Determinants of Licensing: A Study of Selected Biotech Companies and Research Institutions

Abstract

Licensing and collaborations are very important for the pharmaceutical and biotech institutes to discover, develop, manufacture and commercialize new medicines for treatment of human diseases. With the advancement in science and technology, our understanding of human biology, drug targets and mechanisms of drug resistance have increased manifold. However, it takes several years and billions of dollars in investment to bring a new drug to the marketplace. The period for new product discovery, development and eventual approval for marketing is the longest in the case of pharmaceutical industry leading to loss of effective on-market patent life of a new molecule. This coupled with the high risk of failure in clinical development makes it important for pharmaceutical companies to seek external innovation to fill their portfolio. Biotech’s that have achieved non-clinical or clinical proof-of-concept need the access to capital to conduct expensive phases of non-clinical and clinical drug development. The licensing process can be very competitive as there would be several pharmaceutical companies interested in licensing first-in-class or best-in-class molecules at various stages of development. However, it is important for biotech and pharmaceutical companies that are seeking licensing partners for their molecules to choose the partners carefully as it takes several years of commitment to bring a new drug to the market. This study investigated the literature on different aspects of new drug discovery and development and the need for licensing by pharmaceutical companies seeking access to new drugs to fill their product portfolios. The study laid special emphasis on licensing in the global context as well as licensing activities by Indian pharmaceutical and biotech companies. This study investigated the five determinants including size of the company, pharmaceutical sales, number of employees, age of the company and pharmaceutical research and development expenditure as key determinants that could have an effect on the licensing deal from the perspective of a biotech or pharmaceutical company when they are seeking licensing partners for their molecules. A sample of 101 pharmaceutical companies and 381 licensing deals that were announced in the period 2011-2015 were collected for quantitative analysis using Multilayer Perceptron technique and regression analysis. Further five cases were analyzed in detail to add a quantitative dimension to the quantitative study findings. The journey undertaken by five biotech companies, namely Array Pharma, Karo Bio, Galapagos, Tobira Therapeutics and Onconova Therapeutics in making their assets valuable for licensing, choosing the licensing partners and managing the life-cycle of their molecules have been covered in these case studies. This study has been organized in nine chapters. The chapter 1 provides the introduction to the research study. The literature review of this study involving 187 references is described in Chapter 2 and has four parts covering the Drug Discovery and Development stages, the licensing activities in the global context, licensing activities in India, and determinants for selecting a licensee in the pharmaceutical industry. The Chapter 3 is focused on the research methodology, which describes the framework of research including the sampling plan, data collection, research techniques and proposed hypothesis of the study. Chapter 4 is focused on the data analysis and case studies. The discussions of the results are given in Chapter 5. The key findings are summarized in Chapter 6. The implications for managers and policy makers are suggested in Chapter 7. The limitations of the study, areas for further research and conclusions are discussed in Chapter 8. The conclusion of the study is provided in Chapter 9. Multilayer Perceptron technique revealed that four determinants including Pharma R&D, age of the company, size of the company and number of employees have good effect on prediction of licensing deals. The further hypothesis testing using regression analysis showed that Pharma R&D expenditure and number of employees explained the variation in licensing deals, while the Size of the Firm or Age of the Firm were not found to be statistically significant. These determinants were further studied using case studies which also added new findings that can play a significant role in pharmaceutical licensing. This study made a significant contribution to existing knowledge of the pharmaceutical licensing area and life-cycle management of licensed candidates.