5 Considerations When Licensing Cell Or Gene Therapy Products

By Brigid Bondoc, Matthew A. Ferry, Robert Grohmann, Dr. Wolfgang Schöenig at Morrison Foerster

The era of gene therapy is here.  Many believe we are on the precipice of a revolution in medicine driven by cell and gene therapies and related technologies.

However, licensing such products involves many legal and regulatory challenges that differ from those of conventional small molecules or biologics.  This article discusses some of the key issues that licensors and licensees should consider when negotiating and drafting cell or gene therapy license agreements.

1 – IP Landscape & FTO

New technologies are often fraught with intellectual property issues, and cell and gene therapy is no exception. 

Accordingly, one of the first steps in licensing cell or gene therapy products is to understand the intellectual property (IP) landscape.  This includes identifying the relevant patents, patent applications, and other IP rights that cover the product, the process, and the platform, as well as conducting thorough patent searches and freedom-to-operate (FTO) analyses to assess the validity, scope, and enforceability of all IP rights involved.

2 – Platforms & Hub-and-Spoke Models

Cell and gene therapies often include a wide array of different technologies such as genes, cell lines, vectors, or different delivery systems or methods.  Deals in this space often utilize the existing technology for specific disease or disease areas and are therefore prime candidates to structure as platform deals.  For example, a licensor may grant an exclusive license for a specific gene therapy product for a specific indication in a specific territory while retaining the rights to use the same product for other indications or in other territories.

Managing a Multitude of Arrangements

Complex technologies offer a wide array of licensing opportunities, including licensing to different parties for different indications, regions, or aspects of the platform.  Both licensors and licensees can benefit from these models by diversifying their risks and revenues, accessing new markets or applications, leveraging complementary expertise or resources, and accelerating product development and commercialization.  They also pose challenges in managing multiple relationships and agreements, ensuring alignment and coordination among parties, protecting IP rights and confidential information, avoiding conflicts or disputes over overlapping or competing fields of use or territories, and complying with regulatory requirements.

Therefore, licensors and licensees should carefully craft their hub-and-spokes arrangements to address these challenges at the outset.  They should also establish effective communication and collaboration mechanisms to facilitate information sharing and governance.

Field of Use

If a licensor provides its platform to multiple licensees, it should carefully consider the field of use for each particular licensee.  An unclear field of use can lead to a fuzzy delineation between licensees, resulting in inefficiencies or conflicts.

The choice of the field of use depends on various factors, such as the novelty, value, and potential of the technology, the competitive landscape, the regulatory environment, and the business strategy of the parties.  Licensors should balance the benefits and risks of granting broad or narrow fields of use. Granting broad fields of use, such as all genes in all cell types for all indications and mechanisms of action, may allow licensors to maximize their revenues by capturing a large market share and preventing competitors from accessing their technology. However, granting narrow fields of use, such as for a specific indication, may allow licensors to retain more control over their technology and to exploit it for other applications or indications that may be more lucrative or promising. Licensors can and should be strategic here and employ contingencies.

Conversely, obtaining broad fields of use may give licensees more flexibility to develop multiple products for various indications using the same technology.  Obtaining narrow fields of use may reduce the upfront costs and royalty obligations for licensees.

Sharing of Improvements

Both the licensor and licensee may develop or obtain improvements to the platform technology and should consider how to approach ownership and licensing of improvement technologies.  From the licensor’s side, the licensor will likely want to remain in control and own the improvements to its platform technology.  From the licensee’s side, the licensee may not be satisfied with a one-sided shift of ownership for improvements.  A middle ground could be a “community license” model, where the licensor obtains a non-blocking license from the licensee with the right to grant sublicenses to other licensees that have similarly licensed their improvements back to the licensor.  This allows for innovations to be shared among the hub and various spokes.

