Licensing Strategies - Examining Today’s Pharmaceutical Licensing Trends

Licensing Strategies - Examining Today’s Pharmaceutical Licensing Trends

Introduction

With Pharma struggling to maintain its pipelines and portfolios with products developed in-house, companies are increasingly turning to licensing. However, the search for late-stage developmental products is becoming tougher and more expensive, and companies are now looking towards licensing earlier-stage compounds.

Scope

CHAPTER 1 EXECUTIVE SUMMARY 4
Scope of the report 4
Interviewed licensing executives 5
Chapter summary 5
Definitions 6
Key findings 7
CHAPTER 2 DRIVERS AND RESISTORS OF LICENSING 13
Both Pharma and Biotech face the same challenges 14
Drivers and resistors of licensing facing Pharma and Biotechs today 15
Drivers for the licensee 16
In-licensing compensates for declining internal R&D 16
To maintain and build upon a company's pipeline and portfolio, selective in-licensing is frequently employed 20
Resistors for the licensee 23
In-licensed products offer a lower ROI than those developed in-house 23
Competition for products drives up costs of licensing deals, so Pharma turn to licensing at an early-stage of development 25
Drivers for the licensor 29
Generating cash 29
Sharing the risk 31
Accessing external resources and capabilities 33
Resistors for the licensor 34
Loss of control 34
CHAPTER 3 HOW TO SUCCESSFULLY NAVIGATE THE LICENSING PROCESS 38
The key to successful licensing 39
The licensing strategy 41
Identifying an opportunity 43
In-licensing - evaluating needs and identifying potential candidates 43
Out-licensing - overcoming limitations 49
Partners of choice 50
Licensing evaluations 53
Signing the deal and managing the alliance 54
Alliance management structure 55
Novel twists on licensing strategies - case study analysis 56
Debiopharm - the consummate licensor 56
Versant Ventures joins in with Lilly's Chorus 60
Pharma looks outside its traditional portfolios 64
Deal values 70
Deal structures 70
Upfront payments 70
Milestone payments 75
R&D costs 80
Royalties 81
Deal structure for marketed products 82
CHAPTER 4 PRODUCT LICENSING DEALS AND TRENDS 84
Introduction 85
Large Pharma turn to in-licensing to compensate for flagging internal R&D pipelines 85
Reliance on licensing deals 87
Eisai forecast to experience the largest increase in dependency on in-licensed products 88
Merck & Co. set to shift its dependence from in-house to in-licensed products by 2012 89
Boehringer Ingelheim set to decrease its reliance on externally sourced products 91
Sanofi-Aventis expected to focus on in-licensing in the future 92
In-licensing used to offset deficiencies in internal pipelines and portfolios 93
Deals continue to rise through 2005-06 94
Deals for drugs in clinical development predominate 95
In-licensing forms the majority of clinical stage drug deals 97
Licensing and co-development deals are most frequently for compounds in preclinical and Phase I development 98
Continued rise in the number of preclinical and clinical out-licensing deals by big Pharma, but deals for marketed drugs fall sharply 100
Marketing, promotion and distribution deals most commonly associated with marketed products 101
Leading dealmakers 103
Japanese companies raise their deal-making profile 104
Leading in-licensor companies 105
AstraZeneca in-licenses to strengthen its neuroscience portfolio 106
Novartis carried out the greatest number of Phase I and equal highest number of Phase III deals 107
Leading co-developers 109
Novartis and Bayer-Schering performed the largest number of co-development deals 110
Roche continues to strengthen key therapy areas through co-development 110
Few companies entered into co-development deals for drugs in Phase III or above 110
More co-development between large Pharma and large Pharma/Biotech expected in the future 111
Companies continue to enter deals for anti-infective and oncology products 113
Resurgence in deals for oncology drug candidates 115
Continued rise in anti-infective and CNS drug deals 116
Small molecules remain the target of choice for licensing deals, but it will be the biologics driving market growth 118
Leading out-licensors 123
Bayer Schering AG out-license products 124
BMS enters out-licensing agreements to share risk and costs 124
Roche performed the highest number of marketed drug deals 124
Sanofi-Aventis transfers Exubera global rights to Pfizer 126
Big Pharma predicted to increase out-licensing deals in the future 128
Marketing, promotion and distribution deals 129
Top companies predominantly enter marketing and promotion deals as partners 130
Abbott uses marketing agreements to bolster its position in the respiratory market 130
Chugai enhances its position in the cardiovascular market through marketing and promotion deals 131
CNS and anti-infective therapies are the most popular targets for marketing and promotion deals 132
CHAPTER 5 TECHNOLOGY LICENSING DEALS AND TRENDS 133
Introduction 134
The importance of technology deals 136
Drug discovery deals take a dive 137
Leading technology dealmakers 140
Merck & Co. remains the dominant drug discovery dealmaker 141
Biologic technologies overtake small molecules in terms of drug discovery deals 141
Therapeutic antibodies and recombinant proteins are the key biologic technologies targeted in drug discovery deals 142
Types of drug discovery deal 144
Assays and arrays 144
Bioinformatics 145
Biopharmaceutical discovery and development 145
CHAPTER 6 BIBLIOGRAPHY 147
Datamonitor reports 147
Websites 147
Publications and online articles 154
Glossary of terms 155
List of Tables
Table 1: Top 20 pharmaceutical companies, 2005-06 4
Table 2: A complementary strategy - strengths that Pharma and Biotechs bring to a licensing deal 14
Table 3: Ophthalmology licensing deals, 2005-06 66
Table 4: Current treatments for AMD, 2006 67
Table 5: Proportion of upfront payment in terms of total deal costs increases with drug development, 2005-06 74
