Sandoz and Vectura announced today that they have restructured their development agreement for VR315, which is generally believed to be a generic version of GSK’s best-selling asthma combination product, Advair (branded as Seretide in Europe). In summary, what the two companies have agreed is that Sandoz will continue to do the development work and commercialisation of the product in Europe, but that Vectura will regain the rights to VR315 in the US. In order to be able to fund development there, Vectura will receive a payment of $9.5m from Sandoz in Q2 this year and will also have access to a $25m loan facility that can only be invested in VR315. Sandoz retains an option to market the product once approved, but this seems to be fairly loose as no terms have been agreed.
Sandoz has a relatively new CEO, Jeff George, and his review of the cost and potential benefits of the company’s various research programmes may well be the reason why Sandoz decided to support this change of tack on VR315. In Europe, the costs of developing the product are largely sunk and the pathway to approval is clear, so it is hardly surprising that Sandoz will continue with development. In the US, on the other hand, there are still no formal guidelines for generic inhaled respiratory drugs and the FDA is clearly being very difficult about approving any that come before it. Also, as the size of the funding package agreed between Sandoz and Vectura shows, getting approval (and fighting the inevitable legal battle with GSK in the courts) is going to be very expensive as well as very lengthy.
Vectura presented the new deal as a big win, on the basis that it furthers its ambition to become a marketing company and not just a development company. It is also possible to argue that Sandoz is simply reducing its risk, by pushing the R&D costs associated with VR315 on to Vectura while retaining a marketing option once the product is approved. However, we cannot escape the conclusion that Sandoz has lost conviction that this product is going to be a big winner. Advair sales in the US were £2.6bn in 2009 and VR315 is believed to be further ahead in development than any other potential generic, so the rewards of successful commercialisation could be huge. With Vectura now taking on the development alone, the chance of the product making it to market at all has diminished and the time before it does has increased. If Sandoz really beieved that the FDA was going to give VR315 the green light any time soon, it is hardly likely that it would risk the future of the product just for the same of a few tens of millions of dollars of development cost, particularly since it has already built a factory to make the drug. The really interesting question now, therefore, is whether any other companies will come forward to lead the charge on generic Advair, or whether Vectura will be left as a lone pioneer.