A Knight Therapeutics Inc. official still believes a rare pediatric disease priority review voucher is worth more than a tropical disease PRV, even though sale prices for both do not reflect it.

Knight received nearly double the price for its tropical disease PRV as BioMarin Pharmaceutical Inc. did for its rare pediatric disease voucher a few months ago.

Gilead Sciences Inc. purchased Knight’s voucher for $125 million, according to a Nov. 19 announcement. [See Deal] In contrast, BioMarin announced in July that it had sold its voucher to Sanofi and Regeneron Pharmaceuticals Inc. for $67.5 million Also see "How Much Is A Priority Review Worth? $67.5 Million, Sanofi/Regeneron Say" - Pink Sheet, 11 August, 2014.. [See Deal]

Knight Chief Financial Officer Jeffrey Kadanoff said in an interview that the company received a fair value for its voucher, although he would rather have sold a rare disease PRV.

“The other voucher is more valuable than ours,” Kadanoff said of the two voucher types. “I would never choose ours over that one.”

A priority review voucher allows its owner to receive an eight-month review for any application they choose. FDA can award vouchers to sponsors who receive approval for products treating several tropical diseases or a rare pediatric disease.

A voucher holder also may sell or transfer it.

But sponsors wishing to redeem a tropical disease PRV must give FDA notice of their intention a year in advance of filing the application. Those redeeming a rare pediatric disease voucher must only give 90 days’ notice.

Kadanoff said the notification time is the biggest issue with tropical disease voucher value. However, he said a sponsor can minimize it by planning ahead.

Tropical disease vouchers also may only be sold or transferred one time before redemption, while pediatric vouchers can be sold or transferred an unlimited amount of times.

Kadanoff said that difference did not pose as much or an effect on voucher value, in part because many companies looking to acquire one likely will not be thinking of reselling it.

In fact, FDA advised Knight that it could sell the rights to a tropical disease voucher an unlimited number of times and get around the one-transfer rule.

But Kadanoff noted the differences between the types of vouchers did not appear to be much of a factor in the sale.

In any event, pending House and Senate bills would change the tropical disease voucher program notification and transfer rules to resemble the rare pediatric disease voucher program, eliminating both problems (see related story, Also see "Ebola Drugs Take Center Stage In Review Voucher Bill, But Real Value May Be Harmonization" - Pink Sheet, 24 November, 2014.).

Gilead did not reveal much about its plans for the voucher, but the firm’s robust pipeline suggests surprisingly few options (see related story,[A#00141124016]).

Price Exceeds Knight’s Expectations

The cash proceeds, which will arrive in a lump sum, will help Knight acquire and in-license products, Kadanoff said.

The final price blew away estimates that Knight had commissioned when it received the voucher in conjunction with its approval of the leishmaniasis treatment Impavido (miltefosine) in March.

At that time, the company said MNP LLC placed the fair market value at $4.4 million to $13.3 million. But in its February application for listing its common shares on the TSX Venture Exchange, the company said economists estimated the voucher may be worth $44.5 million to $445 million Also see "For Sale: Knight Therapeutics Seeks Buyers For Impavido Priority Review Voucher" - Pink Sheet, 20 March, 2014..

However, the sale price is more in line with a survey that found drug companies were willing to invest about $100 million on average to obtain a voucher Also see "Priority Review Voucher Value Still Confounds, But Remains An Incentive For Sponsors" - Pink Sheet, 21 September, 2011..

Knight may have boosted the price by holding an auction for the voucher. Kadanoff said investment banking firm Jefferies LLC, which conducted the auction, contacted more than 40 companies about purchasing it.

Bids came back from many interested parties, Kadanoff said. He did not reveal the exact number.

Small Numbers Make For Hard Math

Kadanoff said the small number of pending vouchers made a valuation difficult.

“It’s a difficult asset to value because there are only four that were issued and one that has been sold,” he said. “I do think doing a full auction brought out the most value.”

So far only a handful of vouchers have been issued. Knight’s announcement marks the second public acknowledgement that one has been sold.

Even though the tropical disease PRV program is much older than its rare pediatric disease counterpart – they were created in 2007 and 2012, respectively – so far the pediatric program appears to be more popular in part because of its programmatic advantages over the tropical disease program.

FDA is also trying to make pediatric vouchers as attractive as possible by noting in a draft guidance that pediatric and adult data can be generated simultaneous to gain a voucher (see related story, [A#00141124009]).

However, the stunning difference in price of the two vouchers may signal a renewed enthusiasm for the tropical disease PRV. Both programs are intended to provide an incentive for more drug development.

The price Gilead paid also may be market-setting for future voucher sales. And if a rare pediatric disease PRV is in fact worth more than a tropical disease PRV, sponsors would appear to have a much more lucrative incentive to pursue treatments in those disease areas.

Novartis AG became the first company to redeem a tropical disease PRV, using it for the gouty arthritis indication for Ilaris (canakinumab). But the review resulted in a “complete response” letter Also see "Novartis Takes Stock Of Ilaris For Gout Following FDA's Complete Response Letter" - Pink Sheet, 29 August, 2011..

Ebola treatment sponsors also could be able to take advantage of the incentive. Bills pending in the House and Senate would add the disease to the tropical disease PRV program.

Priority Review Weirdness: Tropical Voucher Sells For More; Owner Says It’s Worth Less

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