Licensing Strategies of Large Pharmaceutical Companies - Weak R&D Pipelines and the Patent Cliff Stimulate In-Licensing Activity

Additional Information

GBI Research, the leading business intelligence provider, has released its latest research, “Licensing Strategies of Large Pharmaceutical Companies - Weak R&D Pipelines and the Patent Cliff Stimulate In-Licensing Activity” which provides insights into the licensing agreements of pharmaceutical companies. The report provides an in-depth analysis of the major licensing agreement trends in the pharmaceutical industry, along with product and technology licensing trends. In addition, the report also analyzes the top 20 pharmaceutical companies, with respect to the licensing agreement activities.

The report is built using data and information sourced from proprietary databases, primary and secondary research, and in-house analysis by GBI Research’s team of industry experts.

GBI Research has found that large pharmaceutical companies continue to make acquisitions and form partnerships with small pharma and biotech companies in order to fill pipeline voids with new products. These major pharma companies also continue to restructure their internal research and development (R&D) in an effort to cut costs and thereby reduce the impact of the expected patent cliff in 2012. The large proportion of in-licensing deals in 2010 are indicative of the trend that large pharma widely making acquisitions and licensing agreements as a more cost-effective method of gaining access to novel products than carrying out extensive in-house R&D.

Licensing - A Major Growth Driver for the Pharmaceutical Industry

Licensing is increasingly playing a vital role in the current business model of pharmaceutical and biotechnology companies. Limitations of healthcare costs and the threat of generic competition coupled with declining R&D productivity drive leading pharmaceutical companies to adopt successful licensing strategies to remain competitive in the future. Building upon each other's strengths and reducing risk are the main aims of licensing agreements between companies.

Licensing Strategies of Large Pharmaceutical Companies, Top 20 Pharmaceuticals Licensing Deals, 2005-2010

Source: GBI Research, Company Websites, Company Websites

Pharma majors Roche, Pfizer, GSK Merck, AstraZeneca and Novartis secured over 50% of the licensing deals struck during the period 2005-2010 by the Top 20 pharma companies. These companies have taken up licensing activity as a core component of their business development strategies since 2005.

Licensing Strategies of Large Pharmaceutical Companies, Top 20 Pharmaceuticals Licensing Deals, 2010

Source: GBI Research, Company Websites

Six of the big pharma companies that secured more than half of the total licensing deals by the Top 20 pharma companies in 2010 include GSK, Pfizer, Sanofi, Roche, AstraZeneca and Novartis.

Large Pharma Turn to In-licensing to Compensate for Thinning Pipelines

Declining productivity in pharmaceutical R&D over the last decade brought about the need to complement internal pipelines with external products. A large number of successful drugs are the outcome of in-licensing activities rather than internal pipelines of large pharma companies. Licensing agreements are considered to be of top priority in order to maintain long-term growth and viability and thereby profitability.

Pharma Biotech Licensing Activity On the Rise

2010 proved to be a good year for small biotech players in the market. It was observed that pharma giants started scouting for small private drug discoveries and early stage development companies, lured by their promising pipelines and technologies. These small value deals helped the acquirer to maintain or expand their revenue base and also focus on improving R&D in the high growth oncology market.

The main reason behind pharmaceutical companies’ interest in the acquisition of biotech companies can be summarized in the following key points.

To increase R&D productivity.

To diversify the product pipeline.

To enter the high growth therapeutic area market such as mAbs (monoclonal antibodies).

To own an existing/potential blockbuster drug.

To gain control over the full resource projects of biotechnology companies.

To gain access to new technology and talent pools.

Licensing Deals in Asia-Pacific On the Rise

It has been observed there has been a shift in investments in the Asia-Pacific region in the recent past, with factors such as better infrastructure, good pharmacy retail, governments giving more IP (Intellectual Property) protection such as in data exclusivity and clinical trail establishment, and transparency to outsource have enabled companies to compete in the pharmaceutical sector. Moreover, an increased focus on cancer has led companies to rethink their corporate strategies and search for strategic partners to line up products for the future. The region recorded some deals such as F. Hoffmann-La Roche’s in-licensing agreement with Chugai, Eisai’s licensing deal with Almirall, S.A, and Abbott’s licensing agreement with Kowa Company.