Antibiotic Business Plan

            BUSINESS PLAN FOR DEVELOPMENT AND MARKETING 

                                             OF A NEW ANTIBIOTIC

 

THE PATENT IS THE PRODUCT

                                                By Robert Bayless, inventor.

 

Following positive Phase III test results for both a new anti-fungal and a new antibiotic, Pfizer, Inc. bought a small company, Vicuron Pharmaceuticals, for $1.9 billion in cash in 2005. Pfizer could justify such a purchase premium because total worldwide antibiotic sales in 2000 exceeded $25 billion. A single blockbuster 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 a patent describing a new antibiotic requires a total investment of $5 million over five years to maximize future patent yields. Identifying, testing, and preparing the patent should take four years, followed by filing the patent and marketing it to drug firms in year five. When a drug firm commits to a licensing deal, they typically pay upfront money, and royalty payments in the range of 5% to 10% of total revenue continue for the patent's life. Setting up a joint venture between a major drug firm and the patent holder increases the potential for a higher return to the original investors compared to a license or acquisition.

Background: In 1983, Robert Bayless began researching new antibiotics to treat bacterial infections with the late Dr. G.P. Hirsch, Ph.D. He and Dr. Hirsch established The Lithox Corporation in 1985 to further refine this research. After four years of work, they were unable to synthesize a stable product that could withstand the rigors of synthesis, purification, and analysis. They filed and were granted six U.S. patents disclosing the use of an amino acid as an antioxidant to treat various ailments. In 2001, while continuing his study alone, Bayless discovered a novel synthesis method for a new antibiotic. After considerable research and work, he filed a series of Disclosure Documents, culminating in the 2014 disclosure   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 patents filed describing such products and their uses.

 

Challenges:

The U.S. pharmaceutical industry is facing challenges. Worldwide, branded pharmaceutical sales are projected to exceed $706 billion in 2012. However, about 9% of patents expire annually, resulting in a loss of roughly $60 billion in projected revenues to the generic market each year. For instance, in 1984, only 19% of U.S. prescriptions were filled with generics; by 2015, that number had risen to 88%. The generic market comprises approximately $67 billion in sales each year, with profit margins that are razor-thin compared to those of patent-protected drugs. Global animal pharmaceutical sales average around $14 billion per year, with large volumes but minuscule profits. Consequently, large drug firms actively seek patented products for human use that will ensure a price-protected market for the future.

Primary target markets for a new antibiotic include:

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

External use to treat bacterial skin infections in humans.

Inhalation use to treat bacterial lung infections in humans.

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

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

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

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

Cleaning fluids and sprays to disinfect surfaces.

Disinfection of foods and liquids, including water and blood.

Use in wound coverings to prevent and treat bacterial infections.

 

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 Market Strategy:

 Bayless proposes to market patent-pending drugs to large pharmaceutical firms with the resources to conduct clinical trials and finance the FDA regulatory process necessary to sell drugs in the United States. However, large drug firms refuse to sign Non-Disclosure Agreements to review new drug entities in the pre-patent stage because of concerns that their ongoing research may impinge on the new material. By designating the drugs as patent-pending, the drug firms can review the material without such concerns. Additionally, since it takes on average 12 years and costs $24 million to bring a New Chemical Entity (NCE) to the preclinical/nonclinical patented stage, large drug firms can skip a significant part of the time delay and uncertainty of the drug discovery process (refer to Attachment "C" for an in-depth discussion of drug discovery and development costs). The cost difference between the $24 million incurred on average by large firms to develop a patented drug in-house and the $5 million cost outlined by this document constitutes the value-added available to investors in this plan.

 

Patents:

 Patents are legal monopolies granted within the capitalist system that provide up to 20 years of exclusive ownership for a given technological advance. European patents must be filed before U.S. patents issue to protect European rights, so the timing of patent filing is of great importance. Investors should consult patent counsel to fully understand the patent process.

Funding Proposal:

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

 Step I: Set up a corporate entity to pursue the patent (please see Corporate Structure for details).

 Step II: Prepare and file a provisional U.S. patent. Although Bayless has already written one, it requires review and editing by patent counsel before filing.

 Step III: Synthesize compounds, identify chemicals, and conduct biological testing. Once the Provisional Patent is filed, approach companies to subcontract the synthesis, analysis, and in vitro and animal testing required to support a patent filing.

 Step IV: File U.S. Patent application(s) based on the results. The filing provides patent pending protection. Filing foreign patents must occur before the U.S. patent issues. Steps II and III run concurrently.

Step V: Begin marketing the patent(s) to major drug firms.

 

       TYPICAL PHARMACEUTICAL LICENSING DEALS ANNOUNCED IN 2006:

 

GlaxoSmithKline has agreed to purchase 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 the treatment of leukemia. Genmab received a license fee of $102 million, and GSK agreed to invest $357 million in Genmab. Additionally, Genmab 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 Genentech to commercialize their version of human growth hormone. Genentech paid $15 million upfront and 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. If commercialization is successful, Kosan will receive $250 million, as well as royalties on worldwide sales.

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

MedImmune signed an agreement with Japan Tobacco with the 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. In exchange, 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. This collaboration includes upfront payments, research funding, and milestone payments.

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