(Bloomberg) — The most valuable part of tiny biotech Knight Therapeutics Inc.’s new treatment for a rare tropical disease isn’t the drug. It’s a $125 million piece of paperwork that came with its approval from the FDA.
When Knight’s drug, Impavido, was approved in March, the U.S. Food and Drug Administration awarded one of its first priority review vouchers — the cornerstone of an seven-year-old program to entice drugmakers into developing medicines for diseases that sicken millions but are never likely to be big moneymakers. Knight agreed to sell the voucher six months later.
The voucher, a ticket to move any drug to the front of the line at the FDA, could be worth billions to a company that uses it to jump ahead of a competitor — or takes it off the market so a rival can’t use it. The payment Knight fetched from Gilead Sciences Inc. was about double the only previous voucher sale on record, and prices are poised to balloon further as drugmakers seek even a brief head start for new products.
The typical FDA review takes about 10 months, and priority reviews cut the wait to about six months. “If you have a multibillion-dollar drug, four months is worth a lot,” said Howard Liang, an analyst at Leerink Partners.
For small pharmaceutical companies like Knight, vouchers are a way to help turn a profit in a field where taking a drug from invention to use can cost about $1 billion, according to a 2010 study in the journal Nature. Knight had about $200 million in cash before the deal with Gilead.
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The FDA’s voucher program was first proposed in a 2006 academic paper and became law the following year, to be used for diseases like malaria, cholera and dengue fever.
The market for the VIP passes has taken a while to pick up speed, with only four granted so far. Novartis AG received one in 2009 for its Coartem to treat malaria, which the company used to accelerate review of a gout drug that failed. Johnson & Johnson hasn’t yet used a voucher it got in 2012 for Sirturo, which treats tuberculosis.
Regeneron Pharmaceuticals Inc. and Sanofi were the first to buy a voucher in the market, paying $67.5 million for the one BioMarin Pharmaceutical Inc. was awarded last February. They’ve said they’ll use the pass to eliminate rival Amgen Inc.’s lead in bringing to market a potential blockbuster drug to treat ultra-high bad cholesterol levels. Amgen submitted its drug in August, while Sanofi and Regeneron planned to submit theirs late last year. The voucher could draw them even.
Gilead is still deciding how it will use the voucher it bought from Knight, said Cara Miller, a spokeswoman. The company may have acquired it simply to keep out of the hands of Merck & Co., which is developing a rival hepatitis C drug, according to RBC Capital Markets. Gilead declined to comment further.