, with large volumes and minuscule profits.  Therefore, the large drug firms actively seek patented products for human use that will insure a price-protected market for the future.

Target Markets:

            Primary target markets for a new antibiotic include:

1)    Internal use to treat bacterial infections in humans, including respiratory infections.

2)     External use to treat bacterial skin infections in humans.

3)     Inhalation use to treat bacterial lung infections in humans.

4)     Internal use to treat bacterial infections in food and non-food animals.

5)  External use to treat bacterial skin infections in food and non-food animals.

6)     Systemic use to treat bacterial infections in food and non-food plants.

7)   Topical sprays to treat bacterial infestations in food and non-food plants.

8)     Cleaning fluids and sprays to disinfect surfaces.

9)     Disinfection of foods and liquids, including water and blood.

10)   Use in wound coverings to prevent and treat bacterial infections.

Market Strategy:

            Bayless proposes to market patent(s) pending to mid-level drug development firms which have the resources to conduct the clinical trials and finance the F.D.A. regulatory process necessary to sell drugs in the United States.  Such firms refuse to sign Non-Disclosure Agreements in order to review new drug entities in the pre-patent stage because of their own on-going research may impinge on the new material.  A patent-pending designation allows the mid-level drug firms to look at the material without such concerns.  In addition, since it takes on average 12 years, and costs $24 million to bring a New Chemical Entity (NCE) to the preclinical/nonclinical patented stage, the drug firms can skip a large part of the time delay and uncertainty of the drug discovery process (See Attachment “C” for an in-depth discussion of the costs of drug discovery and development.)  The cost difference between the $24 million incurred on average by drug firms to develop a patented drug in-house and the cost of $5 million as outlined by this document constitutes the value-added available to investors in this plan.

            Patents are legal monopolies carved out of the capitalist system.  A U.S. patent provides up to 20 years of exclusive ownership of a given technological advance. European patents must be filed before U.S. patents issue in order to protect European rights.  The timing of patent filing is of great importance, and investors should consult patent counsel to fully understand the process.

Funding Proposal:

            In order to interest a major drug firm in a licensing deal, the following steps must be accomplished:
            (See Attachment “B” for complete Research Plan proposal)

Step I.  Prepare and file a Provisional U.S. Patent.  Bayless has already written               one, but it needs to be reviewed and edited by patent counsel before filing. 
Step II.  Synthesis of compounds, chemical identification, and biological testing.
             Once the Provisional Patent is filed, companies can be approached to                     subcontract the synthesis, analysis, and in vitro and in vivo animal                         testing necessary to support a patent filing. 
Step III.  File U.S. Patent application(s) based on the results. 
              Filing provides patent pending protection.                            
              Filing of foreign patents must occur before U.S. patent issues.
              Step II and Step III run concurrently.

Step IV.  Begin marketing patent(s) to mid-level drug development firms.


GlaxoSmithKline has agreed to buy all outstanding shares of Praecis Pharmaceuticals for $54.8 million. Praecis has an anticancer drug in development.

Genmab has entered into a worldwide agreement with GlaxoSmithKline to commercialize a human monoclonal antibody for treatment of leukemia.  Genmab received a license fee of $102 million, and GSK agreed to invest $357 million in Genmab.  Genmab also received tiered royalties on worldwide sales.

            Exelixis has entered into a worldwide agreement to develop cancer treatments with Bristol-Myers Squibb.  Exelixis received $60 million in cash, $20 million for each drug candidate selected by BMS, and royalties on worldwide sales.

            Altus Pharmaceuticals has entered into an agreement with Genetech to commercialize their version of human growth hormone.  Genetech paid $15 million upfront, as well as purchased $15 million of Altus’ stock.
Commercialization milestones trigger up to an additional $110 million in payments.

            Kosan Biosciences has established a worldwide license agreement with Pfizer for a drug to treat gastrointestinal diseases.  Kosan received $12.5 million upfront, and Pfizer will initiate a Phase I trial.  Kosan will receive $250 million if commercialization is successful, as well as royalties on worldwide sales.

            Astra Zeneca paid a $20 million milestone payment to Targacept following successful completion of clinical studies of a cognitive-enhancing drug.

MedImmune signed an agreement with Japan Tobacco with intent to develop a monoclonal antibody to treat lupus.  JT received upfront payments as well as royalties on marketed products.  MedImmune received exclusive development and marketing rights everywhere in the world except Japan.

            Crucell has signed a cross-licensing agreement with Merck allowing Merck to use Crucell’s technology in the vaccine field.  Crucell will receive access to Merck’s large-scale vaccine manufacturing technology.

            Albany Molecular Research has entered into a two year collaboration with Bristol-Myers Squibb.  Upfront payments, research funding, and milestone payments are included.

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