SOURCE: Cutting Edge Information

Cutting Edge Information

June 21, 2011 09:52 ET

Net-Present Value Still a Top Priority for Pharmaceutical In-Licensing Deals

Partners That Understand Each Other's Goals Cultivate a Healthier Partnership, Whether Their Focus Is on Revenue or Expanding Capabilities

RESEARCH TRIANGLE PARK, NC--(Marketwire - Jun 21, 2011) - When evaluating a deal's potential profitability, pharmaceutical business development and licensing teams use similar criteria regardless of which side of the table they sit on, but they may prioritize differently, according to a new study by life sciences industry benchmarking firm Cutting Edge Information.

Net Present Value as an Indicator of Deal Profitability

The study, "Pharmaceutical Business Development and Licensing: Strengthening Pipelines and Managing Relationships" ( finds that 100% of surveyed commercialization-oriented companies consider net present value when evaluating potential deals' profitability. By comparison, only 58% of smaller, development-focused companies consider this factor. This makes sense, as the in-licensing company is focused on the projected future income of its investment -- something that may not come to fruition for many years after the deal is signed.

For their part, development-oriented companies concentrate on areas such as future ability to grow a marketing or sales force or strengthen clinical operations. They can learn how to expand functional expertise from their larger partner. Other factors both groups consider include market value, risk/benefit analyses and scientific analysis.

Strategic Goals Guide Pharmaceutical Dealmaking Decisions

"When pursuing a partnership, business development teams must weigh several factors in a short time, and it's important to look beyond market value and also align the deal opportunity with long-term company strategic goals," said Adam Bianchi, chief operating officer at Cutting Edge Information. "A well-negotiated deal will meet partners' individual goals while optimizing profitability."

Cutting Edge Information's study examines the motivations behind pharmaceutical deals. It explores the deal processes from asset identification through post-deal management, presenting key solutions for avoiding common obstacles and maximizing deal position. It showcases pharmaceutical business development and licensing team structure, staffing and spending benchmarks.

"Learning what criteria companies use to evaluate partnerships smoothes the negotiation process and understanding each other's alliance goals builds stronger relationships overall," said Bianchi.

"A successful strategy will enable business development teams to structure deals to meet top-level goals, minimize the disruption of deal-closing and integration, and attract expert opinions from outside both companies for objective input and feedback."

Contact Information

    Elio Evangelista