Earlier this year UCB signed a unique deal with the European Investment Bank (EIB) to support its drug development activities.
The bank, set up by the EU in 1958, has funded pharmaceutical activities before – Pierre Fabre and Ferrer Pharmaceutical are among the firms whose projects have been financed under its risk-sharing finance facility – but its deal with UCB was something different. A Warsaw metro line, German motorway or rural Spanish bank – all recent recipients of EIB support – are typical of the deals struck by the Bank, but with the UCB agreeement a first-of-its-kind risk-sharing deal was hammered out.
Persuading the EIB to look beyond its traditional infrastructure projects and essentially go out on a limb was quite a coup for the company. Explaining the deal UCB’s chief executive Roch Doliveux told PME: “Here they are, basically, taking some risk and co-investing in programmes”, which will, Doliveux said, bring new medicines more quickly to patients. The deal was driven, he said, by “the productivity and the wealth of [UCB’s research] programmes”.
“I think they wanted to pick somebody that they trusted, somebody that they had a longstanding relationship with, and picked UCB.
“We feel extremely good about [that] and proud, to some extent, that they picked us as their first investment at risk, which is a pilot for them [so] we carry a lot of weight for the entire industry.”
Sharing risks
The EIB will provide €75m in funding for the Belgian biopharma company’s R&D projects in return for milestone payments if the drug candidates progress through development. And the agreement is truly risk-sharing, with the EIB standing to lose money if the projects it backs are unsuccessful.
Announcing the deal – which is the first to be signed under the terms of the recently-launched InnovFin funding initiative set up by the European Commission and the bank – EIB vice president Pim van Ballekom said it showcased “the direct intervention and risk-taking capacity of the EIB and its role in supporting key R&D activities”.
The [European Investment Bank] deal is very consistent with the need to collaborate in order to harness the power of science today
Access to funding has long been considered a weakness for the EU compared to other areas of the world, and the European Commissioner for Research, Innovation and Science Máire Geoghegan-Quinn has been pushing a series of initiatives to meet an EU target of investing 3% of GDP in R&D by 2020.
InnovFin (EU finance for Innovators) was officially launched earlier this month with a war-chest of €24bn to support research and innovation in European companies over the next seven years. In addition to direct financial support, InnovFin will also provide advisory services to companies.
Looking to Europe’s needs Doliveux said: “The issue of growth in Europe is more driven by innovation than by infrastructure, at least that’s my belief.”
It’s a statement that would resonate with the EIB, whose Philippe de Fontaine Vive said at the time InnovFin was first announced: “Investment in innovation is key to this end. We need to ensure that a limited EU budget is used to maximum effect.”
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What is InnovFin It is a joint initiative launched by the European Investment Bank Group (EIB and EIF) in cooperation with the European Commission under Horizon 2020. InnovFin consists of a series of integrated and complementary financing tools and advisory services offered by the EIB Group, covering the entire value chain of research and innovation (R&I) in order to support investments from the smallest to the largest enterprise. InnovFin is available across all eligible sectors under Horizon 2020, in EU Member States and Associated Countries. By 2020, InnovFin is expected to make over €24bn of debt and equity financing available to innovative companies to support €48bn of final R&I investments. European Investment Bank |
The funding vehicle grew out of an early risk-sharing finance facility developed under the seventh EU framework programme for research and technological development (FP7), which provided around €11.4bn to research-based companies.
InnovFin is designed to help the EU meet its objectives under the €80bn Horizon 2020 programme, which laid out research priorities for the region between 2014 and 2020 and endeavoured to do away with the red tape that limited access to funding.
At stake within the UCB-EIB deal are six unnamed projects split across early- and late-stage development and independent of each other to increase the probability that milestones will be met.
In addition to milestone payments the deal includes a number of other contractual elements that makes it sound more like a traditional pharma partnership, including setting out what happens to the intellectual property (IP) resulting from the research. On this point the EIB will acquire and co-own (with UCB) part of the IP that will be jointly developed during the investment programme, but UCB will ultimately re-acquire all the co-owned IP at the end of the partnership agreement.
It’s an innovative deal that’s quite a long way from traditional bank investments and could be the first of many within the industry. “If this pilot that they run with us is positive, they want it to broaden this type of offering … and clearly there is a lot of [industry] interest in deals in where you share risk and you share returns,” Doliveux said
Funding growth
Looking to his company’s current performance, Doliveux says UCB is now in “an intense growth phase fuelled by Cimzia”. The anti-inflammatory TNF drug, whose indications currently include rheumatoid arthritis and Crohn’s disease, became UCB’s leading product in the first half of 2014, thanks to 23% growth in the US (where it brought in €214m) and a 36% rise in European sales, which reached €106m.
But it’s not just UCB’s established products that Doliveux is confident about. “We feel very good about having a very productive late-stage pipeline,” he said, adding that UCB is ranked in the industry’s top three when it comes to research pipelines, only behind two mid-size US biotechs (“depending on the ranking”).
One of UCB’s brightest prospects is its osteoporosis candidate romosozumab. In January phase II trial results were published that showed significant increases in low bone mineral density at both spine and hip and in June the monoclonal antibody began phase III studies in men with osteoporosis, with the first results expected in by June 2016.
But, as Doliveux notes, “it costs some money to then bring this pipeline to reality”, hence the company’s deal with the EIB, about which Doliveux commented that “anything we can do to be able to accelerate the development of this pipeline is welcome”.
“They are taking €75m of risk and we are investing almost €1bn,” though he acknowledged: “It’s still a small portion of our overall R&D programme [and] UCB carries the majority of the risk.
€75m is clearly a lot of money. But in pharma research terms how far does it go? Doliveux won’t be drawn on exactly how the company will use the injection of funds from the EIB, other than to note “it gets you to advance the six programmes faster than you would have done without the €75m”.
“The deal is very consistent with the overall trend of the need to collaborate in order to harness the power of science today,” he said.
As with many of its industry peers UCB has already been following this trend and in January signed an agreement with Biogen Idec to develop and commercialise multiple sclerosis and haemophilia therapies in Asia.
This was followed in March by a drug discovery and development partnership with Sanofi that focuses on anti-inflammatory small molecules and the work could lead to new treatments for the likes of immune-mediated diseases in areas, such as gastroenterology and arthritis.
Paying for innovation?
We end on the thorny subject of paying for innovation and how austerity-hit Europe in particular fares. Doliveux draws a distinction between the ‘big picture’ view held by most in Europe that the biopharmaceutical industry is a key driver of growth and the disconnect often seen at a country level that says ‘pharmaceuticals are expensive’.
“There is clearly schizophrenia within countries [on this issue]” he said. Picking out a handful of countries he contrasts the UK’s poor rating for market access with Germany. “For many years Germany was moving in the wrong direction but it is I think rethinking [its approach] and there is a much better understanding of the implications of stalling access to innovation.” UCB’s home of Belgium is another country Doliveux sees as making progress when it comes to access to innovation.
He concludes: “There is more and more understanding as we move on that the biopharmaceutical industry is a key strategic sector for European growth.”