Avecho Biotechnology signs exclusive licensing deal with Sandoz for CBD insomnia treatment

Avecho Biotechnology (ASX: AVE) has signed an exclusive 10-year development and licensing agreement with Swiss generic pharmaceuticals developer Sandoz Group to investigate the commercialisation of a cannabidiol (CBD) capsule for insomnia in Australia.

The companies have identified a market in which nearly 9.5 million Australians experience symptoms of insomnia, with approximately 3.6 million of those considered chronic.

Avecho is in the process of refining the first pharmaceutical CBD capsule registered with the Therapeutic Goods Administration (TGA) as an over-the-counter medicine into a market in which it forecasts estimated sales of more than $200 million per annum in Australia.

Australian opportunity

Under this agreement, the two companies will collaborate to provide Sandoz with the potential to obtain the Australian commercial rights to Avecho’s Phase III CBD capsule.

Avecho will retain its rights to commercialise the product in all other territories, with Sandoz granted first right of refusal for these markets.

To secure this opportunity, Sandoz has agreed to pay an upfront licensing fee of approximately $4.8m.

At the same time, Avecho will continue to fund and oversee the ongoing Phase III clinical trial.

Commercial potential

“We are excited to announce this partnership with Sandoz, which underscores the commercial potential of Avecho’s drug delivery platform and our shared commitment to delivering innovative insomnia treatments,” Avecho chief executive officer Dr Paul Gavin said.

“Sandoz’s extensive reach and expertise in the Australian market will ensure our products are widely accessible to insomnia patients across Australia.”

“This partnership provides Avecho with a strong commercial foundation for success.”

Upon successful completion of the deal, Avecho and Sandoz will collaborate to secure TGA regulatory approval.

Marketing and distribution

Sandoz aims to purchase the finished product from Avecho and assume responsibility for the product’s commercialisation, including marketing and distribution in Australia.

Avecho is eligible for development milestone payments totalling approximately $25.7m prior to commercialisation and will receive tiered royalties ranging from 14% to 19% on net sales once on the market.

The agreement has an initial term of 10 years, with automatic extensions for two further renewal terms of two years each unless terminated by mutual agreement.