In recent years, many biopharm companies are looking for alternative sources of revenue to fund their R&D and clinical operations. For biotech companies, being able to sign out-licensing agreements with a credible licensee in early stages of the company life cycle can have a significant impact. In addition to the immediate capital infusion, the licensor benefits from increased technology credibility and investor confidence, which normally translates into enhanced capability to raise capital in the private or public market, at higher valuation. However, many companies struggle to execute an effective out-licensing strategy and fail to maximize the value of the out- licensed asset.
THE OUT-LICENSING CHALLENGE Being able to find a partner — and more importantly, the right partner — is instrumental to the success of most emerging biotech companies. Many companies face tremendous challenges in getting the attention of potential licensees, in some cases due to mismanagement of the out-licensing process. We work hard to solve following challenges while working with clients to manage their out-licensing processes.
1. Identifying the right time to partner
Is later better? The cost and risk to continued development using internal resources must be weighed against the estimated value and other benefits of structuring a licensing deal. Some pharmaceutical companies are willing to pay a premium for early-stage technology. However, shopping around your technology too soon may reduce its attractiveness in the future, consume management time, and generate premature expectations from investors.
2. Identifying and prioritizing among the most appropriate strategic partners
Skipping a well thought out research process that examines strategic synergies with mid-to-large companies is a drastic mistake. Sending information to the top 40 pharmaceutical list is usually the wrong approach and results in lower out-licensing success probability. Entry into potential partners through an internal champion insures a shortened "sales" cycle. In many cases, this can be provided by an external business development firm with existing networking capabilities.
3. Assessing and defining the scientific and commercial viability of each potential strategic partner
Omitting a thorough prioritization process that eliminates less-relevant companies and targets only strategic partners and specific individuals within target companies can expedite the out-licensing process.
4. Having a limited network of personal relationships with key decision makers
Emerging companies have small business development teams. Management should never underestimate the value of a having a lead into the decision maker of a potential partner; licensing deals are made between people and not between companies. Managing an out-licensing campaign is a complex process requiring real-time access to data and therefore consumes valuable time and resources. Companies should incorporate a well-structured, web-based contact management and follow-up system to track and share all communications with all the internal and external parties involved in the deal.
5. Preparing the offering material
Effective offering materials take into account a realistic and pragmatic assessment of the target market, competitive product timelines and the nature of an unmet medical need. Frequently, smaller firms neglect the perspectives of larger, fully integrated partners. Attempting to maximize deal valuation by overestimating the market opportunity or underestimating developmental timelines will not insure the completion of a licensing discussion. Presenting mature, sophisticated, analytical offering material will insure that discussions produce a mutually satisfactory endpoint for all parties involved in the transaction. Critical elements to include in the offering material are IP portfolio and freedom-to-operate issues, clear summaries of clinical data including issues that can be misinterpreted by external clinicians, brief market opportunity analyses, and any relevant company/management information that can strengthen the partner's willingness to enter into further discussions.
THE OUT-LICENSING CHALLENGE Being able to find a partner — and more importantly, the right partner — is instrumental to the success of most emerging biotech companies. Many companies face tremendous challenges in getting the attention of potential licensees, in some cases due to mismanagement of the out-licensing process. We work hard to solve following challenges while working with clients to manage their out-licensing processes.
1. Identifying the right time to partner
Is later better? The cost and risk to continued development using internal resources must be weighed against the estimated value and other benefits of structuring a licensing deal. Some pharmaceutical companies are willing to pay a premium for early-stage technology. However, shopping around your technology too soon may reduce its attractiveness in the future, consume management time, and generate premature expectations from investors.
2. Identifying and prioritizing among the most appropriate strategic partners
Skipping a well thought out research process that examines strategic synergies with mid-to-large companies is a drastic mistake. Sending information to the top 40 pharmaceutical list is usually the wrong approach and results in lower out-licensing success probability. Entry into potential partners through an internal champion insures a shortened "sales" cycle. In many cases, this can be provided by an external business development firm with existing networking capabilities.
3. Assessing and defining the scientific and commercial viability of each potential strategic partner
Omitting a thorough prioritization process that eliminates less-relevant companies and targets only strategic partners and specific individuals within target companies can expedite the out-licensing process.
4. Having a limited network of personal relationships with key decision makers
Emerging companies have small business development teams. Management should never underestimate the value of a having a lead into the decision maker of a potential partner; licensing deals are made between people and not between companies. Managing an out-licensing campaign is a complex process requiring real-time access to data and therefore consumes valuable time and resources. Companies should incorporate a well-structured, web-based contact management and follow-up system to track and share all communications with all the internal and external parties involved in the deal.
5. Preparing the offering material
Effective offering materials take into account a realistic and pragmatic assessment of the target market, competitive product timelines and the nature of an unmet medical need. Frequently, smaller firms neglect the perspectives of larger, fully integrated partners. Attempting to maximize deal valuation by overestimating the market opportunity or underestimating developmental timelines will not insure the completion of a licensing discussion. Presenting mature, sophisticated, analytical offering material will insure that discussions produce a mutually satisfactory endpoint for all parties involved in the transaction. Critical elements to include in the offering material are IP portfolio and freedom-to-operate issues, clear summaries of clinical data including issues that can be misinterpreted by external clinicians, brief market opportunity analyses, and any relevant company/management information that can strengthen the partner's willingness to enter into further discussions.
