Licensing Fees on the Rise
Executive Summary
Never so much as in the past few years have pharmaceutical in-licensers been willing to pay high licensing fees to access novel drug candidates.
Never so much as in the past few years have pharmaceutical in-licensers been willing to pay high licensing fees to access novel drug candidates. Or so implies an analysis we did on average upfront payments across all phases of development.
Starting in 1995, the cash portion of average upfront payments began to rise dramatically in comparison to the equity side. In previous years, equity represented the overwhelming majority of upfront money. The rise of the cash portion in comparison to equity accompanies a rise in later-stage licensings because high upfront equity payments are a hallmark of broad research collaborations, while high upfront cash payments are typical of straight compound licensing deals. Over half of the deals for 1997 were signed at the clinical stage or later.
As the biotech industry matures, leading to more later-stage compounds available for licensing, potential in-licensers, whose hunger for novel compounds to fill out their pipelines has remained constant, have been consistently paying high front-end licensing fees to access them.
Among the recent deals contributing to the jump in average upfront cash are Roche 's $18 million payment to Agouron Pharmaceuticals Inc. and Japan Tobacco Inc. for HIV treatment Viracept [See Deal].—KR