GTCB – Economics of the Leo partnership (updated):
1. The milestone payments from Leo are as follows:
$5M already received for EMEA approval in HD indication
$38M for clinical/regulatory milestones in the DIC/sepsis indication
$30M for sales-based milestones
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$73M Total
2. The combined royalty and manufacturing transfer payment payable by Leo to GTC on commercial sales of ATryn is in the mid-to-high teens as a percentage of end-user sales, and this figure is net of GTC’s production costs. If we assume to be conservative that a 2.5% royalty is payable by GTC to third parties for IP licenses (the size of these payments has not been disclosed), then the net (pre-tax) income to GTC comes out to about 15% of Leo’s end-user sales.
3. For ATryn used by Leo in clinical trials, Leo will reimburse GTC for its cost of production up to an undisclosed cap. (Unlike commercial sales, there is no built-in profit margin for GTC on Leo’s use of ATryn for clinical trials.)
4. Leo will fund 100% of the phase-2 development in the DIC indication. When this program enters phase-3, GTC will have the option—but not the obligation—to fund half of the clinical-trial expenses. If GTC exercises this option, it will have access to all of Leo’s phase-3 data for use in the U.S. and Japan—territories not covered by the Leo partnership; if GTC declines to exercise the option, it will have access to only the phase-2 data. (GTC’s decision to exercise or not exercise this option will presumably depend on how important the European data will be to the FDA and the Japanese regulators.)
“The efficient-market hypothesis may be
the foremost piece of B.S. ever promulgated
in any area of human knowledge!”
