Licensing Executives Society (USA & Canada) Reveals Results of Groundbreaking Royalty Rates and Deal Terms Surveys

Results Offer an Inside Look at Deal Dynamics in the Life Sciences/Health Care and Chemicals/Energy/Environmental and Materials Industry Sectors

CHICAGO--(BUSINESS WIRE)--The Licensing Executives Society (U.S.A. and Canada), Inc. today announced the results of two groundbreaking surveys that provide rare industry-specific data on intellectual property (IP) licensing deal terms and royalty rates. The results of the Global BioPharma and Chemicals, Energy, Environmental and Materials (CEEM) Royalty Rates and Deal Terms Surveys will be presented during a special plenary session today at the LES (USA & Canada) Annual Meeting at the Sheraton Chicago, and the final survey reports will be made available exclusively to LES (USA & Canada) members worldwide.

“For example, the report illustrates the impact that other financial components and the stage of technology development can have on a negotiated royalty rate.”

The field of IP commercialization and licensing has seen enormous expansion in recent years and while industry increasingly relies on collaborations and deal-making as part of growth initiatives, there has been a major gap in available data on deals themselves. LES (USA & Canada), in coordination with LESI, has launched a broad-reaching ‘Royalty Rates and Deal Terms Survey’ initiative to address the elusive gaps in industry-specific deals and trends.

“This type of global initiative has never been undertaken before,” said Jim McCarthy, Chair of the LES Global BioPharma Royalty Rates and Deal Terms Survey. “The rare data we’ve gathered through these surveys is not available from other sources and offers a more current perspective on royalty rates and deal terms than the Freedom of Information (FOI) approach allows, which is generally limited to information from public U.S. companies. It will provide members with key information about negotiation trends and deals within their industries.”

Global BioPharma Royalty Rates and Deal Terms Survey

Building upon a hugely successful inaugural survey in 2008, this new survey was expanded globally by the LES (USA & Canada) Life Sciences/Health Care Sector in coordination with the LESI Life Sciences Sector. The survey targeted members in the biotechnology and pharmaceutical industries with international participants representing 19 of its national societies from around the world. The global survey report provides a detailed analysis on fixed royalties, tiered royalties, deal terms, valuation methods, and therapeutic areas.

“Thanks to a joint initiative by LES (USA & Canada) and LESI, this year’s survey includes international companies and deals outside of USA and Canada. This coordinated effort enhanced participation by LES members resulting in a groundbreaking collection of data that offers powerful information and perspectives for IP professionals globally,” said LES (USA & Canada) President Ada Nielsen.

Global BioPharma Survey Respondents

A total of 184 completed surveys were incorporated into the final Global BioPharma Survey Report with over 40% of the reported deals from outside North America. This is a 20% increase in response from 2008. Of those who responded, 39% were from pharmaceutical companies, 23% were from biotech companies, 12% were from academic institutions, 6% were from government, and 20% were from other organizations.

In terms of the deals themselves, 18% were from not-for-profit organizations, 9% were from government, 64% were from operating companies, and 9% were classified as “other.” Of the operating companies, 59% were pharmaceutical and 28% were biotech.

Key BioPharma Deal Statistics

Over 80% of the deals submitted had licenses that included the United States and close to 63% of licenses were considered “Global” in scope. Sixty-one percent of the deals were reported by the licensors and 82% of the deals were categorized as exclusive.

The survey results showed that half of the deals submitted were still in the preclinical stage of development and close to 40% were related to small molecule. Anticancer (Oncology), CNS, and infectious disease deals were the most prevalent therapeutic area types submitted and 62% of the deals represented peak annual sales estimates of greater than $US100 million.

Chemicals, Energy, Environmental and Materials (CEEM) Royalty Rates & Deal Terms Survey

Also released today was a report on the first-of-a-kind survey targeted to businesses and technologies licensed in the CEEM sector. It offers a detailed analysis on fixed percentage and per unit royalties, tiered royalties, financial and non-financial components and valuation methodologies in each deal.

“The report provides a unique industry sector perspective on licensing royalty rates and deal terms not found in other licensing or royalty rate publications,” said David Leathers, CEEM Royalty Rates Committee Chair. “For example, the report illustrates the impact that other financial components and the stage of technology development can have on a negotiated royalty rate.”

CEEM Survey Respondents

Like the Global BioPharma survey, the CEEM survey was also launched in October. Participation included academic institutions (34%), operating companies that ranged from big energy to start-up (39%), lawyers (16%), and other licensing organizations (11%). Deals submitted were primarily from the chemicals and energy industry segments making up approximately 52% and 28%, respectively, of the total responses.

Key CEEM Deal Statistics

Approximately 70% of the deals collected contained flat running royalties and most deals were entered by the licensor. About 75% of the deals were executed during 2008 or 2009 and 80% of the deals came from the chemicals and energy sectors. Of those reported, approximately 40% of the deals estimated peak annual sales of less than $50 million, most deals involved commercialized or soon to be commercialized products/technologies and a majority of the deals were exclusive.

Design and Implementation

The surveys were designed by committees of experienced LES members within CEEM and Life Sciences who worked alongside an independent team from Veris Consulting, LLC, on design, dissemination, data collection and analysis and ensuring confidentiality.

“The key to collecting quality data and producing an invaluable report/business tool like this one is to ensure the participants of the complete security and confidentiality of their information and deliver upon that promise. LES took the extra step of hiring a 3^rd party fiduciary to gather the confidential data and compile the reports. This assures member participants of data security and adds credibility to the precision and fairness of the final report,” said Ian Santo Domingo, Senior Manager with Veris.

The complete surveys will be made available online exclusively to LES members worldwide on October 4, 2010. For more information on LES membership and the LES 2010 Annual Meeting, visit www.lesusacanada.org.