Cell and gene therapy transactions carry unique risks for both licensor and licensee

Due to concerns over cell and gene therapy pricing, there is a growing sentiment that pricing should be based to some extent on patient outcomes. Typically, “Net Sales” definitions permit deductions for rebates and chargebacks, but further modifications may be necessary to ensure that a licensee is permitted to recoup/offset against future royalty payments any refunds or payments to insurers/payors as a result of negative patient outcomes.

Typically, royalty terms continue until the later of expiration of (i) the last valid patent claim, (ii) a period (typically 10 to 12 years) following first commercial sale, and (iii) regulatory exclusivity. Because of the complexity of the manufacturing process associated with cell therapy (which in itself could provide de facto market exclusivity), some companies are pushing for royalty terms to extend until there is some biosimilar market entry (or, a longer period). 

With respect to the manufacturing process, given the high cost of materials (plasmid DNA/cell banks), their long lead times and limited high specification manufacturing facilities, careful planning of manufacturing capacity is also key. The impact on platform technologies of adjustments to specification/process, particularly with respect to evolving products such as mRNA based vaccines may also need to be factored in.

We also see differences in the exclusivity provisions. Where cell and gene therapies are based on platform technologies, it may be necessary to limit the rights being out-licensed to preserve flexibility and maximize the value of the technology for future deals. We have seen exclusivity being limited to certain indications, or rights preserved to the licensor to use the target or binders for other collaborations. Obviously, this has significant implications from both a regulatory perspective (e.g., risk of data contamination) and the risk of funding technology that could compete with the collaboration.

Authored by Penny Powell and Denis Segota.

This article is the second in our 2022 series, “Trends in Cell, Tissue, and Gene Therapies,” which aims to help you stay informed about the broad array of legal and regulatory issues affecting companies operating in the regenerative medicine space. From clinical studies, to obtaining patents, to scaling up manufacturing, our global team will discuss novel issues arising in all parts of the world, including unique deal-making, litigation, and inspections concerns for CTGT companies. Ensure you are subscribed to Hogan Lovells Engage to receive these new insights weekly!