- According to an analysis by the McKinsey & Company consulting firm, most companies forging licensing and acquisition deals have lot hit rates, though there are a few exceptions.
- McKinsey analysts examined the top 20 drug manufacturers involved in mergers and acquisitions between 2004 and 2014, with the exception of deals valued at more than $16 billion. They then calculated projected revenues in 2023.
- The analysts found that very few companies were able to in-license blockbuster drugs over that 10-year period.
While the McKinsey analysts concede that there are success stories in the M&A/licensing game, such as Gilead's $11 billion acquisition of Pharmasset and its hepatitis C compounds, much of the money being spent to build pipelines through external sourcing is falling short of target goals.
A huge part of the M&A trend is focused on looking externally for a company to buy or a drug to license, and then using capital to leverage a company's regulatory and marketing resources to bolster the impact of that investment.
The McKinsey analysis found that very few companies were successful at creating blockbusters from in-licensed or acquired drugs, and when they did, seven of 10 of the blockbuster deals involved late-stage licenses.
The takeaway is that in-licensing and rampant M&A activity are not going to solve the innovation problem. Companies need to look internally more often, with the goal of building their pipelines organically.