Pharmaceutical Company In-house Research and Licensing Transaction Review

Abstract

Background:​ Pharmaceutical in-house research and licensing deals are effective means of widespread production of drugs to the public. These transactions follow a normalized procedure requiring upfront payments between a buying company to work either collaboratively with a small to medium sized selling company or buying the right of a product completely. Licensing a novel pharmaceutical drug goes through several clinical phases, and transaction deals can involve royalty and/or milestone payments along the research and clinical trial process.

Methods​: Data was collected through analysis of pharmaceutical licensing market deals via online databases and extracted to a data sheet for examination. Trends were highlighted after analyzing upfront payment values, royalty sales, milestone payments and total transaction deal value.

Results​: Total milestone payments averaged at USD $639.1 million, and total royalty payments averaged at USD $899.77 million. Average total deal values is USD $1445.18 million. Correlation coefficients between: (1) upfront and milestone payments r = 0.155; (2) upfront payments and royalty payments r = 0.188; and (3) upfront payments and total deal value r = 0.604. Most transactions are a small/medium enterprise selling to big pharmaceutical companies (32%) or a big pharmaceutical company selling to a small/medium enterprise (32%). 27% of deals are between big pharmaceutical companies, and 9% of deals are between small/medium enterprises.

Conclusion:​ There is a positive correlation between upfront payment costs with milestone/royalty costs and total deal value (n=25). Small or medium enterprises are beginning to take a large sector of the transaction business as their in-house research licensing grows more appealing for market distribution.