US firm opens new funding route with clinical trials start-up investment

At the same time, the new company Phase III Development Company SARL (P3D), has announced that it has sealed an agreement with a major global pharmaceutical company to fund the label expansion of a currently approved product.

Under the terms of the agreement, P3D will assist in the management and funding of Phase III clinical trials in additional indications for the product. In return, the pharmaceutical company will provide P3D with development and regulatory milestone payments related to the Phase III studies, plus a percentage of certain out-licensed product royalties, and a percentage of the revenue it generates on the product once it is approved in the additional indications that are the subject of the clinical trials.

Ken Macleod, Partner in the London office of Paul Capital, told Science|Business that the investment provides a new route for companies to access capital markets to fund clinical trials and product development. “By funding P3D, we can provide a truly novel means of assisting pharmaceutical companies seeking external financing and risk-sharing in the development of their late stage drug pipelines.”

Paul Capital’s previous model was to provide money in return for a royalty stream from existing or future products. “We took the risk on the basis of the royalty stream materialising; companies took the risk on being successful in developing the product,” said Macleod.

The difference in this latest deal is that part of Paul Capital’s return is tied to success in clinical development, Macleod said. “We are taking some direct risk in the success of studies, because part of the return is based on [clinical] milestones.”  

Companies lacking the resources to fund all their late stage projects can now access risk capital to support a compelling growth opportunity while minimising the impact on internal financial resources, said Macleod. “For years, our industry has been looking for ways to make this type of collaboration work, and we now have the right win-win structure.”

While it may be welcome news for pharmaceutical and biotechnology companies, there seems to be some sensitivity about accessing this type of external funding. There has been no formal announcement of the formation of P3D, or who is behind it, and Macleod was unable to give any information about the company, its first pharma client, or the exact nature of the first label extension project.