This investment carries considerable risks and may lead to a loss of the entire assets invested. Projected returns cannot be guaranteed and may be lower than expected.
Degode recreated the patented prescription medication Beloren for the treatment of acne and rosacea (generic medication). The development is so accurate that 5 EU regulatory authorities have already confirmed that we are eligible for approval without the need for costly studies. EU sales are already secured: The sales partner Aristo guarantees minimum purchase quantities in the first 5 years and thus a total turnover of at least EUR 2.5 million.
Degode receives next confirmation from European regulatory authorities
The next European regulatory authority has confirmed Beloren's formula. This brings the total to 7. We have also reached our financing target of EUR 500,000.
The pharmaceutical company Degode is the first German generics manufacturer to run an equity crowdfunding campaign and is thus breaking new ground.
The product Beloren is a reimbursable prescription medication for acne and rosacea. Degode is the first manufacturer to offer this medication as a generic medication (copy of a medication with the same active ingredient) of the original medication patented in the EU until the end of 2018.
The original product Skinoren generates an annual worldwide turnover of approximately EUR 150 million in over 70 countries. The worldwide market for acne medication is forecast to grow by 75% (currently: USD 3.1 billion worldwide).
Degodehas already succeeded in concluding a sales contract with the major German pharmacy coorporation Aristo.
The sales contract guarantees Degode a fixed minimum purchase quantity for the 11 EU countries with the hihgest sales in the first 5 years after market launch. This results in a total sales volume of at least EUR 2.5 million.
Degode also receives an advance payment from Aristo for the exclusive distribution rights as well as the option to sell these distribution rights for the 11 countries after 5 years. Moreover, license negotiations are currently underway for the United States & Brazil.
Typically, the approval process for generics is very complex because development takes several years and costs tens of millions of euros.
Furthermore, the chance of approval by the BfArM (Bundesinstitut für Arzneimittel und Medizinprodukte - Federal Institute for Drugs and Medical Devices) for the first time is very low.
Degode has succeeded in developing a formula so close to the original product that the EU authorities waived the customary long-term studies that would cost EUR 14 million.
A final test in the form of a larger validation batch (largest possible batch comparable to the later commercial size) is now pending as the last step.
Since the production is determined by the quantities purchased and the required batch sizes, Degode is able to produce much more cost-effectively than the original.
The large generics manufacturers avoid risk in this market and concentrate mainly on medications with turnovers of at least EUR 500 million (blockbusters).
Degode was founded by Sven Schimansky-Wabra. With more than 8 years of experience in the pharmaceutical industry, he has already successfully developed and received approval for 5 formulas of a generic medication for skin care.
He receives the support of several experts from the pharmaceutical industry, such as Prof. Martin Sieber, and Dr. Francisco Harrison, who serve on the advisory board.
With the help of the Companists, Degode wants to take the last step towards the approval of the medication and be the first generics manufacturer to serve a lucrative market and to look forward to high and secure sales over the next 5 years.
With Beloren (gel and cream), Degode offers a generic version of the prescription drug Skinoren.
The cream is the older formulation (composition of active ingredient and excipients) and therefore contains a higher concentration of the active ingredient. The gel is the more modern formulation, though the strength of the active ingredient is lower, its effectiveness in the skin is higher.
The product is used to relieve mild to moderate facial acne and to treat rosacea.
Acne is a complex skin conditionin which a whole range of pathomechanisms play a role, such as increased sebaceous gland activity and excessive cornification and microbial colonization in the pores of the skin or inflammatory reactions.
These are also starting points for the mechanisms of action of azelaic acid. In the literature for azelaic acid, a normalization of the cornification, an antibacterial effect, and an anti-inflammatory effect are described. Azalic acid thus intervenes in central processes of acne pathology.
Beloren contains the active ingredient azelaic acid. This active ingredient has been used to treat acne for many years and has been approved for local treatment in many countries; it has also been positively evaluated in current treatment recommendations.
The generic medication can be offered at a lower price compared to the original medication - with the same quality.
This reduces the co-payment for the patient and the costs for the health insurance companies.
Degode selects dermatological prescription products whose patents are about to expire and examines the possibility of creating a generic version using common methods and intensive database research.
Degode itself does not manufacture but cooperates with suppliers. The suppliers are checked not by third parties, but always personally in order to get an idea of the conditions on site. The products are then developed with the partners and the results are presented to a selection of EU approval authorities.
In the event of positive feedback from the approval authorities, Degode accompanies the products through the approval phase up to the granting of approval. During the approval phase, license partners are identified and exclusive agreements concluded. If the market entry is successful, Degode only acts as the license holder and commissions the production of the products on behalf of the licensees.
Revenue is generated as follows:
- Down payment for the exclusivity of the product per country
- Payment by licensees upon completion of the dossier
- Payment by licensees upon receipt of approval
- Payment by the licensees upon delivery of the goods
- Payment by licensees of a share of sales
- Possible use of a purchase option agreed upon previously
Degode has succeeded in developing a formula so close to that of the original product that the EU authorities have decided against the usual cost-intensive efficacy studies. Due to this unique regulatory study situation, Degode will be the first supplier of the generic version of Skinoren within the EU.
