Building up cash to advance its more lucrative programs, Avant Immunotherapeutics Inc. sold for $61 million an interest in the net royalty of Rotarix to Paul Royalty Fund II LP.
Rotarix is the company's vaccine for rotavirus, which causes severe diarrhea and vomiting in babies and kills about 600,000 children worldwide each year. Avant's partner, GlaxoSmithKline plc, of London, has filed for approval of the vaccine in about 30 countries and expects to launch it in Latin American and Asia Pacific countries this year and the European Union within 12 months. The product received approval in 2004 in Mexico.
Una Ryan, Avant's president and CEO, said the sale of Rotarix royalties to Paul Royalty Fund (PRF) will help the company advance its cardiovascular programs in the clinic and its pipeline of oral vaccines for bacterial infections, as well as complete the validation and staffing of a new manufacturing facility.
"We recognized that Rotarix was a very valuable product, but The Street was giving us absolutely no recognition of that, probably because the launch is in the rest of the world, not the U.S.," Ryan told BioWorld Today. "We really needed to bring the cash forward, so we wanted to reap the benefits today, so that we could plow money back into our higher-money products tomorrow."
Avant's stock (NASDAQ:AVAN) rose 10 cents Wednesday to close at $1.40.
Under the agreement with PRF, Needham, Mass.-based Avant will receive unconditional payments of $5 million at closing, and another $5 million by Dec. 1. Once the product is launched in the European Union, expected in the first half of 2006, Avant will receive a $40 million milestone payment. A launch in the U.S. could bring between $9 million and $11 million in a milestone payment, depending on the date.
Ryan said GSK has been fairly "tight-lipped" as to when it might file for approval of Rotarix in the U.S. Rotavirus only kills about 40 or 50 children in the nation each year, but it does cause a lot of economic damage in terms of parents missing work and admitting babies to hospitals. The virus is more rampant in countries such as India, where it kills a child every minute.
"It's partly just plumbing infrastructure," Ryan said, explaining why the virus is more deadly outside the U.S. "It's also food that's contaminated. It's public health stuff."
But the worldwide market potential for a vaccine against rotavirus could reach almost $2 billion a year, according to GSK predictions, Ryan said.
The agreement with PRF also calls for Avant to retain half of up to $5.5 million in future gross milestones payable by GSK. On top of that, Avant keeps a substantial share of its royalties once sales reach a certain level.
Under the agreement with GSK, Avant receives between 7 percent and 10 percent based on net product sales in countries in which Rotarix has valid patent protection. The royalties are discounted by 30 percent for non-patent countries.
Of the net royalties received from GSK, Avant will give 30 percent to Cincinnati Children's Hospital Medical Center, which licensed the Rotarix technology to the company in 1995.
"The rest go into a lockbox and the first $27.5 million goes to PRF," Ryan said. "Anything above that in any calendar year goes at a lower rate to them."
At that point, the remaining royalties will be split, with Avant taking 92.5 percent and PRF taking 7.5 percent. Once PRF receives a return on its investment of about 2.5 times the cash payments to Avant, the $27.5 million threshold will no longer be required and Avant will receive 92.5 percent of all future royalties.
If Rotarix is not launched in the U.S. by the end of 2009, both parties could opt out of the $9 million to $11 million milestone payment, and Avant would retain all U.S. royalties.
Avant and GSK took a "backward launch" strategy, leaving the U.S. market to the end, because they wanted to "provide vaccine first to countries where the need is greatest, where the children are dying," Ryan said. "By the time we come back to the developed world, we will have a very interesting safety package."
In the meantime, Avant will take the proceeds from the royalty sale to advance products such as TP10, which has completed a Phase II trial and now is in a Phase IIb trial for women undergoing cardiac surgery. The endpoints are death or heart attack. TP10 already has shown a great benefit for men, she said.
"We're just doing a trial in women to be sure we can progress to Phase III in both genders," Ryan said.
Avant also has completed a Phase II trial of its cholera vaccine, CholeraGarde, in U.S. patients, and is studying it in Bangladesh, where cholera is endemic. With good safety and immunogenicity data on hand for adults, the company is waiting for pediatric results expected this summer.
In addition to those two programs, Avant is studying a vaccine for cholesterol management. It has completed a Phase II trial, but is moving back to a Phase I/II study because Avant changed the adjuvant to make the vaccine more powerful.
And Avant is working with the Department of Defense and Dynport Vaccine Co. LLC, of Frederick, Md., on a Phase I injectable anthrax vaccine as part of its biodefense program.
Aside from working on its programs, the company has established a new manufacturing facility in Fall River, Mass., which soon will begin making three of Avant's vaccines - Ty800 for typhoid fever, CholeraGarde and a biodefense vaccine for the plague.
Money from PRF is non-dilutive, Ryan emphasized, saying it will help Avant validate and staff that new facility.
"All of our vaccines, whether for biodefense for travelers or for global health, are all based on the same platform," she said, adding that the facility will make single-dose, oral- and temperature-stable products.