Pharmaceutical licensing is best understood using the analogy of a dating agency.
There are two key functions to perform – the presentation of yourself as a potential partner and the selection of appropriate profiles of potential partners. No matter how much effort is put into these two functions, the process for identifying licensing opportunities is not an exact science and is therefore fraught with inflated expectations and considerable disappointment. As with personal dating, pharmaceutical licensing suffers from an unfortunate externality resulting from the inflation of expectations and disappointment, which is that a highly skeptical opportunity screening process has emerged.
As in the ‘market for lemons’ – a microeconomics paper written by Nobel laureate George Akerlof about the market for second hand cars – if you cannot easily determine whether an opportunity or partner is a good one you inevitably assume it is a bad one.
As such companies looking to present their compounds as good licensing opportunities or themselves as good licensing partners must find new ways to credibly elevate themselves above the mass of potential opportunities available for scrutiny. Saying you are young, attractive and blonde but not attaching a photo will not work in attracting a partner today. Companies need to demonstrate their strengths rather than simply listing them as a proof of suitability.
The process of opportunity identification is somewhat different for in-licensing and out-licensing.
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In-licensing
Companies looking to identify potential compounds/technologies for in-licensing must first determine an appropriate set of search criteria with which to produce a manageable list of potential opportunities. Having determined an agreed licensing strategy, broad criteria regarding specific market sectors, geographies and development stages will already provide the focus for the opportunity search. However, refinement of this list will take into account a more targeted set of criteria including:
Do we have the required R&D capabilities for this product?
Do we have the required sales and marketing capabilities for this product?
Is the product likely to be made available for licensing?
Are we likely to be considered to be an attractive partner for this product?
A full list of search criteria – once an initial selection has been limited to the required therapy area, geographies and development stages – are used to eliminate specific opportunities. These would include the following:
Specific therapeutic classes and indications;
Geographic availability;
Development stage and expected launch dates;
Maximum and minimum projected sales performance;
Key performance objectives (once-a-day dosing, low side effects etc);
Risk profile (first in class, reformulation etc).
Identifying potential opportunities can involve significant research, but should be carried out in a logical way using the criteria identified above. Sales and marketing data, available from IMS Health or through other aggregators of product sales information provides a useful tool for identifying potential opportunities.
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Given that a high proportion of licensing occurs for development compounds, some of the best research sources for licensing opportunities are R&D databases such as LifeScience Analytics’ MedTRACK, Informa’s PharmaProjects, ADIS R&D Insight and IMS Health’s R&D Focus. Each has the ability to refine searches by indication, technology, development stage and company. In this way, a short list of suitable targets that meet these criteria can be formed. More detailed profiles for key drugs are also found in a number of the main databases which can further refine choices around sales projections and the likely risk involved with further development.
Aside from the desk research involving sales- and R&D-based database querying, the main source for identifying potential opportunities is the old-fashioned route of networking. There are a number of well-organized licensing network events and a number of websites, such as Pharmalicensing, that are now providing networking short cuts in order to pass-on details of available opportunities to potentially interested parties. It is still the major responsibility of any licensing or business development manager to form networks through which information about potential opportunities can quickly be shared. Above and beyond the direct networks between licensing and business development managers, there are significant roles to play for R&D managers and regional marketing teams. R&D managers, in particular, are exposed to many new developments and opportunities in the various therapy area-focused conferences and industry journals. These can often provide excellent sources for identifying new opportunities or for fleshing-out an early evaluation of a potential opportunity using the most up-to-date information.
In order to reduce the broad list of potential licensing opportunities to a more manageable size, a process of prioritization must be applied. A formal review stage is undertaken using a series of licensing opportunity profiles. These profiles present the relevant product information alongside status details for each of the key selection criteria. These standardized profiles then form the basis for a formal discussion regarding potential strategic fit, value and prioritization. As mentioned earlier, any determination of opportunity value must include an introspective look at whether you as a company can offer sufficient value to the partner to make it a valuable opportunity
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to them too. The prioritization of opportunities must include a realistic determination as to the likely success of subsequent deal negotiations. A licensing opportunity profile for a development compound should include the following:
Drug name (brand/ chemical);
Originator/owner;
Planned indication(s);
Intellectual property status;
Abstract (history, mechanism of action, potential competitive benefits etc);
Development status (global/ regional);
Market profile (size, key players etc);
Clinical profile (patient size, clinical targets etc).
