While many royalty and milestone-based licensing and development deals lead to successful drug development and commercialization,
the question always remains whether the risks and rewards allocated on the front end of the deal achieve a balanced exchange
of value on the back end — one that best serves the interests of both parties and the long-term health of the $500 billion
pharmaceutical industry. Now may be the time for biotech companies to grab a larger slice of the economic pie by participating
in profits derived from the commercialization of their intellectual property and developed products. Now, too, may be the
time for Big Pharma to encourage biotech companies to underwrite a portion of product development costs.
Of course, the ability of biotech companies to share costs and profits requires that they have the capital to invest in product
development. The present environment is very encouraging and bodes well for a wider adoption of cost sharing and profit sharing
deals between large pharmaceutical firms and biotech companies. According to a healthcare report by Jefferies & Co., private
biotech companies raised nearly $4.2 billion in 2004, and public biotech companies raised $4.1 billion, up almost 50 percent
in each category over 2003.1
In the absence of the pharmaceutical industry more widely embracing "cost and profit sharing deals" over "royalty and milestone
deals" in drug development and commercialization, some in Big Pharma may conclude that industry demand for new products has
driven or will drive "royalty and milestone deals" too high. If that occurs, more large pharmaceutical firms may seek to purchase
entire biotech companies. M
1. Abrams, SL. Searching for a Cure. Investment Dealers Digest. 2005 March 28.
2. Wyeth Reports Results for the 2004 Fourth Quarter and Full Year [press release]. Madison, NJ: Wyeth. 2005 January 31.
Available at: http://
3. Product Development and Commercialization Agreement, June 11, 2003, between Pozen, Inc and Glaxo Group Ltd (dba GlaxoSmithKline).
Filed with Securities and Exchange Commission. 2003 August 12, as Exhibit 10.1 to Pozen, Inc's Form 10-Q.
4. Headache News, 2000, July. Nearly 28 million Americans have migraine, and one in four US households have at least one migraine sufferer.
American Council for Headache Education Website. Available at: http://
5. Therapeutic programs. Alnylam Pharmaceuticals Website.Available at http://
6. Collaboration and License Agreement, 2004 June 29, between Merck & Co, Inc and Alnylam Pharmaceuticals, Inc. Filed with
the Securities and Exchange Commission, 2004 August 12, as Exhibit 10.1 to Alnylam's Form 10-Q.
7. More Americans Facing Blindness Than Ever Before [press release]. Washington, DC: National Institutes of Health — National
Eye Institute; 2002 March 20. Available at: http://
Jeff Stewart, J.D., is president of the Georgia Nanotechnology Alliance, Inc. and a partner who chairs the Mergers & Acquisitions
/ Strategic Alliances Practice and co-chairs the Nano-Biotechnology Practice at Arnall Golden Gregory LLP, 171 17th Street
NW, Suite 2100, Atlanta, Georgia 30363, 404.873.8670, firstname.lastname@example.org