3 – Licensed/Royalty-Bearing Product

Financial terms are key in any deal, including in cell and gene therapy.  Parties should carefully define the product for which royalties or other forms of consideration will be due.  Instead of defining them by their chemical composition or structure, they may be defined by their function, mode of action, mechanism of action, target gene sequence, indication, or outcome. Some may be commercialized as a service rather than a product, such as autologous cell therapies that involve collecting, processing, and delivering cells from and to the same patient.

Licensors and licensees should carefully craft the definition of the licensed or royalty-bearing product or service to capture the essence of the invention and its value and to avoid ambiguity or disputes.  They should also consider whether the licensed patents actually cover the product or service that is being commercialized or only covers a tool to develop the commercial product or service.  In such cases, licensors may seek to include reach-through provisions that entitle them to royalties on ultimate products or services even though they are not covered by their patent claims.  However, such provisions may face legal challenges on the grounds of patent exhaustion, patent misuse or antitrust.

4 – Milestones and Royalties

Once the parties determine the scope of licensed products, they should carefully craft the operative provisions related to financial consideration.  These typically come in the form of milestones and running royalties.

Milestones

Regulatory pathways for cell and gene therapies differ significantly from traditional small molecules. For instance, the first clinical trial for a cell or gene therapy may be structured as a Phase I/IIa study.  Licensing agreements should reflect the unique regulatory considerations, including clinical trial design and endpoints.

Running Royalties

Cell and gene therapies are often very expensive, and a single dose can cost millions. As this poses extremely high budgeting pressure on payors in the various healthcare systems, various innovative reimbursement models have been created. These include staggered payment plans or success-based considerations (payment-by-result/outcome-based payments or rebates).

Licensors should consider how to reflect these realities in their royalty schemes to minimize knock-on effects of such risk-based models on their royalty revenue, for instance by including floors for each administered dose.

Anti-Stacking

A licensee may require a license under third-party IP rights to commercialize a cell or gene therapy. To lower their burden, licensees may include anti-stacking clauses, which enable the licensee to deduct all or part of third-party royalties from the royalties due to the initial licensor.

Licensors may limit this possibility, such as by limiting it to patents only or by including a floor.

Reductions

It is common to agree on cases of royalty reductions when competing products may enter the market, such as on patent expiration or loss of regulatory exclusivity.  Licensors may minimize the reduction by licensing of know-how or providing materials to the licensee.  If so, it may be easier for the licensor to extend the royalty base to include non-patented products.

5 – Regulatory Compliance

Licensors and licensees alike should stay abreast of the changing regulatory landscape in various jurisdictions and should structure their agreements accordingly.  Key considerations include:

Quality Control and Consistency Is Non-Negotiable

Gene therapies and regulators require precise manufacturing to ensure consistency between doses and the therapy’s safety and efficacy.  Compliance with Good Manufacturing Practices (GMP) throughout the supply chain is non-negotiable.

Access to Preclinical Data

Before advancing to human trials, companies must conduct extensive preclinical studies to assess the safety and efficacy of the gene therapy in animal models.  For example, assessing immunogenicity in animal models helps researchers understand the potential risks and safety profile of the gene therapy.  If they observe concerning immunogenicity, they can consider modifications to the therapy or additional safety measures before advancing to clinical trials in humans.  Regulators will require detailed data from preclinical studies, including toxicology and pharmacokinetics, to demonstrate the safety profile and justify the rationale for moving into clinical trials.

Long-Term Post-Marketing Stipulations

Gene therapies can have long-lasting effects, necessitating extended follow-up of patients’ post-treatment, for as long as 10-15 years.  Regulatory agencies often require post-marketing surveillance to monitor the safety and efficacy of approved therapies over time. Long-term data collection is critical for assessing the therapy’s durability and identifying any potential long-term safety concerns.

Effective Risk Mitigation Strategies

Developers need to anticipate and plan for potential adverse events, defining procedures for their management and ensuring patient safety, and build risk mitigation into their agreements. For example, adaptive trial designs, which allow for real-time adjustments to the study protocol based on emerging safety data, may be necessary to address unexpected issues.

