Strategic growth is essential in the pharmaceutical industry, where staying competitive depends on expanding portfolios and reaching new markets. Companies continually seek ways to grow and maintain their relevance in an ever-changing industry.

Two commonly used strategies for achieving growth are Licensing and Merger Acquisitions (M&A). Licensing allows a company to access new products without the full risks and costs of ownership. Whereas M&A allows for complete control over new assets, potentially leading to significant market expansion.

Which strategy should you use, and crucially, when?

This blog will compare licensing and M&A as growth strategies, helping you determine which approach aligns best with your business goals, resources, and risk tolerance.

Understanding licensing as a growth strategy

Licensing agreements in the pharmaceutical industry allow one company to market, sell, or further develop a product created by another. This approach allows the licensee to expand its portfolio while reducing the costs and time associated with internal research and development.

One of the main advantages of licensing for the licensee company is the reduced risk related to bringing a product to market growth. By licensing a product, a company can quickly introduce new treatments to the market without needing substantial capital or financial commitment. Licensing also offers the opportunity for companies to diversify their portfolios and explore new therapeutic areas without the need for heavy investment in R&D.

However, licensing does come with some trade-offs. The licensee may have limited control over the licensed product, as certain rights and decisions remain with the original developer. Additionally, revenue is shared, often through royalties or milestone payments.

Understanding Mergers and Acquisitions (M&A) as a Growth Strategy

M&A involves a company purchasing or merging with another, or acquiring a product, resulting in full control over the assets, technologies, or markets.

The benefits of this growth strategy can be significant. Complete ownership allows the acquiring company to make strategic decisions without the restraints that come with licensing agreements. M&A can rapidly expand market presence, increase market share, and access new therapeutic areas. By acquiring established products and intellectual property, M&A can also accelerate growth by strengthening the company’s pipeline and operations.

However, M&A also has its challenges. The costs involved are typically higher than licensing, given the need for substantial purchasing capital and the acquisition of any existing liabilities. Integration issues are another concern, as combining different corporate cultures, systems, and processes can be complex and time-consuming.

Choosing the right approach

Licensing is often a better fit for companies with limited resources or those looking to enter a new market quickly without a significant upfront investment. It’s also a good option for diversifying a portfolio without the complications of full integration.

In contrast, M&A is more suitable for companies with strong financial backing that aim to make a major impact, expand market share, or acquire strategic assets that align closely with their long-term objectives. If control and long-term growth are priorities and your company can manage the associated costs and integration challenges, M&A may be the better route. If flexibility and lower risk are more important, licensing could be the preferred strategy.

The Galen approach to partnering

With over 50 years’ experience selling medicines worldwide across multiple therapy areas, we are committed to customer care and partner with like-minded companies to accomplish this.

From licensing agreements to mergers and acquisitions, we welcome all partnership opportunities and seek to collaborate closely with partners on a wide range of initiatives.

We value partnerships that are built on a strong connection and shared values. This foundation is essential for delivering exceptional service to our customers and ultimately improving the health of all generations.

So, are you ready to explore new ventures together?

You can read more about our recent POA acquisition here.