The Evolution of Alliance Structure in the Biopharmaceutical Industry (1978-2008)
Abstract: Using a unique dataset containing 398 technology commercialization agreements signed between 1978 & 2008 that involve the transfer of U.S. marketing rights to 866 identifiable products, this paper analyzes how the structure of technology commercialization agreements between biotech and pharmaceutical firms has evolved since the pioneering Genentech/Lilly alliance was signed in 1978. Many empirical researchers have used biotech alliances to test theories in economics, and strategic management. However, that literature largely ignores how alliance structure may have changed as industry norms have evolved over time. We present evidence that while traditionally the biotech firm licensed all the rights to perform the commercialization activities (i.e., clinical development, marketing, and distribution) to the pharmaceutical firm in exchange for financial payments, over time biotech firms have become increasingly more integrated into the commercialization activities of the alliance product through Co-Development and Co-Promotion arrangements. At the same time, the pharmaceutical firm has become less likely to retain an Equity stake or enter an equity-based Joint Venture. We argue that this trend is related to the demand from public financial markets, and particularly a preference for full integrated, product-based firms over ‘platform’ or licensing-based firms, which we attribute to the informational problems that public equity investors face in evaluating technology.
