Understanding In-License and Out-License Pharmaceuticals

Posted on: 30 July 2019

In-license and out-license pharmaceuticals are terms you come across when dealing with drug commercialisation rights. To understand in-licensing and out-licensing, you need to think of two companies: Company A and Company B. 

Assume that Company A innovates, produces and tests a drug. Based on clinical trials, it is found to work in treating a specific disease.

The challenge then comes when Company A has to complete development or market the drug. It out-licenses its drug commercialisation rights to another company, Company B, which can market the drug.

At times, the drug may not be fully developed and may require some minor stages of development for it to be consumer-ready. In-licensing is when Company B acquires the drug commercialisation rights to market the drug or carry out some final development stages for the drug to become consumer-ready. Company B can be a pharmacy.


If you are Company B, you may be aware of the many risks and financial costs involved in innovating a product from scratch. If you in-license a drug that has already passed through all the first development stages and only a few are remaining, you avoid the major risks and extra costs associated with development. The remaining work is simple and not that costly. Getting a drug on the shelf is not easy and most companies incur huge losses when attempting to do so. If you want to avoid huge losses and get some profits more easily you can in-license.

In-licensing also builds your brand because customers will be saying that the only place to get the drug is Pharmacy B. Your pharmacy will then likely be trusted not only for that particular drug but other drugs as well.


If you are Company A, you are aware of the amount of money you are investing in the drug and know the risks you are exposing yourself to. You cannot be sure that the drug is going to work, but you can have a probability ratio that leans more in your favour. Even though this might be the case, the amount of costs and risks involved in the first stages is large. You might not have enough resources to complete development. Out-licensing comes in handy because it provides an opportunity for other companies to help you with the burden and also enjoy the profits that come from selling the drug.

If there are positive clinical trials, you will get many companies requesting in-licensing commercialisation rights and you can take advantage of this in order to get back some of the money you invested during the initial development stages.

If you're interested in this topic, learn more about in-license pharmaceuticals and out-license pharmaceuticals today.


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