A biotech company has developed Acmed, a potential treatment for asthma. Acmed has passed Phase 1 clinical trial testing and is entering Phase 2 clinical trials.
The company partners with a pharmaceutical company to rely on the market and manufacturing capacity of the partner, and the royalties the company will be receiving are 30% of the annual gross revenue.
The remaining life of patents is 17 years. The years that it takes to get the product to market is 7 years based on assumptions for development costs; hence the number of years after NDA approval is 10.
The annual market for asthma treatment is around US$6 billion, and the anticipated market share for Acmed may be just 5%. The annual gross revenue of Acmed will therefore be about US$300 million.
The royalties the company will be receiving are US$90 million, which is 30% of the annual gross revenue.
The payoff for Acmed is US$90 million a year for 7 years ...