Chennai: Glenmark Pharmaceuticals Inc (GPI), a wholly owned subsidiary of Glenmark Pharmaceuticals Limited (Glenmark), has announced a unique royalty deal with leading international healthcare investment fund, Paul Capital Partners'' Royalty Fund (Paul Royalty).

Under the terms of the arrangement, Paul Royalty will invest up to $27 million to finance Glenmark to develop 16 dermatological products for the US market. In return Paul Royalty will receive undisclosed royalties on net sales following the approval of these products by the US FDA and their launch. The investment to be made will be based on the milestones achieved over a period of two years. The royalty amount varies from product to product and also its performance.

The products in the portfolio currently have a total US market revenue of about $1 billion. DSP Merrill Lynch and Greenberg Traurig LLP were Glenmark''s financial and legal advisors respectively for the deal.

Under the agreement, Glenmark will be responsible for pre-clinical development, managing clinical trials and manufacturing the products; GPI will be responsible for filing the abbreviated new drug applications (ANDA) and, upon approval, marketing the products in the US.

Glenmark will also supply active pharmaceutical ingredient (API) for some of the products.

This dermatological portfolio ranges from the easier to the more complex product development, near- and medium-term revenue opportunities. Clinical trials for two of the products have already been initiated and ANDA filings will commence from the end of 2006 and continue over the next two years. All 16 products are expected to be launched over the next five years with the first product launch occurring in 2007.

"This is the first time an Indian company is entering the US market with an entire portfolio of dermatology products," says Glenn Saldanha, managing director and CEO of Glenmark. "This is also the first risk-sharing financing deal of its kind. Sharing clinical and operational risks inherent in the portfolio and reducing the impact of generic research and development (R&D) expenditure on the profit and loss account are among the key reasons we have entered into this deal. We have chosen Paul Royalty to partner with us in this risk-sharing deal for their deep experience in healthcare investment and understanding of the processes involved."

According to Ken Macleod of Paul Capital Partners, "The US dermatology market has very few players due to a number of entry barriers, including high clinical trial costs, investment in infrastructure and FDA approval timelines."

Glenmark''s previous efforts to accelerate its portfolio build-up have involved in-licensing generics from US-based manufacturers, collaboration agreements for joint development with other companies and also acquisition of ANDAs. The company closed FY 2006 with a portfolio of 17 ANDAs filed with the US FDA and three by its partners till date. Glenmark also purchased two ANDAs from Clonmel Healthcare Ltd. in FY 2005. GPI is currently marketing six generics in the US and is expecting to launch 7-8 more over the next 6 months, including niche controlled substance generics recently in-licensed from Aspen and Lehigh Valley Technologies.