In-Licensing in Pharma

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INDEX
Introduction…………………………………………………………………….2

The development of a qualitative model Rationale………………………………………………………………8 The qualitative model………………………………………………...9 Strategic fit……………………………………………………………11 Market definition…………………………………………………….12 Customer definition…………………………………………………14 Product opportunity…………………………………………………15

Summary…………………………………………………………………….22

Bibliography…………………………………………………………………23

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INTRODUCTION
The process of bringing a new drug to market is an extremely expensive one, often costing above $200 million. This enormous cost can be explained by the fact that a very small fraction of molecules in research and development ultimately become pharmaceutical products. However, the rewards of a successful new product can be tremendous generating, depending on the therapeutic areas in which the product will be used and the disease it will directed to, from millions to billions of dollars of sales annually worldwide. Many pharmaceutical companies are facing a pipeline gap because of the increasing economic burden and uncertainty associated with internal research and development programs designed to develop new pharmaceutical products. The need for large pharmaceutical companies to constantly replenish the supply of potential blockbusters requires a consistent and dedicated approach to drug R&D. However no longer is inhouse research expertise sufficient.

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Chart 1 Decreased R&D Productivity (source: FDA - PhRMA 2007)

Pharma R&D Investments (Billion USD) 120

New medicines Approved by FDA
60

100

50

80

40

60

30

40

20

20

10

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 YEAR

0

To fill this pipeline gap, pharmaceutical companies are increasingly relying on in-licensing opportunities. Business development and licensing department identifies new pharmaceuticals that satisfy unmet needs and are a good strategic fit for the company, completes valuation models and forecasts, evaluates the ability of the company to develop and launch products, and pursues in-licensing agreements for pharmaceuticals that cannot be developed internally on a timely basis. The in-licensing process provides a source of new drugs to a given company to supplement internal laboratory research, to reach the company’s goal in term of present and future portfolio.

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As competition in the pharmaceutical market continues to grow, effective business development strategies become critical to maintain momentum and improve global market share for the leading pharma companies. An increasing proportion of revenues are expected to be generated from licensed products and as a result licensing will become an ever more important component of the overall business development mix (source: Wood Mackenzie’s Licensing insight Multi-Client study, April 2003)

Chart 2 Projected pharmaceutical industry growth by strategic activity

Organic Growth 700

M&A Transactions

Licensing Deals

Drug Discovery Deals

600

500

Billion USD

400

300

200

100

0 1980 1990
YEAR

2000

2010

The in-licensing process might imply enormous effort by the company. It can be compared to the proverbial search for a needle in the haystack. First, the haystacks are large and require a massive amount of searching. Second, no one knows how many needs are in the haystack. There might be none, or multiple. Third, 4

the search is conducted in public and multiple companies compete for innovative therapies, and resource allocation and financial aspect play a role in such competition. The key to pursing in-licensing opportunities is rapidly to identify individuals and companies with the intellectual property sought by the company. New business development teams maintain a business development customer relationship management information system. The information stored in this system has been gathered from personal networking contacts, industry available organization...
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