The secret to licensing success is to have your plan in place years in advance. Companies that achieve the best financial and patient outcomes consider business development strategy as early as possible, on Day 1 of the company, before capital investment occurs and again as pipeline decisions need to be made.
Building an understanding of how your science fits the market of potential partners allows you to navigate early conversations with grace and reduced risk, to inform critical conversations that guide the future of the company, and to architect a future where preferred outcomes can be achieved financially and commercially.
1) Who are the potential buyers for this asset, and how many of them are there?
2) What can we expect these potential buyers to pay and at what phase of development?
3) Will it be possible to drive a competitive deal cycle, or will we have little leverage to command time and price for this asset?
4) Does the realistic timing and financials for this deal fit our company goals?
The purpose of asking these questions is to ensure that when the company does go to license, the market will be there and the company will be able to deploy the resulting upfront and milestone payments towards new program development.
If the answers to these foundational business development questions are not positive, management may decide it’s best to invest in a different program, one in which the company and its stakeholders can be more confident that a transaction will occur at an acceptable time and value. This prioritization exercise is particularly helpful at companies who have many scientifically promising early-stage programs to choose from, such as those with high-output platform technologies. For a case example, click here.
Alternatively, management may prefer to go ahead with an investment even when the market situation is difficult. This may be the case at companies working with just one or a few promising assets that don’t fit well with buyers existing strategy, and/or where buyers cannot easily appreciate the science. With clarity into the market situation and thoughtful execution, difficult market situations can be overcome and the company can be very successful.
Not every company does or is able to engage this best practice. If you are reading this, you can probably think of cases where companies failed to sufficiently evaluate partnering appetite for their product and experienced distress. At times, even very experienced company teams overestimate the appeal of a product that they are excited about. The key is to begin evaluating the market and planning licensing strategy as soon as possible. The earlier a company comes to appreciate its situation with clear eyes, the easier it will be to develop and execute a sophisticated licensing strategy that can overcome market challenges.
Early and thoughtful evaluation of a program’s transaction prospects de-risks investment and influences a company’s overall value. When a product’s attractiveness to the partnering market is well understood at the outset, a licensing strategy can be put in place that fits the company’s goals; these typically include maximizing deal value, closing on time, increasing confidence that the product will be developed successfully, and reaching patients globally.
Click here for a further case study on how to apply licensing insights to influence investor confidence and company value as an aspect of venture financing..
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