Priority Review Vouchers: another high value sale generates a significant return for licensor

On 5 November 2024, Acadia Pharmaceuticals Inc. ("Acadia") announced that it sold its rare paediatric disease priority review voucher ("PRV") to an undisclosed buyer for $150 million. In March 2023, the U.S. Food and Drug Administration ("FDA") granted Acadia the PRV following the approval of DAYBUE, a medicine used to treat a rare genetic brain development disorder, Rett Syndrome, in adults and children 2 years of age and older. 

DAYBUE was initially licensed by Acadia from Neuren Pharmaceuticals Limited ("Neuren") in 2018 and Acadia has disclosed that pursuant to the terms of such licence, Acadia is required to pay Neuren one-third of the net proceeds of the PRV sale. With Neuren set to receive up to $50 million by virtue of its licence agreement with Acadia, we explore PRVs in more detail and why licensors should consider the possibility of a PRV being granted to its licensee in the future when negotiating the financial terms of licence agreements. 

PRVs

A PRV is a valuable asset which can be used by the holder to accelerate the FDA’s review of a new drug application. In broad terms, PRVs may be awarded by the FDA to companies that develop drugs for: (i) tropical diseases;¹ (ii) rare paediatric diseases;² or (iii) use as material threat medical ("MCM") countermeasures.³ The intent behind the U.S. PRV programmes is to provide companies with an incentive to develop drugs in areas which might otherwise not be prioritised. Drug development is a lengthy and expensive process with, on average, a 10-15 year timeframe and a cost of between $314 million to $2.8 billion in order to bring a new therapeutic agent to the market. Relative to more common and widespread diseases, PRV-qualifying diseases have considerably smaller markets and generally therefore lower potential for profitability. Accordingly, pharmaceutical companies will be cognisant of the potential imbalance in the risk of developing such treatments as against the potential reward.  

The FDA may award a PRV to a pharmaceutical company upon approval of the company's drug in one of these qualifying areas (provided that the drug meets the relevant criteria under the applicable section of the FD&C Act). The company may then redeem the PRV concurrently with the submission of a future drug application for a drug intended to treat, crucially, any disease or condition. This then reduces the FDA's targeted review time of the subsequent drug application from the usual 10 months to 6 months. 

As an alternative to redeeming the PRV itself in a future drug application, holders of PRVs also have the option to sell or transfer the PRV to another company, and there is no limit on the number of times a PRV may be transferred or sold before such voucher is used. The Acadia PRV sale is just a recent example of a PRV sale; however, the PRV sales market is highly lucrative as evidenced by the plethora of high value PRV sales in recent years.

It is important to note that the PRVs discussed in this article are a feature of the U.S. regulatory system. Despite concepts such as the transferable exclusivity voucher (intended to incentivise new priority antimicrobials and which could be used by the holder to extend the data exclusivity period for the priority antimicrobial or any other centrally authorised product) being put forward as part of the current reform of the EU pharmaceutical legislation, there is no existing or proposed European equivalent to the U.S. PRV program.

PRV sales

As noted above, a company that has been granted a PRV may decide to sell it, rather than using it to shorten the FDA review of another drug application. Amongst other reasons, companies may wish to utilise the income from the PRV sale to invest in research and development efforts for other drugs or even to generate funds to assist with a prospective acquisition or investment.

