If you're a pharmaceutical researcher or manufacturer, or if you have a company that markets and sells pharmaceutical products, you would do well to understand the terms in-licensing and out-licensing. Both of these arrangements allow you to make the best use of someone else's research and production or their marketing abilities to build on your work or to increase your profits overall. Note what is meant by that and by in-license and out-license pharmaceuticals.

What Is Meant By In-License and Out-License?

When you allow someone else to use your exclusive product, you are out-licensing to them. If you enter into an agreement with someone to use their product for your own research, development, or marketing, you are in-licensing that product.

In many cases, an individual or company will in-license or out-license their intellectual property, and the terms in-licensing and out-licensing are not exclusive to the pharmaceutical industry. For example, a person or company might in-license or out-license recipes for various food products, the chemical makeup of perfumes or cleaning products, engineering specs and drawings and so on.

Why Out-License Pharmaceutical Products?

Many chemical or small pharmaceutical companies out-license their products so that a larger company with more research funding can expand on their work. For example, a larger company might have the funds to schedule clinical trials or otherwise complete the development of certain products. That larger company might also have more success in sales by packaging a product under their name and brand, as opposed to a pharmaceutical company that is smaller, more localized, and not as well-known.

A marketing company or pharmaceutical seller will have the means to actually sell your product! If you're a chemist or have a small pharmaceutical development company, you already understand that simply creating a safe, effective new drug doesn't mean it's going to be prescribed by doctors. Marketing and pharmaceutical sellers will have a sales force, sales leads, contacts with doctors and other healthcare professionals, and everything else needed to actually get your product on the market, which you can accomplish through an out-license agreement with them.

Why In-License Pharmaceutical Products?

Larger pharmaceutical development companies benefit from in-licensing pharmaceutical products because much of the discovery work is done for them when they use someone else's intellectual property. A larger company can then expand their product base and offerings by relying on in-license pharmaceuticals, which can keep them from having to hire additional staff or spend money on initial research for new pharmaceutical products.