Licensing compounds

Pharmaceutical firms often choose to in-license compounds to beef up their developmental pipeline or round out their existing product portfolio. Structurally, in-licensing can be represented with a simple extension of the basic stock/flow framework, as shown in Figure 35.19. 

In-licensing opportxmihes can enter the drug development process at the level of phase trials and the on patent stage. In either case, the simulahon model can assign a cost necessary to obtain in-licensed compoxmds (cost per in-licensed compound), which can be compared... 

Some sort of revenue-sharing arrangement if and when the compound reaches the market out-licensed revenues.) The variable revenues per out-licensed compound is commonly a time-based scenario of revenue generation over the life of the compound before it eventually exits through the retirement flow. A proper analysis of the revenues per out-licensed compound flow should incorporate the uncertainty of markef enfry however, if fhe out-licensed NCE is one which has not yet passed the FDA approval process. 

This is higher than previous estimates, largely due to capitalization of expenditure flows and exclusion of licensed compounds. 

This is the first time a data base.of this size and degree of comprehensiveness has been compiled on the state of new drug development in any country. We are currently obtaining further information on investigational NCEs, which will include the reasons for termination of clinical research by the firms and full data on licensed compounds. These additional data will clarify some of the trends that have been revealed by the present study, and will allow further analyses to be performed of the reasons behind the observed changes. 

Replacement of the carbon atom at C4 by lactam-nitrogen also leads to compounds with pharmacological activity. The several FDA-licensed compounds in this small class act as androgen antagonists, in direct contrast to oxandrolone, which presumably acts on the same receptor. 

Not all in-licensed compounds, of course, originate in biotech, but the majority do. 

Another problem sometimes occurs where diversity-based company A has granted exclusive rights to license compounds in its libraries to several other companies, and two or more of these partners identify and claim the same compound. This can happen where partners have defined their fields of exclusivity by different mechanisms (e.g., partner B claims IL-IOR antagonists , while partner C claims dihydropyridine derivatives , or immune modulators ), or where the selected targets respond to the same compound (e.g., where new, poorly characterized receptors turn out to be related or identical). When this happens, one has partners converging on the same compound (or similar compounds). 

Developer. Firm/institution that developed the project. This is the same as the Originator for the in-house projects. For the licensed compounds, the Developer is the licensee who is entitled to develop it further. Frequently the relationship between Originators and Developers is not just a pure licensing contract. In 67% of the cases it amounts to an R D collaboration with fairly complex contractual and organizational settings. Moreover, 12% of the collaborations are between one Originator and many Developers. In these cases we considered different projects for different Developers. 

Collaborations and licensing activity For the licensed compounds, PHID records the development stage (clinicals I, II, or III) at which the collaboration agreement was signed, and the type of collaboration that was specified by the parties. 

In this section we focus on the development capabilities. In order to do so however, we caimot simply look at our sample of projects. This is because, for in-house projects, the probability of success of the compounds may be affected by the upstream capabilities of our companies, and this implies that we cannot disentangle their specific downstream capabilities. We focus on the licensed compounds. We argue that when the compounds are licensed, the originator capabilities are with the licensor. If development capabilities did not matter, we ought to observe that different companies would not have different probabilities of success once the compound is licensed. By contrast, if for licensed compounds there are differences in the probability of success, they can be attributed to differences in development capabilities. 

Table 5 reports probit estimations in which the dependent variable is whether the compounds were successfully marketed or not. The sample is composed of all the licensed compounds, and we run two separate regressions for the US companies miming trials in the US and for the whole sample. Apart from risk class dummies (and a dummy for US trials in the full sample probit), we use a dummy for whether the company is a large pharmaceutical company rather than an NBF. The Table reports both the estimated probit parameters and the implied changes in the probability of success. 

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