Drug Pipelines and Pharmaceutical Licensing

Junichi Nishimura Hitotsubashi University, Office of Pharmaceutical Industry Research
Yosuke Okada Hitotsubashi University, Office of Pharmaceutical Industry Research
Toshiro Takatori Office of Pharmaceutical Industry Research

No.45 : April 2009

We examine how drug pipelines (drug candidates and post-market product lines) affect pharmaceutical licenses, controlling firm size, diversity, and competition. The data collected comprises 347 license-outs and 604 license-ins closed by 54 Japanese pharmaceutical companies between 1997 and 2007.

We classify licensing contracts into four stages: (i) drug discovery, (ii) early development, (iii) late development, and (iv) marketing. Estimates from random effect IV models reveal that fewer drug candidates in either late development or marketing stages accelerate license-ins in various stages.

On the other hand, richer pipelines in any stage facilitate license-outs in that stage. In addition, theoretical implications are discussed.

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