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Executive Summary

PRODUCT EXCHANGES ARE BECOMING QUID PRO QUO FOR LICENSING agreements in the drug industry, J&J VP-Special Projects George Poos indicated in a speech to a Robert S. First Inc. strategic planning conference on April 9. "Some form of product exchange is becoming more and more usual, particularly among the research-based multinatls.," Poos said. "Efforts are made to find good fits of technology with marketing capability in various territories. Rights for the licensor to co-market in a given territory after a period of time are usually secured." Poos maintained that a full R&D pipeline of in-house projects is the most important criteria for success in finding candidates to license to another company. "Productive innovators are in the driver's seat," Poos said. "They can often use 'back-up compounds' (relatives of the lead compound) to negotiate for promising products in therapeutic areas where their research has been unproductive or that they have not been able to enter." Poos emphasized that "although it is clear that in-licensing is a very effective means of supplementing internal innovation, it is also apparent that effective internal innovation is necessary to support in-licensing." In response to a question about the trends in the financial terms of licensing deals, Poos said he sees a movement towards less downpayment by the firm acquiring rights to a product. Instead, Poos said their is more interest by the company selling the rights in larger royalty percentages. The licensor, Poos said, wants to see more commitment to a development and marketing effort for the product.

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