Biotech Values

[DewDiligence]

Re: GTCB, Merrimack

>>Do we have any idea what GTCB's cut would be if one of it's partner's drugs was to enter the market post-approval?<<

MM-093 is the furthest along of any of GTC’s external programs, but I doubt that the post-approval terms have been fully negotiated yet. Still, we can guess at what the terms will end up being.

GTC will probably get a mid-single-digit royalty on sales—for Merrimack’s use of GTC’s IP—and a markup on GTC’s fully-allocated production costs for product that GTC sells to Merrimack. For the cost-of-goods mark-up, the industry standard is about 10%. If, for the sake of discussion, we say that GTC’s fully-allocated COGS will be 15% of the end-user selling price of MM-093, then the COGS mark-up is economically equivalent to a 1.5% royalty on sales over and above the royalty that will be earned for Merrimack’s use of GTC’s IP. Hence, the overall economic value of the deal might be equivalent to a high-single-digit royalty on sales.

Eventually, these kinds of arrangements could provide a highly consequential income stream for a company of GTC’s size.