Percentage of Company Deals by Development Phase
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A Time and a Place
Analyzed by phase of development, the licensing field shows important differences among players. Amgen banks on early-stage
deals—more than 80 percent of its agreements are in preclinical. Similarly, Merck's "back to the science" strategy places
more than 70 percent of its licensed portfolio in early-stage development. In contrast, Schering Plough, Boehringer Ingelheim,
and Schering AG remain focused on late-stage deals. (See "Percentage of Company Deals by Development Phase,".)
Deals by Therapeutic Area
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Deal-making activity varies widely from one therapeutic area to another, but the oncology sector has seen the greatest proportion
of licensing deals over the last 15 years, reflecting the specialist nature of the oncology market, the diverse array of specific
indications, and the large number of biotechs focusing on this area. (See "Deals by Therapeutic Area.") Genentech and Roche's
Rituxan (rituximab)—even with its narrow indication profile—exemplifies the commercial potential for targeted oncology products.
In contrast, the cardiovascular segment has not experienced licensing activity proportional to its size—probably because companies
have historically approached it with internal R&D resources. But promising candidates can produce high value on the licensing
front (Lipitor is a prime example), and biologics are beginning to make inroads into the cardiovascular and metabolism areas.
The growth in combination treatments—hypertension and diabetes, to name two—might necessitate the emergence of licensed product
"combo platters."
Study Methodology
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Predictions and Questions
Licensing deals, along with most other alliances, have a relatively high failure rate—an average 37 percent are successful.
Therapeutic focus, strategic fit, development phase, and even uniqueness of technology determine the success or failure rate
and return on investment. More than 60 percent of products licensed in Phase III or pre-regulatory stages actually reach the
market. This drops to 20 percent for Phase I and II compounds. In spite of that, licensing will likely continue to be the
key development strategy for many large pharma companies. Facing this reality, major players will have to consider their strategies:
- Will Lilly continue to be the most widely extended partner, or will it focus on its key therapeutic areas (CNS and metabolism)?
- GSK manages the most deals, but with less success than its peer group. Can GSK's Centers of Excellence for Drug Discovery
strategy gain momentum in licensing?
- Merck has entered the fray this year with a dramatic increase in licensing deals. Does 2004 mark a change in long-term strategy?
- Can Pfizer remain the leader in generating revenue from licensed products? With a goal of 50 percent in-licensed product
revenue and 50 percent internally developed product revenue, will Pfizer's R&D program be able to do as well as its licensing
group?
- As the newest top 20 pharma company, should Amgen keep pace on the licensing front? While Big Pharma licenses biologics,
Amgen has licensed and developed a small molecule—Sensipar (cinacalcet). Will it be the in-licenser of choice for companies
unable to develop their own small molecules?
Individual strategies are still evolving, but the market will grow as long as deals deliver revenues. Successful companies
will need to focus not only on their own approach to deal making but also that of their competitors. Keeping deals close may
help keep business enemies further away.
Jim Hall is president of the life sciences practice of the consulting firm Wood Mackenzie’s Boston office. He can be reached at jim.hall@woodmac.com
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