Energize your life science business development and licensing efforts
Whether the target is a new drug or new capital, business development and licensing deals pump lifeblood into pharma and biotech companies of all sizes.
Everyone has a different motivation for deal-making: larger companies face portfolio gaps, for example, as well as patent expirations, pipeline setbacks and other challenges. Smaller organizations may have wizards in the lab — but limited infrastructure and resources to commercialize their innovations.
Superior pharmaceutical business development teams address critical strategic needs by aligning goals with deal opportunities, navigating negotiation challenges and establishing clear protocols to manage relationships and create lucrative partnerships.
Gain access to both sides of the negotiating table with detailed metrics and real-company practices for pharmaceutical business development efforts:
Build and maintain a top-notch Business Development and Licensing team
Explore models of BD&L team structure that bolster communication and streamline reporting relationships. Use detailed benchmarks to discover when other pharma and biotech companies pursue deals — and ensure your Biz Dev team has ample spending and staffing resources.
Maximize deal position
Follow strategic recommendations to guarantee a thorough process and a well-negotiated deal. Evaluate prospective partners and see how they’ll evaluate you as you identify red flags and avoid weak deals. See who should be involved in the deal-making process and when — and learn to expertly handle the tough questions that inevitably arise.
Master post-deal management
Examine real-company practices for managing partnerships, with or without a formal alliance management team. Get the right personnel involved at the right points — and build institutional memory that will protect the partnership through personnel turnover and team changes.
The following excerpt is taken from Chapter 2, “Deal Processes and Strategies.” This section discusses a red flag during the due diligence stage of the pharmaceutical deal-making process. The full chapter provides strategic recommendations and red flags to avoid for each stage, as well as benchmarks detailing deal costs, ROI and groups’ involvement throughout the deal-making process.
Red Flag: Financial Concerns
Several executives taking part in this study identified financial concerns as a very important element of the due diligence process. Weak finances might indicate that the partner company is not capable of delivering on its contractual obligations after the deal is signed. Many other problems with the compound, such as manufacturing concerns or trial issues, will result in heightened costs that can be tracked through financials.
Another important consideration when evaluating financial information is the accuracy and completeness of the data. One executive pointed out that if finance is not worked out diligently, it is a good indication that the company is likely not meticulous with other activities, either. After all, the financial books represent the lifeblood of a small company, and if the company has not managed this well, then it may also be careless with clinical data or patent submissions, a trait that will present major problems down the road.
If a company does not have clean books, it could also lead to billing disputes going forward. In many deals, the in-licensing partner is responsible for certain expenses, which the out-licenser will bill after these expenses are incurred. If the out-licensing company cannot provide very clear expense reports, then reimbursement will become a significant challenge.
If the finances are in order, companies will use these in conjunction with other information about the compound to evaluate a deal’s potential profitability. Figures 2.26 and 2.27 [data shown in the full repoort] show the ways in which development- and commercialization-oriented companies evaluate profitability. The tools used by development- and commercialization-oriented companies are very similar. Scientific analyses and risk/benefit analyses are used at around two-thirds of both company types, and fair-market value is used in less than half of companies surveyed. The one major difference is in net present value calculations; whereas many development-oriented companies do not evaluate compounds on the basis of net present value, every commercialization-oriented company surveyed uses this tool to evaluate a deal’s profitability. Any out-licensing company should come to the table prepared to present its perspective on net present value and able to discuss how it calculated the figures.
The following excerpt is taken from Chapter 3, “Managing the Deal.” This section examines the challenges faced by commercialization-oriented companies and development-oriented companies after the deal has been signed. The full chapter contains best practices for managing the post-deal time period. It focuses on such areas as creating formal alliance management teams and/or steering committees, monitoring alliance health, establishing regular communication schedules and preventing and resolving conflicts between partners.
Figures 3.5 and 3.6 [data shown in the full report] highlight stark differences between commercialization- and development-oriented companies in their review of deal problems. