Biomedical Engineering Reference
In-Depth Information
in-depth knowledge and the willingness to tap into risky cutting-edge research that
comprises biotech fi rms' chief contribution to drug innovation. In fact, in some
cases, licensing out newly developed technologies may be their only viable route to
market, as the majority have no signifi cant sales structure or marketing capacity in
place. Thus, licensing fees may constitute their main source of revenue.
As biotech companies assume the role of renowned drivers and suppliers of inno-
vation, those that succeed can enjoy a rather favorable business outlook. There is
empirical evidence that fi rms investing more in research tend to obtain more licens-
ing deals. In turn, having a wide portfolio of licensing deals translates into more
new licensing deals (Wuyts and Dutta
2008
). Thus, investment in focused R&D
efforts can create a self-perpetuating momentum that bolsters fi rm viability and
brings in sustainable revenue streams from licensing. Increased innovation output,
learning effects, the accumulation of valuable R&D stock, or a growing reputation
for creativity and novelty can explain these linkages.
Dedicated biotech fi rms investing in narrowly focused drug research can fi nd
themselves on a lucrative spiral of growth.
18
Developing specialty drugs for
niche
markets can be profi table as no large-scale marketing efforts are involved, and com-
petitor entry is less likely due to the small market potential. There are indications
that the stock market, too, regards small fi rms of a sharp research focus (i.e., those
with small research portfolios) more favorably by boosting their stock prices, essen-
tially acknowledging the greater likelihood that they can be successful if they sus-
tain a narrow specialization (Grewal et al.
2008
).
Still, too narrow a specialization in innovation can become risky as economies of
scope might be hard to come by. Moreover, overreliance on partnerships and exces-
sive dependence on collaboration, necessary to overcome the constraints of narrow
specialization, can turn precarious. Disagreements between partners may occur,
leading to delays. The incurred R&D costs can be diffi cult to allocate and recoup.
A more detailed examination of licensing dynamics and their impact on perfor-
mance is necessary to further elucidate the associated mechanisms, the drivers and
the moderators, the boundary conditions and the most likely process outcomes
under different conditions.
Generally, small fi rms would fi nd large fi rms attractive to partner with because of
their considerable resources and intangible assets. Yet, in a partnership, large fi rms
will have to share the eventual market proceeds with another fi rm. If small fi rms can
benefi t from the immediate access to funding, downstream assets, and experience
that alliances with large pharmaceutical fi rms make possible, what are the advan-
tages from in-licensing agreements and other forms of cooperation for the large
fi rms?
18
Prior to its acquisition by Roche in 2009, Genentech, the company considered to be the fi rst
biotech fi rm, remained focused almost exclusively on large molecules, using partnerships to aug-
ment its core research and to increase its access to capital. Other companies have also chosen to
restrict their R&D to few carefully selected areas, e.g., Biogen Idec Inc. is specializing in drugs for
neurological disorders, autoimmune disorders, and cancer.
Search WWH ::
Custom Search