Before a new drug can be released to the market, it has to undergo a regulatory process. To complete the process, first the drug company (the sponsor in the process) has to submit information to prove that the drug is safe and effective. Pre-clinical data first has to be submitted before clinical trials can be conducted. After demonstrating the safety and efficacy of the drug through successful clinical trials, the sponsor company submit that information, along with information on manufacturing specifications, drug stability and bioavailability, and suggested packaging and labeling, as a "new drug application" (NDA) to the FDA. The NDA is then reviewed by teams of FDA employees, including physicians, statisticians, chemists, pharmacologists, and other scientists who assess the validity of the sponsor's claims. FDA inspectors also examine the facilities in which the sponsor intends to manufacture the drug The outcome of such process could be "approved", "approvable" (meaning adjustments have to be made), or "not approved". As one can see from the above process, the testing and regulatory process alone is a long, costly process entailing significant risks for a drug company. Startups often lack the financial resources and expertise to shoulder alone the risks of such process, let alone in situations where they have not gone through this process before.
Collaboration would allow Abgenix to obtain rapid access to complementary assets -- the skills and resources of its collaboration partner to through the testing and regulatory process, and the commercial launching and marketing of the drug afterwards. As a result, ABX-EGF can significantly reduce the time to get ABX-EGF out to market. This is especially important since its competitors Astrazeneca and Genentech were already working on EGF pathway drugs already. By shortening the development time, and retain all the first-mover advantages of the drug in the ABX-EGF path
Collaboration can also significantly reduce the costs and risks of Abgenix in the ABX-EGF project. Regardless of which of the two available collaboration mode it chooses, Abgenix would be able to reduce its asset commitment and enhance its flexibility; and have a collaboration partner to wholly or partially bear the cost and risks of the subsequent testing and regulatory process. Moreover, upfront payments would provide short-term cash infusion.
On the flip side, by opting for collaboration, Abgenix will not achieve full potential revenue as it can achieve if it were to go solo. Abgenix might risk exposing the proprietary ABX-EGF technology, making it vulnerable to expropriation if the partner ends up being a potential competitor. Abgenix would have to yield some of the control over their development process and the use of the ABX-EBF drug.
If Abgenix chooses collaboration, would it be better off licensing ABX-EGF to the pharmaceutical company or forming a joint venture with the biotech company? The main differences between joint venture and licensing out are as follows:
a. Monetary: In the short term, Abgenix needs cash infusion. Both collaboration modes would provide that. By licensing out, however, Abgenix would not have to bear further costs for further developments, testing, regulatory, manufacturing and marketing of the ABX-EGF product, whereas in the Joint Venture option, Abgenix still has to shoulder a share of such costs and risks.
b. Speed: Abgenix's competitor's are already developing drugs targeting the same EBX pathway. Should too much time be spent before the product is launched, Astrazeneca and/or Genentech might get their products out in the market first and obtain first mover advantage. Once the customer base gets used to the products from Genentech and Astrazeneca it might be difficult for customers to switch back to ABX-EGF.
The above two factors would suggest that licensing out...