Pharmaceutical firm Sandoz has invested an initial A$4.8 million in Avecho’s attempt to register an over-the-counter CBD product after the two firms struck a 10-year development and licensing agreement.
The investment is a leap of faith for the Switzerland-based pharma giant, with interim analysis of Avecho’s phase III trial exploring CBD’s effect on insomnia still around 12 months away.
But the deal represents something of a coup for Avecho which will now have the resources to complete the trial, and with a commercial deal in Australia already secure.
“This partnership provides Avecho with a strong commercial foundation for success,” Avecho chief executive Dr Paul Gavin said.
Under the agreement, Sandoz will pay an upfront US$3m to Avecho, and, if the trial is successful, US$16m (A$25.7m) in development milestones ahead of commercial sales.
Upon registration with the Therapeutic Goods Administration (TGA), Sandoz will purchase product from Avecho which will also receive tiered royalties ranging from 14% to 19% on net sales.
In addition, the pharmaceutical company will play a central role in the TGA registration process, a task in which it has considerable experience.
Sandoz, which was part of Novartis until it was spun off 18 months ago, has a portfolio of 1,500 products and generated net sales that year of US$9.5 billion (A$15b).
The deal will initially be limited to the Australian market although Sandoz has first right of refusal for the commercialisation of the soft-gel capsules in other markets.
Gavin said the agreement demonstrates the “compelling” nature of the trial and the potential value of an OTC CBD product targeting insomnia, of which there are an estimated 9.5m in Australia.
The company has said the schedule 3 CBD market in Australia could exceed $200m each year.
“This story isn’t all about a little biotech Aussie battler. It’s about building something that has passed muster with one of the biggest pharmaceutical product companies on the planet, and the potential they see in it,” Gavin told Cannabiz.
“Sandoz has taken a look at this and gone: ‘You know what? This looks compelling.’
“The cool thing is we’ve got the US$3m just for Australia. All the other big-ticket markets, the expensive, valuable markets, are all still on the table. So there’s the opportunity to wash, rinse, and repeat and licence the product for various territories to bring in even further income.”
Commercialising the product, of course, lies in the trial generating positive results.
Researchers are testing Avecho’s CBD soft-gel capsule using its Tocopheryl Phosphate Mixture (TPM) drug-delivery system, with nightly doses of 75mg of CBD, 150mg or a placebo over an eight-week period.
Avecho dosed the first of an initial 70 patients last May, with the company set to recruit approximately 150 more participants during 2025.
Following difficulties recruiting enough patients last year, the criteria to enrol in the trial have been tweaked, while new trial sites will soon come online.
Gavin said the upfront Sandoz funds will enable the new sites to get up and running, and obtain the interim analysis “as fast as possible”.
While the agreement comes with a degree of risk for Sandoz, such prospective investment is the norm for pharmaceutical companies who often sink vast sums into research and development without any guarantee of success.
“Sandoz understands the risk of R&D and it’s a risk worth taking for this magnitude of investment,” Gavin said. “It’s all about the investment versus the potential upside and the potential upside is significant. If this product works in phase three, it will be a monster in Australia. It will be unheard of in the Australian pharmaceutical scene.”
Gavin said both Avecho and Sandoz have benefitted from striking a deal before any results are known.
“If we had interim analysis showing CBD worked for insomnia, Sandoz would have entered a bidding war with four or five other companies and the price would have escalated significantly,” he said. “So coming in now is perfect. They get it a bit cheaper than they may have done, and we needed help.”
It is also hoped the backing of Sandoz may pique the interest of the investment community in Avecho.
Such a partnership with a large pharmaceutical company “gives everyone a bit of confidence”, Gavin added.
Sandoz Australia and New Zealand general manager, Clint Holland, said in a statement to Cannabiz that the agreement “aligns with our mission to pioneer patient access and our commitment to delivering high-quality healthcare solutions”.
“We are dedicated to ensuring that innovative treatments reach those who need them most,” he said. “Upon completion of an efficacious and safe outcome from the Phase III trial, it will mark a significant step forward in making effective, over-the-counter treatments available to patients.
“With our extensive expertise and reach across Australia, Sandoz is ideally positioned to bring this groundbreaking product to Australian patients suffering from insomnia, helping them achieve better sleep and improved quality of life.
“Avecho, like Sandoz, is interested in driving innovation and unlocking the true potential of products that can make a significant difference to the lives of patients who really need them.”
