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Regulatory News | 10 May 2016 | By Zachary Brennan
It’s well-known that the National Institutes of Health (NIH) offers billions of dollars in grants to US academic research facilities. What’s less well-known is that each year, hundreds of new inventions are produced in the laboratories of NIH, the Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA), and these inventions are licensed out to private companies in the US and internationally for further research and development, with the hopes of bringing new products to market.
The licenses generate significant amounts of revenue for NIH. From 1988 to 2004, NIH entered into almost 2,500 license agreements and generated more than $500 million in royalty revenues, according to a study from Nature Biotechnology.
And among those licensing opportunities, there’s a subset of exclusive licenses, meaning the use of the invention is limited to the license holder, which are offered to only tiny start-up biotech, pharmaceutical and medical device companies that are less than five years old, have raised less than $5 million and have less than 50 employees.
The goal of this exclusive license program for start-ups is to bring early technologies to a stage of development where they might be acquired or brought into later-stage clinical trials, or even marketed, by larger biotech or pharma companies.
And as NIH’s Steven Ferguson noted in the Journal of Commercial Biotechnology in 2012, “Because many, if not most of the technologies developed at the NIH and FDA, are early stage biomedical technologies, the time and development risks to develop a commercial product are high.”
But for industry, the exclusive licenses offer a way to minimize the barriers faced by start-up companies and provide a structure that supports the commercial development of early stage NIH and FDA technologies.
In order to participate in the NIH grant program of exclusive licenses for start-ups, companies can either pay $2,000 to NIH for a one-year exclusive evaluation license that can be later amended to an exclusive commercialization license; or obtain an exclusive commercialization license which includes:
As NIH notes, the start-ups that win these exclusive licenses face a major uphill challenge in further developing these early-stage technologies.
However, that battle isn’t an impossible challenge. Examples of exclusive licenses helping to bring successful products to market include Amgen’s Kepivance (palifermin), Milennium’s Velcade (bortezomib), Medimmune’s Synagis (palivizumab) and Angiotech’s Taxus Express (paclitaxel-eluting coronary stent system).
In the case of the blockbuster drug Velcade, Millennium (which is now known as Takeda Oncology, following an $8.8 billion acquisition in 2008) “obtained an exclusive license from the NIH for an invention that originated from research under a CRADA (Cooperative Research and Development Agreement) between the NIH and Proscript (which was later acquired by Millennium). The marketed product, Velcade (bortezomib), is a lyophilized powder that is formulated as a mannitol boronic acid ester, and this license relates to the mannitol ester formulation of bortezomib,” Takeda spokeswoman Amy Atwood told Focus.
The CRADA with NIH’s National Cancer Institute resulted in “a number of studies of Velcade in solid tumors and lymphoma … At the time of the submission that resulted in the very first myeloma approval (accelerated, 2003), I recall that 25% of the patients were from NCI trials,” Dixie-Lee Esseltine, M.D., Vice President of oncology clinical research for Takeda, told Focus.
In the past year, NIH has offered dozens of prospective grants for start-up exclusive licenses, including ones for:
More than 2000 other licensing opportunities are also available through NIH, some of which are non-exclusive, exclusive and exclusive but only for start-ups.
But because of the sensitive nature of the licenses and the developing drugs and devices, NIH releases little to no information about how the start-ups are vetted and then granted the exclusive licenses.
An NIH spokeswoman told Focus: “We follow the process for granting exclusive licenses per Federal law and regulations for government owned inventions. When a government agency has received an application from a company (it is rare that there is more than one) that wants an exclusive license to a technology, the agency must advertise the intent to grant, i.e. the intent to negotiate the terms of, an exclusive license … Any other interested company has 15 days to object by submitting a business plan of their own.
“If there is more than one company interested, which would be unusual, and if neither agrees to less than an exclusive license, we must decide between the two based on their capabilities and business plans, favoring a small US business over others of similar capability,” the spokeswoman said.
More recently, NIH has awarded exclusive licenses to companies that don’t have office space or even websites.
James Love, director of the non-profit non-governmental organization Knowledge Ecology International, which has been denied information from NIH on the exclusive licenses, told Focus: “I think the NIH Is operating in a highly non-transparent manner, really appalling. Nothing that is not in the federal register notice is known about the licenses. They won't answer questions about the state of the technology, provide copies of the patent applications, or give out the addresses or names of the principals of businesses that have no web pages. They won't give the royalty rate, the term of the license, or answer any questions about the analysis that was done to limit the exclusivity to something less than worldwide life of patent rights. The NIH seems to be ignoring the requirements of 35 USC 209(a)(1-2).”
For instance, NIH released a proposal to grant exclusive patent licenses to Vital Spark Inc. and Kalytera Therapeutics Inc. for CB1 receptor mediating compounds, but as KEI noted, Vital Spark does not have a website and there’s “virtually no information” on their status as a company.
“As far as we know, the NIH has not demonstrated why granting an exclusive license to either company is necessary, how the proposed scope of exclusivity is limited to that 'reasonably necessary to provide the incentive for bringing the invention to practical application,' or how the NIH will ensure that the inventions is available to the public on reasonable terms, including but not limited to a reasonable price,” KEI said in a letter to NIH on 4 May.
Sudarshan Upadhya, co-founder and chief scientific officer of AestasRx, which does not have a website but won the exclusive start-up license to develop diagnostics for Alzheimer’s and other diseases, told Focus that he could not discuss his work because of a non-disclosure agreement with NIH.
Ram Aiyar, executive vice president of corporate and business development at Corvidia, which has four employees and was granted an exclusive NIH start-up license this year for a cardiovascular therapeutic, told Focus his company is targeting certain segments of cardiovascular disease with mortality rates higher than 20%.
He said the company’s decision to apply for the license was based on Corvidia CEO Michael Davidson’s relationship with an NIH official, though the company was not launched “solely based off of that asset.” Corvidia recently closed $26 million in Series A financing, though Aiyar declined to offer any details on the timeline for the development of the NIH-developed therapeutic.
Sai Prashant Boyreddy, manager of Great Lakes Neuroscience, told Focus, noting his start-up of seven employees is still working on obtaining an exclusive license from NIH, which is reviewing the company's comments. He said NIH's due diligence has been a "long and lengthy process" and that he should know in two or three weeks if they've won the license. If they do, he said the company could hire more employees.
"The most important thing that needs to be told is that these inventions cannot be commercialized by NIH," Boyreddy said. "And the inventions are at such an early stage that large pharmaceutical companies don't want to waste their time on them."
An NIH spokeswoman also told Focus: “Any information about why a company submitting an application for an exclusive license was found acceptable would be business confidential and not subject to release to the public.”
NIH Start-Up Exclusive License Agreements
Draft of a START-UP EXCLUSIVE EVALUATION OPTION LICENSE AGREEMENT
Tags: NIH, exclusive start-up licenses, FDA inventions, FDA labs