Never stopped licensing

Licensing deals have become a mainstay of the Indian pharma scenario. Companies have been licensing molecules and brands for quite sometime now. What is it that makes this alliance popular in the pharma fraternity in India and across the globe? Sachin Jagdale finds out

"Issues like term, trademark usage, territory, exclusivity, royalty, signing fees, renewal might stand out as precursors of conflicts" - Alok Saxena Director-International Elder Pharmaceuticals

There is always a flavour of the season, even in business. For instance, the pharma industry till date has witnessed a spate of high profile mergers, most talked about acquisitions and a couple of joint ventures. Along with these, pharmacos have been consistently and continuously striking licensing deals. Though not as tedious as the M&As, this type of strategic alliance is becoming a main feature of Indian pharma scene.

Licensing in and out has emerged as a tool for pharmaceutical companies to make their presence felt in the global market. It involves lesser risk and relatively lesser investment in terms of time and money, in contrast to an M&A. As a result, these partnerships have become a common phenomenon in the pharmaceutical and biotechnology industries. However, they are not as easy to execute, as they might seem. There could be various issues that might result in the undoing of the partnership. "Issues like term, trademark usage, territory, exclusivity, royalty, signing fees, renewal, etc, might stand out as the precursors of conflicts if not clearly stated and understood by both the partners at the beginning of the arrangement," explains Alok Saxena, Director International, Elder Pharma-ceuticals. One can never rule out the chances of conflict. The change of mind by any of the partners could also create a rift in the alliance. So there should be a close vigil on the proceedings of the alliance to protect its basic purpose. Mismanaged expectations are always harmful while going hand in hand. This could in turn undermine the alliance.

Thus with a view to ensure success, the management teams from both the sides should lay down the future plans in advance. These future plans would include possible pros and cons of the alliance required solutions. Written agreements are necessary from the legal perspective. Relevant use of intellectual property is also crucial as it avoids invasion in to any of the original product. A person with requisite knowledge of legal issues licensing deals will be the important factor in keeping the alliance intact.

Today more and more companies are opting for licensing deals. While elaborating on this trend, Saxena says, "Licensing is a cheaper and less risky way of securing products rather buying companies or doing R&D, which is far more expensive. As product pipelines are drying, in-licensing products or technology is the fastest route to new products. Also, companies looking to increase their presence in the existing markets or enter new markets find it easy to go for licensing arrangements." Many small and mid-sized pharma companies (which may not have the financial muscle power to carry on from the early stage research up to the last stage), license out the molecule to large companies while retaining the marketing rights for favourable markets for themselves.

editorial.ep@expressindia.com
(With inputs from Nandini Patwardhan)