Table 6: Upfront and milestone payments made by GSK, 2005-06 77
Table 7: Royalty rates for in-licensed compounds 81
Table 8: Top 20 pharmaceutical companies forecast to grow by only an average of 2.6% CAGR, 2006-12 86
Table 9: Product deals made by Japanese headquartered companies during 2005-06 104
Table 10: Key anti-infective drug in-licensing and co-development deals, 2005-06 117
Table 11: Small molecules remain the focus of in-licensing and co-development deals during 2005-06 120
Table 12: Drug discovery and delivery deals made by the top 20 pharmaceutical companies, 2000-06 138
Table 13: Leading companies licensing biopharmaceutical discovery and development technologies, 2005-06 146
List of Figures
Figure 1: The key drivers and resistors facing licensees and licensors in today's pharmaceutical industry 15
Figure 2: Factors responsible for declining revenues 16
Figure 3: The number of in-licensing deals rose rapidly in 2005-06 following gradual growth over previous years 19
Figure 4: Factors determining a licensee's profits 23
Figure 5: In-licensed products offer a lower ROI than those developed in-house 24
Figure 6: The rising cost of in-licensing, 2000-05 25
Figure 7: Resurgence in the in-licensing of preclinical compounds, 2005-06 26
Figure 8: The pros and cons of in-licensing at different stages of drug development 28
Figure 9: Factors leading to partnership breakdown during licensing deals 40
Figure 10: Overview of the pharmaceutical licensing process 41
Figure 11: Key elements that need to be considered when developing a company's licensing strategy 42
Figure 12: Key factors to be evaluated when identifying a suitable in-licensing opportunity 45
Figure 13: Merck & Co.'s 'Submit your discovery' licensing opportunity profile template 47
Figure 14: Factors which can tip the balance in favor of initiating or delaying the out-licensing decision for a licensor 49
Figure 15: Partner's of choice must satisfy several hard and soft factors 51
Figure 16: Novartis's strategic alliance process 54
Figure 17: Poor deal management can have major detrimental effects on the alliance performance 55
Figure 18: Debiopharm's business model 57
Figure 19: Licensing agreement between Lilly's Chorus and Versant Ventures 63
Figure 20: Weighing up upfront payments 72
Figure 21: Mean upfront payments for licensing and co-development deals made by the top 20 Pharma, 2005-06 73
Figure 22: Total and mean upfront payments by licensor, 2005-06 74
Figure 23: Mean milestone payments for licensing and co-development deals made by the top 20 Pharma, 2005-06 75
Figure 24: Total and mean milestone payments by licensor, 2005-06 76
Figure 25: Externally developed drugs will not be sufficient to offset revenue losses from in-house products for GSK, 2006-12 80
Figure 26: Top 20 pharmaceutical companies forecast to grow by only an average of 2.6% CAGR, 2006-2012 85
Figure 27: Companies increasing their in-licensing dependence during 2006-12 87
Figure 28: Companies decreasing their in-licensing dependence during 2006-12 88
Figure 29: In-licensed products are not expected to offset revenue decline from in-house products for Eisai, 2006-12 89
Figure 30: Externally sourced products help drive Merck & Co.'s sales growth during 2006-12 90
Figure 31: Boehringer Ingelheim set to decrease its reliance on externally sourced products during 2005-06 92
Figure 32: Summary of how product sourcing is forecast to effect company sales by 2012 93
Figure 33: In-licensing deals in 2005-06 versus 2000-04 94
Figure 34: In-licensing deals are the most frequent type of deal carried out by the top 20 pharmaceutical companies, 2005-06 95
Figure 35: Deals per stage of drug development, 2005-06 95
Figure 36: Development stage of product's licensed, by type of deal, during 2005-06 97
Figure 37: Licensing and co-development deals are most frequently made for compounds in preclinical and Phase I development, 2005-06 98
Figure 38: Resurgence in the in-licensing of preclinical compounds, 2005-06 99
Figure 39: Continued rise in the number of preclinical and clinical out-licensing deals, but deals for marketed drugs fall sharply, 2000-06 101
Figure 40: Definition of source and partner companies 102
Figure 41: Novartis was the leading dealmaker during 2005-06 103
Figure 42: Novartis and AstraZeneca were the top in-licensors during 2005-06 105
Figure 43: Number of in-licensing deals versus sales growth, 2005-06 106
Figure 44: Novartis and Bayer-Schering were the top co-developers during 2005-06 109
Figure 45: The ratio of deals per therapy area has changed little between 2000-04 and 2005-06 113
Figure 46: The number of oncology and anti-infective in-licensing and co-development deals grew strongly during 2005-06 114
Figure 47: Novartis entered into the greatest number of small molecule in-licensing and co-development deals, 2005-06 119
Figure 48: Significant increases in deal numbers were made across all biologic categories during 2005-06 121
Figure 49: Bayer-Schering and BMS were the top out-licensors during 2005-06 123
Figure 50: Out-licensing deal territories, 2005-06 125
Figure 51: Novartis was the leading company to enter marketing, promotion and distribution deals during 2005-06 129
Figure 52: Marketing and promotion deals by therapy area, 2005-06 132
Figure 53: The drug development process, including stages where drug delivery technologies can be applied 135
Figure 54: Drug discovery and technology deals made by the top 20 pharmaceutical companies, 2000-06 137
Figure 55: Merck & Co. and Novartis performed the most technology deals during 2005-06 140
Figure 56: Biologic technologies overtake small molecules in terms of drug discovery deals, 2000-06 141
Figure 57: Therapeutic antibodies and recombinant proteins were the key biologics targeted in drug discovery deals, 2005-06 143
Figure 58: Drug discovery technologies, 2005-06 144