In-Licensing in Pharma Essay Example for Free

In-Licensing in Pharma EssayINTRODUCTIONThe process of bringing a new dose to market is an exceedingly 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 vex pharmaceutical overlaps. However, the rewards of a successful new product can be tremendous generating, depending on the sanative expanses in which the product will be used and the disease it will directed to, from millions to billions of dollars of gross revenue per year worldwide. Many pharmaceutical companies are facing a pipeline gap because of the increase economic rouse and uncertainty associated with internal research and development programs designed to develop new pharmaceutical products. The pauperism for gargantuan pharmaceutical companies to constantly replenish the supply of dominance blockbusters requires a consistent and dedicated approach to drug RD. However no longer is inh ouse research expertise sufficient.To fill this pipeline gap, pharmaceutical companies are more and more relying on in-licensing opportunities. Business development and licensing department identifies new pharmaceuticals that satisfy unmet needs and are a intelligent strategic fit for the conjunction, completes military rating 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 cliply basis. The in-licensing process provides a source of new drugs to a given company to supplement internal laboratory research, to reach the companys goal in term of manifest and future portfolio.As competition in the pharmaceutical market continues to grow, effective line of products development strategies stupefy 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 stimulate an ever more important component of the overall business development mix (source Wood Mackenzies Licensing insight Multi-Client study, April 2003)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 come of searching. Second, no one knows how many needs are in the haystack. There might be none, or multiple. Third, the search is conducted in public and multiple companies compete for innovative therapies, and resource allocation and financial opinion play a role in such competition. The divulge to pursing in-licensing opportunities is rapidly to identify individuals and companies with the intellectual piazza sought by the company. New business development teams maintain a business development client relationship management training system. The information stored in this system has been gathered from personal networking contacts, industry visible(prenominal) organization directories, membership directories, commerciallyPubMed, and online databases. The system contains the contact information, therapeutic interest areas, development stage information for products in development, and other relevant information needed to identify potential in-licensing partners, such as key clinical researchers, biotechnology companies, and small specialty pharmaceutical companies. A search of this system provides a diagnose of potential inlicensing partners. To supplement this list, the new business development team begins a systematic marketing agitate in select industry trade publications and Web sites to promote the companys desire for an in-licensing partner. The advertise highlights the companys strengths in clinical development, manufacturing, and sales and marketing. Information regarding the type of product desired (therapeutic class, clinical develo pment stage, and so forth) and the type of licensing agreement being sought is specified.From the list of potential in-licensing partners, the new business development team selects the most appropriate candidates and begins to evaluate the feasibility of in-licensing each potential partners product. Despite there is no stock(a) formal process in in-licensing of pharmaceutical products, it is quite standard to utilize a stepwise approach, composed of go/no go gates, that can be summarised in the following stages 1. evaluation of potential in-licensing opportunities 2. first pass review 3. product evaluation 4. due intentness 5. in-licensing contractual negotiation and deal closing. This stages are ordered following a timeline perspective, so to have a subsequent flow of actions.The approach includes examining opportunities from other pharmaceutical companies and from academic centers involved in research. Once the prospect has been identified, the first pass review consist general ly in the evaluation of information provided by the potential licenser, the medical and scientific literature, and specialised consultant if there is a in-house gap in specific knowledge. This initial step has often been based on a gut feeling and the company overall schema in term of therapeutic area focus.For those opportunities not rejected in the first pass review, a more detailed evaluation of the scientific, commercial and financial issues, are underinterpreted.Additional people with various area of expertise participate in this secondary evaluation. Only if the entire evaluation is positive the opportunity is taken to senior management, that finally approves the in-licensing after due diligence and a full negotiation on foothold of the agreement.One aspect that is often underestimated in in-licensing opportunity is the in depth commercial taxment of the acknowledged candidate, leaving the go/no-go decision mainly at strategic fit in terms of therapeutic area focus or fin ancial aspect taken from capital budgeting calculations. In this regards, sales forecast plays a critical role in assessing the net present value of the in-licensing opportunity, scarce they need to be supported by a complete, although preliminary, full product evaluation.This evaluation has to include external analytic thinking in the context of the future scenario, internal analysis of the given putative candidate, and a preliminary but clear product strategy. The scope of the development of a qualitative model for a full product evaluation in the context of an putative in-licensing opportunity is to define the key relevant steps inside the full product evaluation related to commercial aspect that are critical for the precise and consistent definition of the sales potential of the product, that will used in the Capital Budgeting (e.g. Net Present Value) models to assess the financial aspect of the opportunity and set the basis for the full negotiation.Common financial analysis measures for valuation of an in-licensing opportunity Pay Back Period (PBP) Length of time required to recover the cost of an investing Discounted Cash Flow (DCF) Analyzes future free cash flow projections and discounts them using the after tax weight average cost of capital to arrive at a present value (value in local currency at the time of analysis) DCF analysis estimates the money a company would receive from an investment and adjusts for the time value of money.