Home > Topics > Dealmaking and Marketing Technology to Product-Development Partners > Biotechnology and Pharmaceutical Commercialization Alliances: Their Structure and Implications for University Technology Transfer Offices > Editor's Summary, Implications and Best Practices

Over the last few decades, the biotechnology and pharmaceutical industries have created a system in which interdependent players buy, sell, and trade technologies, intellectual property, and services, thereby sharing both risks and rewards in the uncertain game of product innovation. Development partners form so-called “alliances,” which they formalize with alliance agreements. The four characteristics of an alliance that generally define the allocation of value between an originator and a commercial partner are:

1. its stage of development,
2. the role retained by the licensor in product supply or other ongoing activities,
3. the size of the market opportunity, and
4. the scope of the market granted to the development partner under the alliance agreement.

Because biotechnology companies have become so specialized, it is no longer necessary, or even possible, for any one company to be involved in every stage of the R&D process. Up to half of the product candidates in pharmaceutical companies’ R&D pipelines originate from elsewhere, and 60 to 80 percent of the leading therapeutics on the market were developed or distributed through some form of alliance.

Universities and research institutes are a significant source of early-stage technologies, drug leads, and occasionally more mature technologies. A biotechnology company with the appropriate business model is most likely to find early-stage technologies and drug leads attractive. Once smaller biotechnology companies have developed technologies and drugs, they will probably need to enter into alliances with larger pharmaceutical companies in order to conduct clinical trials on, commercialize, and market those products. A university developing a more mature technology might ally itself directly with larger pharmaceutical companies, a situation that is usually more profitable to the university. Empirical evidence shows that the more mature the technology is when an alliance agreement is assigned, the more profitable that technology is for the technology provider.

The chapter explains some of the most important terms found in biotechnology alliance agreements: “fixed fees,” “reimbursement of expenses,” “development milestones,” “equity investments,” “royalties,” as well as terms for other, more specialized, types of post-commercialization payments. The chapter then goes on to illustrate these principals. Four specific alliances entered into at different stages of development are detailed as case studies.

No matter whether a university wants to join a commercialization alliance itself or license an innovation to a biotechnology company that is allied to other companies, it is essential for university technology transfer offices to understand and influence the terms of the alliance agreements in order to protect the value of their intellectual property.

Key Implications and Best Practices

Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.

For Government Policymakers

• Health and agricultural innovations can only move down the innovation pipeline if there is an integrated system in place that involves both the public and private sectors. Legislature that encourages the development of such a pipeline will encourage the growth of a biotechnology industry.
• The robust market for technologies, intellectual property, and market services that has evolved over the last few decades in biotechnology and pharmaceutical industries (primarily in developed countries) likely represents the most efficient way for society to spend its limited resources on discovering and testing new health compounds.
• No industry should rely solely on the efforts of public research institutions or fully integrated private-sector companies. Under those circumstances, no specialization or competition would be possible.
• Support laws and policies that support alliance agreements.
• Biotechnology is a fairly risky field. Governments can help lessen this risk by supporting research in public-sector institutions.

For Senior Management (university president, R&D manager, etc)

• Networking is important, and the technology transfer office is an invaluable part of your networking strategy.
• Regardless of whether a university wants to join a commercialization alliance itself or license an innovation to a biotechnology company that is allied to other companies, it is essential for university technology transfer offices to understand and influence the terms of the alliance agreements in order to protect the value of their intellectual property.

For Scientists

• Collaborative R&D, especially collaborations with private-sector companies, can create relationships that will be helpful in later endeavors.

For Technology Transfer Officers

• Your office ought to engage in and encourage networking.
• Your office ought to understand, and hopefully influence, any alliances that your institution joins, so that you can protect the value of your intellectual property.
• The four characteristics of an alliance that generally define the allocation of value between an originator and a commercial partner are: its stage of development, the role retained by the licensor in product supply or other ongoing activities, the size of the market opportunity, and the scope of the market granted to the development partner under the alliance agreement.
• A biotechnology company with the appropriate business model is most likely to find early-stage technologies and drug leads attractive. Once smaller biotechnology companies have developed technologies and drugs, they will probably need to enter into alliances with larger pharmaceutical companies in order to conduct clinical trials on, commercialize, and market those products.
• A university developing a more mature technology may wish to deal directly with a larger pharmaceutical company, and thereby make more of a profit on its technology. Typically, the more mature a technology is when an alliance agreement is made, the greater the profit of the technology provider.
• Your office is a gateway between your institution’s researchers and private-sector companies that can commercialize your researchers’ inventions.
• It is important to both remain faithful to your institution’s mission and make sure that this mission is fulfilled in the most efficient and cost-effective way.