In-Out licensing is a relatively new term for the pharmaceutical industry. However, it is gaining popularity because of the associated benefits in the local and global market. As a result, many Indian pharmaceutical companies have turned towards in-out-licensing and are looking to cash in on prevailing global conditions to accelerate their growth. Here, we will discuss this phenomenon in detail to understand the pros and cons of these licensing types.
Understanding of the terms: In-licensing and Out-licensing
What is In-licensing:
In-licensing creates a contract that allows one firm to provide capital to another firm for the development and launch process, thus shouldering the financial responsibility. This process is a boon for small biopharma start-ups as it helps get their drug off the ground.
What is Out-licensing:
Out–licensing is more focused on opening up the delivery pipeline to assist you with getting your drug “out the door”. Out-licensing is about finding a partnership that will help identify your target market and assist you in getting your product into the right hands. This process may also include working with marketing firms or legal firms.
Challenges and Risks associated with licensing:
Although it gives an excellent opportunity for the companies to expand their business through licensing, it is critical to understand the need of the market and the clinical profile of the drugs and risks associated with licensing. Two parties are sharing profits in these cases, and hence licensing may be less profitable in some cases. Licensee can sell a similar product to other companies once the contract agreement is over or enter the market on its own as a competitor. After licensing, the company’s performance also depends on various factors such as their speed, uncertainties, working pattern differences, financial stability etc.
Out-licensing or licensing agreements put the licensor, innovator, or seller at risk of losing complete or partial rights to the intellectual property, poor marketing strategy and execution, IP theft, and many others.
Critical considerations for choosing the right partner for licensing:
Following are some important considerations for choosing the right partner for licensing.
Understanding the needs:
The company needs to understand the needs of licensing, such as
“Are they looking forward to the latest technologies?”
“Are they interested to see the product at a certain level of development?”
Once these questions are adequately understood, then the company negotiations become easy. After that, they can present their expectations to the licensing companies smoothly.
There will be many contact points between the partnering companies, so it is vital to establish a safe and secure communication channel. Any confusion in the communication may lead to the delay of the processes involved and affect the product development.
Focusing on the business agreements:
Licensing is a long-term agreement. Hence, it is essential that the license agreement clearly defines the rights and responsibilities of the parties so that one can resolve any future disagreements quickly and efficiently. It is also about how much information transfer will be there between both parties. Therefore, instead of just signing the deal, look at all the dynamics and choose a trustworthy, cooperative and helpful partner.
Advantages of In-licensing:
When the company invests in new drug development, the cost is very high, and data production is a tedious process for a new drug. In contrast, in-licensing is beneficial for cost reduction, and the risk involved is less because of promising clinical results. Moreover, licenses allow drug companies to purchase the rights for experimental drugs without taking on another company’s baggage, including unwanted technologies resulting in significant appeal for pharmaceutical industries for in-licensing.
Advantages of Out-licensing:
Even with good marketing strategies, not all companies reach out to their potential customers. Pharmaceutical companies can use Out-licensing to their advantage to reach out to the extensive market and gain desired profit. In addition, licensors reduce the financial burden of manufacturing, production, or commercialisation of patents and create a source of passive income and revenue through Out-licensing. Thus, it is beneficial for both parties.
Why is a paradigm shift necessary for licensing of products and facilities?
In light of the industry changes, pharmaceutical companies should change their mindset and reconsider their investment plans to explore vast opportunities for licensing.
Sometimes, the company needs additional resources to conduct research and development and their established business to enter a new market. Hence, in-licensing can help companies with their innovation and clinical studies for their growth.
Out-licensing is helpful to get the product into the right hands and engage companies for effective marketing strategies. Moreover, it gives access to technologies to reach the market faster for the new products.
In recent years, In-Out licensing has gained much popularity, and the Indian pharmaceutical companies have realised that licensing is one of the ways forward. Licensing is associated with boons more than banes, but companies entering into such an agreement should consider all aspects discussed here to avoid future risks.