Wrt AMG's comment..."Really goes to show how hungry these vultures are now, patent expiry should see many success stories from little biotech companies. 2011 Will be the year of the Speculative biotech's. Companies with innovations that were never heard of by the big pharma's may now be a large blip on the radar, this should give the biotech sector a big shot in the arm. Exciting stuff."
I agree. The following link gives an overview of the biotech licensing process (but is probably not particularly useful to fast-moving consumer products). In fact given abdm/AMG's comments on the 'new age' of out-licensing in the future, it may be an understatement, for biotech licensing.
Signing fees and up-front payments allow a licensor to recoup money spent to develop technology; they depend on access to the entire drug delivery platform. Signing fees are usually modest for basic or undeveloped technology and nonexclusive licensing. Many biotechnology inventions require substantial development or must be combined with other technologies to create a product (e.g. delivery devices). Therefore, a common approach is to backload the fees to keep the signing fee modest but allow other fees to increase as the technology becomes more promising.
Milestone or benchmark payments are used to compensate the licensor when an invention demonstrates value that was not yet proven at the time of licensing. Milestone payments are tied to such contingencies as filing an investigational new drug application (IND) and beginning phase I, II, and III clinical trials as well as to stages that indicate a potential for success �such as when filing a new drug or product license application (NDA or PLA) or receiving approval to market. They can offset nonreimbursed costs that remain with the license and are usually back-end loaded. Milestone payments are critical revenue generators and are likely to be high � typically $2�15 million for early-stage molecules and more than $50 million for later-stage molecules. Penalties for failure to achieve milestones can be financial and/or include a right of termination.
Royalties are due only if a sale is made. Royalties are defined usually as percentage of net sales, normally at 1�18% for many drug delivery technologies. However, a trend for drug delivery companies is in using their technology to develop molecules, which can lead to higher royalties. It is extremely difficult to estimate royalty rates for biotechnology inventions because the final product is often unknown at the time of licensing. In general, a therapeutic carries a higher royalty than a research tool such as a screening assay. Therefore, modest royalty rates (e.g. 6%) are the norm (5).
bluebush
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