■ Developing patented drugs that can extend life and reduce care costs, for sale to the international pharmaceutical industry for further clinical trials.
■ Over a turnaround time of three to five years, developing and licensing out drug candidates in return for payments made upfront and on reaching milestones in product development (typically at the start of clinical phases I, II and III and on filing), with additional royalty revenues.
The business prioritized is based on an option model in which Kancera concludes an agreement in the preclinical phase, before regulatory studies have been initiated, with a chosen international partner that has the resources and capacity for effective clinical development and marketing on an international basis. This option model provides Kancera with a cash flow during more cost-intensive parts of the project’s development, while at the same time the collaboration provides the partner with an opportunity to influence the project’s focus during the critical phase between preclinical and clinical. This also increases opportunities for rapid introduction of a clinical program. A fast, successful transition from Kancera’s preclinical to the partner’s further clinical development also increases the likelihood that the schedule of milestone payments to Kancera will be met.
Agreements in the preclinical phase of development dominated over clinical phase agreements in 2012 and together made up 46% of global agreements in respect of rights to drugs, according to analysis company Burrill & Company (source: http://www.burrillandco.com). This confirms the continuation of the trend during 2009–2011 involving a significant number of deals in the same development phase as Kancera’s projects are in.
The structure of these deals typically includes an upfront payment of around SEK 15–55 million, total revenue from milestone payments up until marketing in the range of SEK 250–2,500 million and royalties in addition. Around half of these deals also include the injection of capital via project financing or investment in the company (source: Kancera, internal report).
In view of the fact that Kancera’s business model is based on developing drug candidates with a turnaround period of three to five years, the company is looking for an agreement structure that allows a significant part of the revenues to be obtained within three years of entering into the agreement. Revenue from sale of drug candidates will then allow accelerated value development in that part of the value chain that is the focal point of Kancera’s operations. Expedited payment terms[F1] as described above mean that the total payment up to marketing is reduced in proportion to the increased risk taken on by the buyer.
Kancera’s research strategy represents an overall competitive advantage compared with many other biotech companies/suppliers of drug candidates, through a combination of:
■ Quality assurance of the prioritized disease mechanisms that form the basis of Kancera’s drug project (knowledge of disease relevance, clinical need and competition situation)
■ Faster and more efficient development of drug candidates using techniques that indicate which candidates act in the desired way in clinically relevant preparations and also through the company creating a sketch of how the drug candidate is to be constructed at molecular level
■ Development of diagnostic tools that aim to identify, in the further development of the project, those patients who can benefit from the treatment developed and how effective the treatment is