¹Santa Clara University, Santa Clara, CA 95053, USA, Tel: +1 408 554 4716, Fax: +1 408 554 5056, E-mail: ttyebjee@scu.edu

Revised 10 March 2004.

Abstract

The drug discovery and development industry is under intense pressure to become more efficient and develop drugs better, faster, cheaper. Consequently, pharmaceutical and biotechnology companies are entering into alliances in an effort to utilise each other's talents, exploit each other's specialisations, and create more value. In this paper, the economics of the drug discovery and development cycle are examined to identify the economic and strategic logic of the alliances. The financial instruments commonly used to structure the alliances are discussed with example case studies.