Determinants of Licensing Decisions: A Study of Pharmaceutical Industry
In “Business, Economy and Environment: The New Normal”, Eds. Shamik Shome, Parag Rijwani and Deepak Danak, Himalaya Publishing House Pvt. Ltd., Mumbai for Institute of Management, Nirma University, Ahmedabad, Jan. 2019, ISBN 978-93-5299-653-7 pp. 242-258
This paper was presented at the 22nd Nirma International Conference on Management (NICOM 2019) on the theme of “Business, Economy and Environment: The New Normal” organized by the Institute of Management, Nirma University (IMNU), Ahmedabad, India during Jan. 17-19, 2019.
17 Pages Posted: 6 Mar 2019
Date Written: January 17, 2019
There are several determinants that could have an effect on in-licensing decisions by a pharmaceutical or biotech firm. This work studies over 200 licensing deals involving big pharma companies in the period (2011 – 2015) and identifies different factors that could play a role in licensing deals, and classifies these determinants into direct determinants and indirect determinants. The direct determinants are defined as determinants that are directly attributable to the molecule. The direct determinants could be related to the indications, type of molecule, effectiveness, safety dose, presentation, shelf-life, treatment cost, target clinicians, availability, owner, stage of development, patent life, product differentiation, number of competitors offering similar product, or the probability of regulatory and technical success. The indirect determinants include the management, type of organization, size of organization, location of the company, quality of scientific publications, scientific advisory board, and current reputation in a certain therapeutic area, stage of deal, and type of license sought, valuation approach, or up-fronts sought. While direct determinants are widely believed to be directly related to the licensing decisions, we find the indirect determinants also play a significant role in these decisions. This paper studies the recent licensing deals and finds that both internal and indirect determinants need to be focused in licensing efforts.
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Keywords: pharmaceutical industry, licensing decisions, drug discovery & development, therapeutic area
JEL Classification: D46, F2, F23, F29, L24, L51, L65, O32, O33, O34, O38
Suggested Citation: Suggested Citation