Pharmaceutical Licensing Strategies: Best Practices In Deal-making, Valuations And Strategic Management

Published by: Business Insights

Published: Jun. 1, 2006 - 116 Pages

Table of Contents

Executive Summary

Introducing pharmaceutical licensing

Licensing trends

Licensing process

Licensing valuations

Licensing best practices

Chapter 1 Introducing pharmaceutical licensing

Summary

Introduction

The age of the partnership

Definitions

Report outline

Chapter 2 Licensing trends

Summary

Introduction

Headline deal trends

Licensing deal partners

Licensing deal types

Licensing deal subjects

Chapter 3 Licensing process

Summary

Introduction

A complex process

In-licensing versus out-licensing

Licensing strategy

Opportunity identification

In-licensing

Out-licensing

Licensing evaluations

General portfolio management

Applications for licensing evaluations

Deal-making and agreement

Key elements of a pharmaceutical license agreement

Post-deal management and analysis

Alliance management

Using outside agencies

Chapter 4 Licensing valuations

Summary

Introduction

Valuing deals

Current best practices

Deal-making valuation model

Model inputs

Evaluation modeling

Model outputs

Model refinements

Chapter 5 Licensing best practices

Summary

Introduction

Top licensing deals of the 21st century

Genentech-Roche

Idenix-Novartis

Millennium-Ortho Biotech

AstraZeneca-AtheroGenics

Preferred licensing partners

Leading in-licensing companies

Novartis

Leading out-licensing companies

Cephalon

Recommendations for the future

Licensing trends

Licensing process

Licensing valuations

Licensing best practices

Chapter 6 Appendix

Primary research survey

Sources

Index

List of Figures

Figure 2.1: Number and average value of top 10 pharmaceutical company licensing deals, 2001- 2005

Figure 2.2: Expected change in number of licensing deals during 2006

Figure 2.3: Expected change in average value of licensing deals during 2006

Figure 2.4: Number of top 10 pharmaceutical company licensing deals by partner, 2001-2005

Figure 2.5: Number of top 10 biotech company licensing deals by partner, 2001-2005

Figure 2.6: Number of biotech out-licensing deals by partner, 2001-2005

Figure 2.7: Number of top 10 pharmaceutical company licensing deals by deal type, 2001-2005

Figure 2.8: Number of top 10 biotech company licensing deals by deal type, 2001-2005

Figure 2.9: Proportion of product-based licensing deals by therapy area, 2001-2005

Figure 2.10: Number of product-based licensing deals by therapy area, 2001-2005

Figure 2.11: Number of R&D licensing deals by development stage, 2001-2005

Figure 2.12: Number of biotech R&D licensing deals by development stage, 2001-2005

Figure 3.13: Expected change in number of potential partners chasing each licensing deal during 2006

Figure 3.14: Expected change in the length of time required to complete a licensing deal during 2006

Figure 3.15: The pharmaceutical licensing process

Figure 3.16: Parties involved in identifying potential licensing opportunities, 2006

Figure 3.17: Parties involved in conducting due diligence for potential licensing opportunities, 2006

Figure 3.18: Parties involved in the valuation and negotiation of potential licensing deals, 2006

Figure 4.19: Information shared between partners during licensing negotiations, 2006

Figure 4.20: Valuation techniques used in determining optimal licensing deal terms, 2006

Figure 4.21: R&D costs by phase, 2000

Figure 4.22: R&D lead times by phase, 2000

Figure 4.23: R&D success probabilities by phase, 2000

Figure 4.24: Drug market diffusion curve - product lifecycle

Figure 4.25: Likelihood of outcomes for new phase I, phase II and phase III drugs

Figure 4.26: Expected real values (non-discounted) for new phase I, phase II and phase III drugs

Figure 4.27: Discounted expected real values for new phase I, phase II and phase III drugs

Figure 4.28: Discounted expected real values for new phase I, phase II and phase III drugs (adjusted for lower R&D cost inflation)

Figure 4.29: Deal outcomes for out-licensor

Figure 4.30: Deal outcomes for in-licensor

Figure 4.31: Share of expected deal outcomes by partner

Figure 4.32: R&D costs by phase by therapy area, 2000

Figure 4.33: R&D lead times by phase by therapy area, 2000

Figure 4.34: R&D success probabilities by phase by therapy area, 2000

Figure 4.35: Peak sales and year of peak sales by therapy area, 2000

Figure 4.36: Discounted value of sales by therapy area, 2000

Figure 5.37: In-licensing partner of choice, 2006

Figure 5.38: Business development and licensing department, Novartis

Figure 5.39: Licensing process at Novartis

Figure 5.40: Out-licensing partner of choice, 2006

Figure 6.41: Licensing trends survey respondents by company focus

Figure 6.42: Licensing trends survey respondents by functional responsibility

Figure 6.43: Licensing trends survey respondents by licensing responsibility

List of Tables

Table 4.1: R&D cost by phase and peak sales, 2006 (expressed in 2006 dollars)

Abstract

• The larger biotech companies now have the resources and the capabilities to develop lead drugs to later stages of development before seeking a pharmaceutical partner, and are now able to compete with pharmaceutical companies for the best in-licensing deals from emerging biotech.
• While the value of licensing deals has risen markedly in the last 5 years, the volume of deals among the top companies has plateaued. Companies are increasingly seeking out long-term, multi-product, multi-indication collaborations rather than one-off transactional deals.
• Using independent and unbiased model inputs in the licensing valuation process limits areas of subjective disagreement, and allows deal terms to be maximized for both parties.
• A successful deal cannot only be judged by deal terms and revenues gained from the eventual product; the quality of the relationship between licensing partners is also equally important.

• What are the best practice strategies in developing an effective win-win licensing deal?
• How does the licensing process differ for in-licensing and out-licensing companies?
• How do outside agencies, consultancies and investors help to support the licensing process?
• What can be done to optimize licensing deal values through collaborative evaluations?
• What lessons can be drawn from the key successful deals and deal-makers of the past 10 years?
• How is the value, volume and competition for licensing deals forecast to change over the coming year?
• Why are companies now forming more relationship-based licenses than ever before?

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