Transaction Case Studies

Assessing the value of a new drug in Japan to assist the purchase of a royalty stream

Situation Assessment

• HealthCare Royalty Partners (HCR) is a private investment firm that purchases royalty streams and uses debt-like structures to invest in commercial or near-commercial stage life science assets. HCR has $3.5 billion in cumulative capital commitments.
• Albireo Pharma sought to monetize a portion of its future elobixibat royalties in Japan. HCR was interested in evaluating its commercial potential in Japan and engaged Locust Walk to assist in the assessment.
• Elobixibat is a first-in-class product candidate to treat chronic idiopathic constipation. Elobixibat is an inhibitor of the ileal bile acid transporter (IBAT) in the terminal ileum to increase secretion and motility in the large bowel without negatively affecting important functions in the small intestine. Elobixibat was approved in Japan in January 2018 and is marketed by EA Pharma and Mochida

 Key Activities

• Locust Walk carried out qualitative physician interviews; Locust Walk identified top KOLs in the chronic constipation space and reached out to the KOLs to obtain input on treatment landscape and use of elobixibat following Japan approval. Subsequently, Locust Walk contacted high general practitioner (GP) prescribers of chronic constipation drugs and validated the findings through the KOL interviews as the constipation market was driven by the GP segment.
• Locust Walk reached out to a number of industry professionals within different companies to obtain their insights into the constipation market, and gauged competitiveness and potential of the market.
• Locust Walk performed analysis on pricing by looking into historical trends and current government’s thinking in anticipation of price revision to take place in April 2018. With all the analysis and the findings, Locust Walk developed a revenue model to project the future revenues of elobixibat.

Successful Outcome

• HCR engaged Locust Walk to drive the process for commercial assessment. Our combined efforts helped lead HCR to make a deal with Albireo Pharma consummating a royalty monetization agreement, less than 3 months after Locust Walk was engaged by HCR.
• Under the terms of the agreement, HCR will pay $45 million if elobixibat is approved by the Japanese Ministry of Health, Labor and Welfare (MHLW). In return, HCR will obtain the right to receive royalties and sales milestones for elobixibat in Japan that may become payable by EA Pharma.

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