a novel way to make it possible for drugmakers to create compounds that could bind with an estimated 120 more targets of this same lineage. If they could prove this, then presumably Omeros would be in a strong position to outlicense these new targets to Big Pharma companies that crave promising new drug candidates to fill up their pipelines, and replace aging blockbusters about to lose their patent protection. Omeros, like most companies in this kind of situation, wants to keep some of these targets to itself, so it can create blockbusters of its own.
The catch was that Omeros needed money to realize its full potential. Demopulos and Cable outlined a plan that said if they could scrape together a total budget of about $40 million, they could launch an 18-24 month scientific program to unlock at least some of the 120 or so GPCR drug targets that are “undruggable” today. If the company could do even half that well, it would benefit not just Omeros and its shareholders, but the Seattle biotech community and Washington State as a whole, Demopulos and Cable said. After the first conversation, Huntsman says he walked away thinking about how to structure the deal so that there was a strong “public purpose” beyond just enriching Omeros.
“We had a lot of conversations early about ‘could Washington do this?'” Huntsman says. “It was about the public purpose.”
Conversations continued with input coming from the Omeros brass; Huntsman; Washington state’s commerce secretary, Rogers Weed; Washington Biotechnology & Biomedical Association President Chris Rivera; and John Gardner of Washington State University. They figured ultimately that the Life Sciences Discovery Fund was the most likely vehicle to try financing the Omeros project.
The key maneuver here is that Omeros structured its proposal so that the state could get a return on its investment in Omeros without actually receiving an equity ownership stake. Instead, Vulcan and the Life Sciences Discovery Fund will be eligible to get a “mid-teens” percentage of proceeds from any partnership income Omeros generates up to $1.5 billion. If Omeros generates $1.5 billion in cumulative proceeds from its GPCR program, Vulcan and the state agency will split a 1 percent royalty stream from revenue that flows in thereafter.
That means that Vulcan and the state’s ability to see returns depends on Omeros’ ability to unlock these new drug targets and then strike partnerships with big drugmakers. Those deals typically provide upfront fees, milestone payments based on progress in development, and royalties on product sales if the targets ever form the basis for an FDA approved product. While many of these deals are pitched in grandiose terms with aggregate sums of $1 billion or more, usually only a small bit of that money comes upfront, and it takes years for a program to ever produce a significant percentage of the full partnership value, if ever.
But if any deal like that is struck, the Life Sciences Discovery Fund will be in line to see returns. Huntsman says the state agency could get a maximum of a 5-fold return on investment, meaning it could get $25 million back. But that’s not the upper financial limit
