The current expectation is a headline deal size of $500 million for dermatology (to include all indications, clinically, pre-clinically or bench tested, such as atopic dermatitis, psoriasis, acne, etc.). The structure of the deal likely would be very traditional:
- An upfront payment,
- One or more clinical milestone payments (e.g., completed pivotal phase 3 trials),
- One or more regulatory milestone payments (e.g., FDA approval for indications), and
- Royalty payments (e.g., a percentage of sales).
- An upfront payment, however structured (e.g., cash and/or stock), might range from $10-$50 million. The range is influenced by direct and indirect factors. A higher upfront payment might accrue because of the increasing value of and potential in PH-10 and/or management's desire to take more money upfront rather than in contingent payments. I do not know management's expectations in this regard, but I would hazard a guess that above a certain cash level, like $10-20 million, they would rather get more cash in the future because of their belief in the efficacy and safety of PH-10 (i.e., more royalties from more sales);
- Clinical and regulatory milestone payments measured in tens of millions of dollars. I cannot really hazard a guess as to a range here, but these payments likely would not be insignificant; and,
- A mid- to high-single digit royalty percent over a 10- to 15-year term. This is facet of the deal is where the clinical and business value proposition of PH-10 is put to the test with the hope of the product earning initial market share and then grabbing more -- much more -- based on robust efficacy, dramatic safety and flexible (and perhaps) predatory [to competitors] pricing. Depending on how high interest is, royalty payments might be low double digits and the term might extend out to 20 years.
This material previously was posted here.