The Benefits of Licensing Your Drug
In today’s dynamic pharmaceutical landscape, companies are constantly seeking innovative strategies to get to market quickly and maximize the value of their drug assets.
One approach that has gained popularity in recent years is licensing. Licensing is when one company (the licensee) acquires the rights of the intellectual property—a drug, in this case—from the owner (the licensor) under mutually agreed terms.
Pharma giants often form licensing agreements with smaller players, providing a mutual benefit. For example, in 2023, CytomX Therapeutics licensed their oncology asset to Moderna, allowing the drug to be commercialized more efficiently (and giving Moderna an expanded presence in the oncology sector).
Considering licensing your drug? Read on to learn the benefits and why you should consider it as part of your commercialization strategy. (And if you want more tactical help beyond this article, download our licensing checklist - more info at the bottom of this page.)
1. Accelerated Market Entry
Bringing a drug from concept to market is a complicated and resource-intensive process. By licensing your drug to a partner with established market presence, you can leverage their distribution networks, regulatory expertise, and marketing prowess.
Like the Moderna example shared above, this can dramatically accelerate the drug's journey to market, allowing you to capture a share of the revenue sooner.
2. Access to Expertise
Pharmaceutical licensing often involves partnering with organizations that possess specialized knowledge and experience in specific therapeutic areas.
Whether the area is immunology or gene therapy or metabolism (you name it), such a collaboration grants you access to a pool of experts who can contribute valuable insights and guidance, enabling you to navigate the intricacies of drug development, clinical trials, and regulatory hurdles more efficiently.
3. Mitigated Financial Risk
As you well know, developing a drug from scratch demands significant financial investment. By licensing your asset, you can share the financial burden with your partner. This can help manage risk, as the costs of development, manufacturing, and marketing are distributed between both parties.
Licensing agreements can also include milestone-based payments, ensuring that you receive compensation as the drug progresses through various development stages.
For example, in the Moderna/CytomX Therapeutics example we spoke about earlier, Moderna will pay $35 million upfront and a $5 million research investment, while CytomX will receive up to $1.2 billion total depending on the milestones achieved.
4. Global Market Penetration
Another major benefit of licensing is that it allows you to tap into markets that might be otherwise challenging to enter due to regional nuances, regulations, or cultural differences.
Partnerships with local or regional pharmaceutical companies can grant you access to these markets through their established networks and understanding of local dynamics.
5. Diversification of Revenue Streams
Through licensing agreements, you can diversify your revenue streams by receiving upfront payments, milestone payments, royalties, or a combination of these. This financial flexibility can be crucial for sustaining your organization's growth and supporting the advancement of other promising drug candidates.
Thinking about licensing your drug? Get our free checklist!
To help you navigate the complex licensing process, we created a free licensing checklist for life science companies. Download it to learn what criteria you need to successfully license your pharma or biotech asset in global markets.
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Sosna + Co is a boutique, outsourced business development partner for the life sciences. From M&A advisory and licensing deals with Fortune 500 companies to uncovering the potential of savvy, new start-ups, the principal is simple: we work meticulously to uncover new opportunities that grow your business. Contact us today to learn more.
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