The current challenge for all the pharmaceutical companies is a lack of innovations. Market evaluation of the pharmaceutical company is based on the 3 key pillars: return on capital employed (ROCE), growth of revenue and composition of pipeline. Most experts agree in the opinion that the last one is the most important evaluation factor. The company can have no revenue, negative ROCE but high enterprise value only based on the promising pipeline and future power of innovations. This is the current reality of pharmaceutical market.

How pharmaceutical companies do survive in the deadly rivalry for innovations? Only 2 basic models are still in practice - in house development and external innovations. If the 1st one is mostly about inhouse R&D scientific work, the 2nd approach is all about company excellence in BD&L activities and capabilities of the company to attract external innovations via licensing, co-development and M&A deals.

What should be strategic priority for the pharmaceutical company? The answer is quite simple taking into consideration the fact that 7 products out of 10 top selling pharmaceutical products in the world – products either licensed or acquired.

Global pharmaceutical companies spend fortune on the inhouse R&D. E.g. pharmaceutical business invested about 158$ billion or 15-17% of Revenue in 2017. At the same time, return on investment from R&D investments shows declining tendency from 10,2% in 2010 t0 3,7% in 2016. Thus, the future shift from in house R&D to the more focused and effective BD&L and M&A approach is quite evident. This strategic shift is changing the balance of power in the industry. For sure, the business scale will continue to play one of the most important roles but there will be a hope for middle sized companies to jump to the top. BD&L is not about scale of business but rather talents, dare and winning business culture.

If 10 years ago BD&L in pharmaceutical business was strongly considered to be prerogative of global deals, discussed and managed in the HQs of global companies, now this paradigm of best practice is completely changed. Today we can observe the global deal only for early stage pharmaceutical assets and presumably in M&A deals. This change is reasoned by increasingly ineffective inhouse R&D and thus higher value of pharmaceutical assets. If before we could see the BD&L deal with worldwide rights, but the real business was concentrated only in US, Japan and biggest EU markets and at the same time the other markets were left neglected as not perspective, now pharmaceutical companies can’t afford such an unthrifty approach.

Pharmaceutical companies pursue distinctive region by region late stage partnering approach based on the ranking, position, sales and marketing infrastructure, BD&L and Alliance experience. Slightly increasing administration costs and BD&L FTEs are justified by higher synergy value from the right choice of the partner and effective collaboration.