For-profits and nonprofits in life sciences team up

Nonprofit groups are actively supporting research to solve tough medical challenges. Life sciences and pharma companies are eager to accelerate product development. Now, new business models are emerging to leverage the strengths of each.

One example: the licensing partnership between Medicines360, a San Francisco-based nonprofit pharma company with a social mission, and Actavis Inc., a specialty drug provider in Parsippany, N.J. Under the agreement, Actavis acquires the right to market, sell, and distribute Medicines360’s new LNG20 intrauterine device in the U.S. and Canada, and Medicines360 will direct all proceeds toward driving down the cost for low-income women and to fund future product development. It retains rights to market its IUD at publicly funded family planning clinics.

“This arrangement demonstrates that serving the public good and making money don’t have to be mutually exclusive,” says Stephen Thau, a partner in Morrison & Foerster’s life sciences practice who provided legal counsel on the deal. “Collaborations between nonprofits and for-profits address the lack of funding for early-stage research and focus on areas where additional research is needed.”

“We have been establishing hybrids (combinations of nonprofit and for-profit entities) since 1999, mainly in environmental sustainability and social responsibility,” says Morrison & Foerster partner Susan Mac Cormac, who has spearheaded many of these initiatives. “While there are considerable complexities involved in establishing the hybrids and in advising them on operations, it is gratifying to see them provide a viable option for life sciences companies that want to generate returns for shareholders and pursue a social mission.”

Chromocell, a North Brunswick, N.J.-based life sciences company, also hopes to team with a nonprofit. Adapting a technology it uses in the development of flavors and nutritional ingredients, Chromocell plans to develop a gene therapy that offers a possible cure for AIDS with financing from a foundation.

“To take this concept to the next stage requires $5 million to $6 million,” says Van Ellis, a partner at Morrison & Foerster who is helping Chromocell structure its partnership. “With this approach, Chromocell can obtain the money it needs, while the foundation advances public health. It’s a win-win.”