New Products are Drivers
So, what has caused partnering to thrive continuously over the last five years or more? The answer lies in low R&D productivity in big pharma plus flattening revenues with both factors necessitating new products to refresh the pipelines and growth rates of big pharma as well as big biotech.
For example, approximately $50 billion worth of drug sales from 2003 will lose patent protection in 20042007. Drug companies of all sizes must replace this $50 billion hole from their own pipelines or from the outside, i.e., by inward partnering.
This need for new products has created a frenzied rush to do partnering and has caused big pharma to agree to transactional components, never before possible, such as granting co-promotion rights to the smaller and ambitious innovator company or just doing a regional transaction, for example, with just Japan or Europe, for product rights, instead of a global deal.
While the focus has understandably been on late stage products to refresh revenues more quickly, partnering at all stages of development is up significantly. Many Phase III products have been recently fished out of the market, so fewer late-stage deals will be done in the near future.
Despite spending large amounts on discovery, Big pharma is now less successful in discovering its own drugs than ever before. Drugs discovered in-house now represent less than 50% of the total drug revenue and the large majority of blockbusters, those with sales greater than $1 billion, were licensed-in, suggesting that the motivation for the current strong activity and interest in partnering will continue for some time.