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21 Feb 2024

Indication splitting in biopharma licensing

While licensing in bio pharmaceutical business, if licenses are issued to different partners based on indications or disease and therapy, then this concepts is known as Indication Splitting. Here same molecule licensed to two or more partners based on the different indications.

How frequently, we see the indication splitting in pharmaceutical and biopharmaceutical business?

This concept is known from past decades, but not quite frequently found in pharmaceutical and biopharmaceutical business space because of the operational challenges.

What are the possible advantages of the indication splitting?

  • Generally it can be ideal for the novel molecule having precise indications.
  • Benefit for licensor, as the multiple partners will focus on the multiple indications, will increase reach, acceptance, revenue more likely.
  • Can increase probability that the product will be developed for multiple indications.
  • Can find best suited partner for each indication, who has strong market dominance in that particular indication.

Case Simulation:

Imagine a pharmaceutical company, PharmaX, has developed a novel drug candidate with the potential to treat both rheumatoid arthritis (RA) and psoriasis, two autoimmune diseases with different underlying mechanisms. Recognizing the complexity and distinct market opportunities for each indication, PharmaX decides to pursue indication splitting in licensing agreements.

PharmaX enters into two separate licensing agreements:

  1. License Agreement A: PharmaX licenses the rights to develop and commercialize the drug for the treatment of rheumatoid arthritis to Company A, a biopharmaceutical company with expertise in immunology and a strong presence in the rheumatology market. Company A agrees to fund and conduct clinical trials, obtain regulatory approvals, and commercialize the drug for RA indication.
  2. License Agreement B: PharmaX licenses the rights to develop and commercialize the drug for the treatment of psoriasis to Company B, a dermatology-focused biotech firm with extensive experience in dermatological drug development and marketing. Company B undertakes the responsibility for clinical development, regulatory submissions, and commercialization efforts specific to the psoriasis indication.

In this scenario, PharmaX strategically splits the indications for its drug candidate to leverage the expertise and market knowledge of Company A and Company B in rheumatoid arthritis and psoriasis, respectively. This approach allows PharmaX to tap into the strengths of each licensee, potentially accelerating the drug’s development and maximizing its market potential in both indications.

Through effective coordination and collaboration between PharmaX, Company A, and Company B, the drug candidate can undergo parallel development for multiple indications, ultimately benefiting patients by expanding treatment options for both rheumatoid arthritis and psoriasis.

What are the challenges of Indication splitting?

  • It can be done, but complicated as measuring sales outcome based on indications will be the major challenge.
  • Separation of product in the market is also a challenge.
  • Is the product substitutable between indications?
  • Off-label sales – If so, who will be getting the sales credit ! Can lead to confusion and lot of financial engineering.
  • In general, once the drug or biomolecule is approved for one indication, MDs can prescribe for any indication, therefore measuring the success of the sales obtained approved split indications can be really¬† a tough task.
  • Safety and pricing issues are not indication-specific. So, it can be challenging, as pricing based on indication will be a demand from licensing partner. At the same time keeping a pricing based on indication not feasible, as drug regulators may not agree with the multiple pricing for same molecule.

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