Why research? Just in-license

Related tags Pharmacology

A new report suggests that pharmaceutical companies reap much
greater rewards from licensing in products than they do in
conducting their own in-house research.

Suggestions that big pharmaceutical companies should abandon drug discovery and concentrate on licensing in compounds from other sources have been backed by a new study.

The report, from Mercer Capital management, suggests that drug majors earn much more cash from an investment of $1 billion (€922m) in licensing deals than they would from spending the same amount on in-house research.

The research suggests that while profit margins on in-house drugs are higher, they generate less cash on average because of higher development costs, according to a report in the Financial Times, which notes that the findings come at a time when pharma companies are spending less on licensing.

According to Mercer​, the cash generated by investing $1 billion every year in in-house discovered compounds is $14 billion, while the return from the same investment in licensing compounds in late-stage (Phase III) clinical trials is $22 billion.

The primary reason for the higher return on licensing deals is that while margins on these products are lower, they can be launched and generate revenues more quickly; in-house developed drugs can take as long as 14 years to reach the market.A decline in R&D productivity affecting the pharmaceutical industries, evidenced by a steady decline in the number of new active substances reaching the market each year, has caused some observers to suggest that companies would be better advised to focus on late-stage drug development, sales and marketing.

Related topics Preclinical Research