An established development and approval network supports Degode in all regulatory activities. With Aristo as an experienced sales partner, Degode generates large market shares at an early stage. The founder himself has already gained extensive experience developing and implementing similar business models at Schering/Bayer/Intendis & Skin Care, which is a clear advantage.
Explanation of the unique regulatory situation
12 months before the patent for an original drug expires, generic companies can start developing generic versions thereof. Normally, cost-intensive studies have to be carried out after the development process in order to obtain approval.
When Degode submitted its formula to the responsible authorities, the company received confirmation that the formula came so close to the original that these studies were not necessary. This considerable cost saving is a major competitive advantage for Degode, as it can act more quickly as an initial supplier and secure a major advantage over future competitors.
This was confirmed to us by Parexel, an international research institute.
Competitive Comparison
Compared to the original manufacturer Bayer, Degode's development paths are short and flexible. As a result, it can act much more quickly. Moreover, there are no unnecessary fixed costs due to external contract manufacturing.
At present, there are no other generic competitors. A market entry of large generic manufacturers is not to be expected, as they mainly concentrate on medications with sales in the range of at least EUR 500 million (blockbusters). Compared to other potential generic competitors, Degode can distinguish itself on the basis of the decisions of the EU authority (similarity to the original product & no need for cost-intensive studies) with a time advantage of at least 24 months and a monetary advantage of EUR 14 million.
Aristo, our major distribution partner (with more than 1,200 employees), provides the necessary experience and the existing sales force structures in the countries. Preparations to extend the license agreements to other countries (USA & Brazil) are underway.
We are currently negotiating with a sales partner in Brazil. In 2017, this partner generated sales of more than € 1 billion. This shows that this partnership will also be able to deliver strong results.
Additionally, our prospective partner for the USA will have extensive experience in the development of cream/gel as well as in the indication of acne.
When concluding licensing agreements with other sales partners, we ensure that we only work with companies with experience in dermatology. The distribution partners must have their own sales force in the countries and make binding plans for sales (i.e. how many tubes per cream/gel per country) for the duration of the contract. Various compensation options will be agreed if these quantities are not met.
Our target group includes dermatologists, pediatricians and, to a small extent, general practitioners who are already the prescribing physicians of the original Skinoren product. Since Schering/Bayer already introduced the original Skinoren product to the dermatology market worldwide in recent years, Beloren does not need to be newly established in the market.
The EU market of the original is approximately EUR 13.7 million. In the first year, we expect the licensee to hold a market share of 10%. At over EUR 121.9 million, the US and South American markets are the largest. Negotiations are underway and we expect the license agreements to be concluded before the end of 2018. Here, too, we expect a market share of at least 10 % in the first year.
The worldwide market for the original is 150 million €. In the long term, we would like to secure a market share of 40 % on the world market.
We are currently in the process of producing the validation batches (approx. 500-1,000 kg) before filing for approval in the EU. All necessary regulatory steps for approval have already been prepared and coordinated in so-called "Scientific Advice" with the first 5 EU approval authorities. We have thus completed the main tasks - we now want to complete the last regulatory step in order to enter the market.
Our next logical steps for entering the US and South American markets are as follows:
- Concluding the license agreement for South America
- Concluding the license agreement for the US
- Prove a shelf life of 3 months
- Consult the US authorities
- Finish the cream dossier
- Finish the gel dossier
We will use the funds from the Companisto campaign to cover the registration fees, analytics, and the first commercial production. The actual use of funds will be divided into stages, which will be as follows (including Aristo's recent down payments):
Level 1: € 100,000
Settlement of ongoing regulatory costs with authorities and laboratories
Level 2: € 300,000
In addition to the measures of Level 1
- Production of validation batches
- Realization of FDA meeting
- Ordering stability data/analytics (proof of product quality over 36 months)
Level 3: € 500,000
In addition to the measures of Level 1 and 2
- Submission of approval (planned for March 2019)
- Commissioning of Franz diffusion cell system test (necessary for the UK & USA markets)
Level 4: € 700,000
In addition to the measures of Levels 1 through 3
- Create an active ingredient supply
- Negotiation of distribution agreements with the 50 remaining countries
In addition, further steps are planned, such as the expansion of the indicator & formula (e.g.: for other uses) and the development of a generic Skinoren/Finacea cream for the USA.
Degode also wants to be socially engaged. Therefore, we will donate 5% of the company profit towards an incurable skin disease (epidermolysis bullosa, EB) with a very high level of severity. We have therefore entered into a cooperation agreement with Prof. Dr. med. Kathrin Giehl and the Clinic for Dermatology and Allergology at the Ludwig Maximilian University in Munich.
DEGODE-Dermago Development GmbH
Kastanienallee 46
15344 Strausberg
Germany
Telephone: +49 (0) 33439 5740 33
Email: sven.schimansky@degode.eu
Website: www.degode.eu
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