The first ever PRV sale was made by BioMarin Pharmaceuticals Inc. to Regeneron Pharmaceuticals Inc. for $67.5 million in 2014 and since then, reports indicate that the average PRV selling price has been settling at around $100 million since about 2017. Whilst PRVs were once valued notably higher than they have been in recent years, with AbbVie Inc. paying $350 million to secure a PRV from United Therapeutics Corporation in 2015, we include below a list of notable PRV sales that illustrates the value that PRV sales can still represent for pharmaceutical companies, and why licensors may wish to consider including PRV provisions in their licence agreements:

• August 2024 - Ipsen Pharmaceuticals sold its rare paediatric PRV (awarded following approval of Sohonos, indicated for the reduction in volume of new heterotopic ossification in adults and children living with fibrodysplasia ossificans progressiva) to an undisclosed global pharmaceutical company for $158 million.
• July 2023 - Sarepta Therapeutics sold its third PRV to an undisclosed buyer for $102 million. The three PRVs were awarded to Sarepta following separate approval of Exondys 5, Vyondys 53 and Elevidys, all indicated for the treatment of people living with Duchenne muscular dystrophy. Sarepta previously sold the other two PRVs in 2017 and 2020 for $125 million and $111 million respectively. 
• January 2023 and November 2022 - Bluebird Bio sold two rare paediatric disease PRVs that it was granted following separate FDA approval of its gene therapies Zynteglo and Skysona to: (i) Argenx SE; and (ii) Bristol Myers Squibb, for $102 million and $95 million respectively.
• July 2022 - Marinus Pharmaceuticals Inc. sold its rare paediatric review voucher (awarded following approval of Ztalmy, indicated for the treatment of genetic epilepsy seizures) to Novo Nordisk for $110 million.  

Relevance to licensing deals

As noted above, the PRVs discussed in this article are a feature of the U.S. regulatory system and there is no European equivalent. Perhaps due to this, mechanisms for licensors to share in the proceeds of licensees’ PRV sales have not traditionally been such a common part of the consideration in English law licence deals. 

However, as indicated by the non-exhaustive list of high profile and high value PRV sales above, there is an increasing awareness of the value of PRVs and the possibility of such sales. In recent years we are seeing more licensors actively seeking a share of licensees’ PRV sales when negotiating licence agreements. 

Unlike the more traditional elements of consideration in licence agreements (e.g. royalties and milestone payments, which are also invariably subject to extensive negotiation and consideration of the deal structure), seeking a share of PRV sales may not always be appropriate. While licensors should be aware of the possibility of including a PRV provision, careful consideration should be given as to whether this is warranted. Whether it is appropriate for a licensor to take a share of proceeds from a PRV sale (as Neuren is entitled to in respect of the recent PRV sale by Acadia) will depend on various factors including, amongst other things, the type of product and eligibility for a PRV, the stage of development of the licensed technology, whether the market for any licensed products will include the U.S. at all, overall deal economics and potentially the extent of any future involvement of the licensor in bringing the product to market. Each deal will of course be different and in cases where a share of PRV sale proceeds is agreed, the percentage payable by the licensee is of course always negotiable.

As with any complex licensing deal, core financial terms should ideally be agreed early on. Provided that the licensor considers that a PRV provision is appropriate, it would be prudent for licensors to include such a provision at the term sheet stage so as to avoid the uphill battle of trying to include such provision later in the deal. 

Key takeaways

The recent announcement of Acadia's PRV sale, and Neuren's substantial cut of the profits, is another example of the potential value that PRVs represent for licensees and licensors. Notwithstanding the fact that it may not always be appropriate to include a PRV share provision in a licence agreement, this possibility is certainly something that licensors should be aware of and, if relevant, considering at an early stage of a licensing deal for products which may be eligible for a PRV in the future. 

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[1] Section 524 of the Federal Food, Drug and Cosmetic Act ("FD&C Act") governs the tropical disease PRV program. See the FDA Tropical Disease Priority Review Vouchers – Guidance for Industry here for more detail.

[2] Section 529 of the FD&C Act governs the rare paediatric disease PRV program although we understand that the rare paediatric disease PRV program may soon be discontinued. See the FDA Rare Paediatric Disease Priority Review Vouchers – Draft Guidance for Industry here for more detail.

[3] Section 565A of the FD&C Act governs the MCM PRV program. See the FDA Material Threat Medical Countermeasure Priority Review Vouchers – Draft Guidance for Industry here for more detail.