The Basics of Licensing: In & Out, Drug, & Facility

When you conduct a quick online search using the following phrases, a vast array of answers will cross your screen:

  • “License a Drug or Facility”
  • “Pharma Licensing”
  • “How to start my own Pharma Company”

The results of these searches tend to center around licensing: in-licensing, out-licensing, drug licensing, and facility licensing. How does all of this relate to launching a drug? Here are the basics:

In-licensing icon


When you hear the term “in-licensing,” simply think of the word “investor“. In-licensing is the process of creating a contract that allows another firm to provide capital to the development and launch process, thus taking on financial responsibility. This is a very popular licensing process for small bio-pharma start-ups to get their drug off the ground. There are pros and cons to this type of licensing; for example, it can provide the capital a company needs, but then the profits need to be shared once the drug enters the market.

Out-licensing icon


Out-licensing is more focused on opening up the delivery pipeline to assist you with getting your drug “out the door.” Out-licensing encompasses finding a partnership, or partnerships, that will help identify your target market and assist you in getting your product into the right hands. This process may include working with marketing firms or legal firms. The financial relationship is very different in this type of licensing than the one outlined in the in-licensing section above.

FDA approval icon

Drug Licensing

Only one entity in the United States “licenses” a drug, and that is the Food and Drug Administration (FDA). The FDA must approve all drugs before they can enter the market, and consequently, FDA approval is paramount before the drug actually leaves your facility and heads to the patient.

FDA approval icon

Facility Licensing

Facility licensing may entail more than you would initially expect. Of course, if you are manufacturing your own drug, your facility must be inspected and licensed by the FDA. However, the state where your facility is located may also require a license which may or may not include an inspection. In addition to your resident state, there are other states that have requirements for a license, certification to do business, or deliver drugs within their borders. Each business location must have its own set of licenses. A company with multiple facilities may end up with dozens of facility licenses and only have one drug.

“The opportunities at Two Labs, both for the industry and for me personally, are so exciting,” said Michael. “I am also excited to work alongside so many innovative and intelligent people with the common goal of helping emerging manufacturers bring their medicines to patients who need them.”

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