LICENSE OR ACQUIRE
Pharmaceutical companies requiring technology improvements may also consider company acquisition. In 2006, for example, Merck
acquired GlycoFi for $400 million to access its yeast glycoengineering and optimization technology. GlycoFi's technology is
designed to produce therapeutic proteins more effectively in Pichia pastoris (yeast) instead of Chinese hamster ovaries (CHO) or NS0 cells, offering improved speed and quality.
Such outright technology acquisitions can be cleaner than technology deals that involve some kind of risk–reward sharing over
time, where both the product developer and the innovator company share the risk if product sales do not meet expectations.
Another concern with licensing and royalties is "royalty stacking." Though more common in drug product licensing, it is one
of the risks technology adopters face. Royalty stacking is caused when multiple overlapping patents compel companies to obtain
multiple licenses. Pharmaceutical companies are increasingly hesitant to form alliances with biotechnology companies if potential
royalty stacking issues exist.
Information on alternative expression systems and genetic engineering technologies is readily available.1 Most technologies can be licensed at reasonable fees for evaluation purposes, and most are available for commercial license
on a nonexclusive basis. Some expression systems may be licensed exclusively. This generally costs more than taking a nonexclusive
license, but can provide insurance against your product competing with another similar one.
Although technology licensing increases costs through licensing fees and royalties based on annual product revenue and sales,
it is often the only prudent option for most organizations. Licensing is the only legal and fair method of using technology
developed by others, particularly if covered by patents. Most organizations, whether biopharmaceutical companies, CROs, CMOs,
universities, or government laboratories, seek to license out any relevant technology that they have invented and patented
to get some return on their investment.
Licensor organizations generally will work with companies to tailor licenses to their needs. This may involve various combinations
of upfront and postmarketing fee arrangements. For example, a small company may prefer to pay a lower upfront licensing fee
in return for somewhat higher royalty rates on eventually product sales. Those confident that a technology will be used to
manufacture one or more products may prefer to pay higher upfront fees with lower back-end royalty rates. For major products,
including blockbusters, this approach can save hundreds of millions over the course of a product's commercial life.
Many technology sources are receptive to providing a limited license for access and use of their technology for in-house evaluation
purposes. Some companies and noncommercial organizations with expression systems in development may be eager to collaborate
with companies that will actually use their technology for product manufacture.
With the pharmaceutical industry being very conservative, and with companies and regulators having distinct preferences for
proven, known technologies, companies among the first to actually commercially manufacture a product using a newer technology
can provide its developer with real-world cost-of-manufacture data and the references needed for wider commercialization of
the new technologies. Thus, those among the first to license a new expression system or related genetic engineering technology
can often receive better licensing terms, although the risk of failure or problems obviously increases with being among the
Unlike licensing of actual product candidates, most licensing of process technology will be done in the relatively early stages
of product development. Because a large number of technologies is available from many sources, there is more competition.
This can tend to keep licensing terms down and increase the predictability of licensing terms and royalties associated with
manufacturing technologies, compared to licensing of product candidates. Thus, in comparison with licensing of candidate products,
licensing of manufacturing technologies tends to be more competitive and predictable in terms of fees and royalties.
ARE NEWER TECHNOLOGIES WORTH THE COST?
For an industry based on innovation, newer manufacturing technologies can be vital for a company's survival, and thus worth
the expense, time, and effort involved. Older technologies have the advantages of predictability and regulatory acceptance.
When considering that many of these technologies entail lost opportunities as we move into the future, older technologies
may find themselves increasingly limited by their performance.
Eric S. Langer is president and managing partner at BioPlan Associates, Inc., Rockville, MD. He is also the editor of Advances in Large-scale Biopharmaceutical Manufacturing and Scale-up Production, and a member of BioPharm International's Editorial Advisorial Board. 301.921.5979, email@example.com
1. Rader R. Biopharmaceutical expression systems and genetic engineering technologies. Rockville MD: BioPlan Associates,
2. Sixth annual report and survey of biopharmaceutical manufacturing, 2008–2009. Rockville MD: BioPlan Associates, Inc.;2009.