Out-licensing
For out-licensing, companies must look to both identify and present their own opportunities (compounds/technologies) as well as identify partnership opportunities with other companies. Before preparing presentational material for a licensing opportunity, a company looking to out-license must determine when and how to go about it. Determining when to license a compound involves the consideration of many factors such as how much risk and financial burden is the company able to bear and how well equipped is that company to continue further development of a compound alone. Deciding how to out-license a compound is often subject to the decision over when to out-license. Licensing at an early stage of clinical development may involve some element of co-development, but is unlikely to include the co-commercialization of the compound once it reaches the market. However, a late stage compound in phase III development is likely to yield significant returns for the out-licensor and include both co-development and co-commercialization rights. Other types of ‘transactional’
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licensing with limited collaboration often occur in early stage development or involve products been divested as part of post-merger anti-trust actions etc.
Having loosely determined the optimal window for licensing and the type of deal been sought, a team of qualified staff need to be brought together to draft the presentational licensing material or licensing prospectus. Usually this involves a non-confidential dossier that can be provided to any and all interested parties, and a more detailed confidential prospectus that is only shared after initial contact has been formed and the appropriate confidentiality agreements have been signed.
The confidential prospectus will include all relevant data available to support the product’s potential. For a development project this will focus on the expected clinical profile, the associated regulatory risks and the status of patent claims. The main sections to be included in the prospectus include:
Overview/summary – a one-to-two page summary presenting the key product features and potential value;
Therapeutic rationale – an outline of the mechanism of action and how and why this differs from other products;
Chemistry and pharmacy – an outline of the product’s chemistry including likely formulations and manufacturing processes;
Intellectual process – a review of the current patent position, expiry dates and any other intellectual property such as confidential information etc;
Experimental studies – a review of relevant data and observations from experimental work, in vitro and in vivo studies and any comparative data;
Clinical development – an outline of clinical objectives, pharmacology and study results including a detailed summary of completed pivotal studies;
Therapeutic potential – a review of the product’s commercial potential and how this links with a significant market opportunity;
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Competitive potential – a detailed profile of the product’s expected dosing, tolerance and efficacy for each indication, as well as likely launch dates.
A references and bibliography section is often included to help support some of the claims made in the experimental data and clinical development sections and to provide further references to papers not referenced within the core text of the prospectus.
The non-confidential brochure provides a more concise product summary (five-to-six pages) aimed to encourage potentially suitable partners to make contact and find out more information. A good non-confidential brochure would also provide enough information to deter unsuitable partners from making contact and wasting time in providing further information. Aside from brevity, there are two further differences between the confidential prospectus and the non-confidential brochure. The first is that some sensitive data may be removed from the latter document, replaced simply with
‘…more information is available under confidentiality’. The second difference is that the wider audience exposed to the brief, non-confidential brochure will require a short introduction to the company at large and not simply the product available for out-licensing. The brochure should include a company section that outlines scientific and commercial competences as well as key contact details.
When preparing presentational materials for marketed products the key difference is the addition of more significant therapeutic and competitive potential sections. Market data will already be available and this will be reflected in a more robust commercial evaluation for the product in current or future potential markets.
The licensing brochure and prospectus form the primary mechanism for presenting a potential out-licensing opportunity to potential partners. The second licensing opportunity process involves the active identification of potential partners.
The first filter for identifying potential partners is to look for activity in the product’s target market sectors. Who is currently marketing, developing or in-licensing products
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for the target therapy sector or physician group? Secondary considerations involve understanding which companies are strong in targeted regional markets, such as the US, Europe and Japan. The final, but often the most important screening, is determining the closeness of fit between the licensing opportunity and the potential licensing partner’s portfolio and pipeline strategy. Would the product add something of value? Would the out-licensing partner be able to add something of value? Ideally, this process should provide around 20 companies to actively target as preferred partners.
These potential partners must be contacted very carefully, as the wrong sort of introduction with the wrong message to the wrong person may prove disastrous to future communications and potential negotiations. Identifying opportunities includes identifying the right approach to the right person within the short list of target companies. Many small, but ambitious, biotechnology companies have managed to do a good job with the preparation of presentation materials and the identification of target licensing partners only to make a bad job of establishing a first contact with the company and as a result fail to make any further progress.
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