The last ten years have seen a remarkable increase in the number of therapeutic products that have received regulatory approval with a companion diagnostic (CDx) test. This trend has been a boon to patients, allowing health care providers to prescribe a drug that is more likely to be effective, and less likely to cause safety issues, for the individual patient than a drug that is developed and approved for all patients. The trend also reflects the value that drug developers derive from a more targeted approval, in the form of lower clinical development costs and shorter timelines to approval. And of course, diagnostic manufacturers have seen revenue growth through their collaborations with drug makers.
While CDx collaborations between pharma companies and diagnostic manufacturers can bring tremendous benefits, they can also present a number of issues that result in significant push and pull between the parties. These include the following:
Payment structure. A diagnostic company typically seeks meaningful upfront payments and no payment risk for its work, while a pharma company may want to incentivize successful completion of the development program.
IP ownership. A pharma company often expects to own intellectual property (IP) that it is paying to develop, while a diagnostic company may insist on owning any biomarker-related IP and any improvements to its assay that may result from the collaboration.
IP risk. Neither party wants to bear the risk of infringement of third-party IP relating to biomarkers that would be infringed through the conduct of the diagnostic test.
Development diligence. A pharma company almost always pushes for a strong commitment for the CDx to be ready at drug launch, while a diagnostic company will seek to limit exposure for delays, particularly those beyond its control.
Commercialization diligence. A pharma company may want assurance that the CDx that it helped pay to develop will be commercially available on an ongoing basis, while a diagnostic company may be reluctant to make strong commitments well into the future.
Remedies. A pharma company often insists on the ability to commercialize the CDx, or have a short path to obtaining approval of a replacement, in the event of a failure by the diagnostic company, while a diagnostic company may not want to risk allowing its IP (particularly trade secrets or otherwise unpatented IP) to fall into the hands of a competitor.
These (and other) issues can make the negotiation of a CDx collaboration agreement a challenge, but given the significant scientific and economic benefits of these agreements, the parties are often able to bridge their differences to add value on both sides and bring life-changing personalized medicines to patients.