Specific EU and the U.S. Legal Frameworks to Be Considered  

United States

The U.S. Food & Drug Administration (FDA) has several special programs and designations in place to facilitate the development and approval of treatments for rare diseases, which can expedite the development process and encourage investment in therapies for uncommon conditions. Some of these key programs and designations include:

• Orphan Drug Designation (ODD) and Exclusivity, which is for drugs and biologics that address diseases or conditions affecting fewer than 200,000 people in the United States. Grant of ODD may include eligibility for tax incentives, grants for clinical trial research, and seven years of marketing exclusivity.
• Rare Pediatric Disease Designation, which is for drugs and biologics intended for the treatment of rare pediatric diseases. The disease or condition must primarily affect individuals aged 18 years or younger. The program provides incentives, including a priority review voucher (PRV) upon FDA approval.
• Fast Track Designation, which is intended to expedite the development and review of drugs for serious or life-threatening diseases and allows for more frequent communication with the FDA, the possibility of a “rolling review” of the New Drug Application (NDA), and eligibility for Priority Review.
• Regenerative Medicine Advanced Therapy (RMAT) Designation, which is intended to expedite the development and review of regenerative medicine therapies, including gene therapies, that address unmet medical needs in a serious or life-threatening condition.  The RMAT designation provides the same benefits as the Fast Track designation.
• Breakthrough Therapy Designation, which is applicable to treatments that demonstrate significant clinical benefits for serious conditions, and offers all the benefits of Fast Track and intensive guidance from the FDA to expedite development.
• Accelerated Approval, which is available for drugs that treat serious conditions and allows for approval based on surrogate endpoints or intermediate clinical endpoints. After approval, further studies may be required to confirm the drug's benefit.

European Union

In the EU, the regulation on advanced therapy medicinal products (ATMP-Regulation 1394/2007/EC) applies to cell and gene therapy and defines the strict legal framework throughout Europe for the approval, monitoring, and market surveillance of advanced therapy medicinal products (ATMPs). In addition, Commission Directive 2009/120/EC establishes the definitions and detailed scientific and technical requirements for gene-therapy medicinal products and cell-therapy medicinal products, as well as for ATMPs containing devices and combined ATMPs. There are additional regulatory considerations, including compliance with:

• EU Tissue and Cells Directive (23/2004/EC) for ATMPs that contain human cells or tissue.
• Good clinical practice (GCP) in clinical trials, subject to the EU Clinical Trials Regulation (536/2014/EU).
• Pediatric regulations (Regulation (EC) No 1901/2006 and Regulation (EC) No 1902/2006), unless the product is exempt due to a deferral or waiver, for any ATMP product targeting the pediatric population.
• EU GMO directive (18/2001/EC) if any genetically modified organisms are part of the therapy.
• EU General Data Protection Regulation (679/2016/EU) for processing health-related data.

CONCLUSION

Licensing cell and gene therapy products involves a complex interplay of legal, scientific, and regulatory considerations. Stakeholders must approach these agreements with meticulous planning and a deep understanding of the unique challenges presented by this dynamic field.

About the Authors

Brigid Bondoc is a partner in Morrison Foerster’s FDA + Healthcare Regulatory and Compliance group in Washington, D.C. where she advises companies on a wide range of U.S. Food & Drug Administration pre- and post-market issues.

Matthew A. Ferry is a partner in the San Diego office and a member of the firm’s Technology Transactions Group, advising companies on strategic transactions where intellectual property drives the deal.

Robert Grohmann is of counsel in the firm’s Berlin office and a member of the Life Sciences Transactions + Licensing group where he advises clients on contentious and non-contentious matters involving IP. 

Dr. Wolfgang Schöenig is a partner in the firm’s Berlin office and a member of the Life Sciences Transactions + Licensing group where he advises clients on contentious and non-contentious matters involving IP.