Pharma Business Development Teams Must Focus on Strategic Fit Rather Than Name Game

RESEARCH TRIANGLE PARK, NC--(Marketwire - Jul 12, 2011) - When pharmaceutical and biotechnology companies select a partner for a licensing deal, there is a strong temptation to go for the biggest name in the field. For out-licensers, this might be the top-selling company in a therapeutic area. For in-licensers, the most talked-about compounds or hottest therapeutic areas may be most enticing.

However, a new study from Cutting Edge Information finds that flashy, headline-grabbing deals often fail to live up to the initial hype and publicity. Researchers concluded that rather than leaping for the biggest names, business development and licensing teams should clearly identify the goals of a licensing deal before beginning to evaluate potential partners. These goals should be reflected in the information sought during all due diligence activities and in the final negotiated deal terms.

Common factors cited by benchmarking partners for "Pharmaceutical Business Development and Licensing" include:

• Whether the license partner can realistically meet obligations.
• The strength and clarity of a partner's balance sheets.
• How the drug fits into the company's long-term strategy.

For example, if a company already has multiple top-selling products in a therapeutic area, an in-licensed compound might be part of a plan to limit losses due to an expiring patent. In these cases, the drug launch may be delayed until timing is ideal for the in-licensing company, rather than the licensor. "The top players in a therapeutic area have nowhere to go but down," said one interviewed executive.

On the other side of the equation, early-stage compounds generating the most headlines will likely attract strong interest from multiple companies. A bidding war may result in the winner making a large upfront payment for a molecule that has not yet proven efficacy or even safety.

For out-licensors, the business development team needs to determine which potential partners have built a strong presence in the therapeutic area and demonstrate commitment to the success of the licensed drug. These companies have proven to be better partners than firms that may have more short-term buzz, according to interviewed executives.