Opt-out options in new product co-development partnerships

We study three contractual arrangements—co-development, licensing, and co-development with opt-out options—for the joint development of new products between a small and financially constrained innovator firm and a large technology company, as in the case of a biotech innovator and a major pharma company. We formulate our arguments in the context of a two-stage model, characterized by technical risk and stochastically changing cost and revenue projections. The model captures the main disadvantages of traditional co-development and licensing arrangements: in co-development the small firm runs a risk of running out of capital as future costs rise, while licensing for milestone and royalty (M&R) payments, which eliminates the latter risk, introduces inefficiency, as profitable projects might be abandoned. Counter to intuition we show that the biotech's payoff in a licensing contract is not monotonically increasing in the M&R terms. We also show that an option clause in a co-development contract that gives the small firm the right but not the obligation to opt out of co-development and into a pre-agreed licensing arrangement avoids the problems associated with fully committed co-development or licensing: the probability that the small firm will run out of capital is greatly reduced or completely eliminated and profitable projects are never abandoned.

Fine scale structures from deformation of aluminium containing small alumina particles

Microstructures and mechanical properties have been studied in aluminium containing a fine dispersion of alumina particles, deformed by cold-rolling to strains between 1.4 and 3.5. The microstructure was characterised by TEM. The deformation structures evolved very rapidly, forming a nanostructured material, with fine subgrains about 0.2 μm in diameter and a fraction of high-angle boundaries which was already high at a strain of 1.4, but continued to increase with rolling strain. The yield stress and ductility of the rolled materials were measured in tension, and properties were similar for all materials. Yield stress measurements were correlated with estimates made using microstructural models. The role of small particles in forming and stabilising the deformation structure is discussed. This nanostructured cold-deformed alloy has mechanical properties which are usefully enhanced at comparatively low cost. This gives it, and similar particle-strengthened alloys, good potential for commercial exploitation. © 2002 Acta Materialia Inc. Published by Elsevier Science Ltd. All rights reserved.