$3.3B Deal for Vertex Royalties a 'Valley of Death killer' for Cystic Fibrosis

From StratAcuity Posted in Industry Articles
$3.3B Deal for Vertex Royalties a 'Valley of Death killer' for Cystic Fibrosis

The deal in question is the sale of the rights to royalties owned by the Cystic Fibrosis Foundation to Royalty Pharma, a New York firm specializing in purchasing royalty rights from large upfront cash payments. The $3.3 billion is eight times the CFF's total revenue from last year. Marshall is co-founder of Portsmouth, N.H.-based biopharmaceutical recruitment and staffing firm StratAcuity with a keen interest in cystic fibrosis. His 15-year-old daughter suffers from the disease, and he celebrated the announcement of positive trial results over the summer from the next drug by Vertex to treat it. 

Marshall says the huge influx of cash will help spur more drug development in biotech and big pharmaceutical companies, as well as helping promising new drugs make the leap from academic research to full commercial-focused development. That's the "Valley of Death" he's referring to, that period of time between initial discovery to industry investment where a lot of promising ideas for drugs die. With the new $3.3 billion in hand, Marshall says, the CFF will be able to fund much more early-stage research and bring to the point that biotech investors will take notice. "For the Foundation, money buys science, and science buys cures," he said. "This level of funding will allow (the CFF) to find out what patients need and how it can help attain that." 

The CFF invested $150 million in Vertex (Nasdaq: VRTX) 15 years ago to encourage the company, now based in Boston, to develop drugs for the deadly lung disease. That initial investment - small by industry standards - enable the development not only of Kalydeco, approved in 2012 to treat a small number of patients with the disease, as well as lumacaftor, its drug expected to be approved next year which will treat many more patients. 

An article in the New York Times Wednesday cites some concerns that the enormous payment for royalties may distract the foundations from its ultimate goal of making life-saving drugs available to as many people as possible. The concern is based on the fact that Vertex charges $300,000 a year for its drug, and CFF is now profiting off the high price. But Marshall, who lives in York, Maine, says not only is the payment a huge validation for Vertex, but he contends that the high price for the drug is encouraging other firms to innovate new treatments for the same disease. "If (Vertex) went out and just gave it away, no one would even try to develop anything," he said. Also, he said, the high price won't remain forever, as newer competing drugs come on the market.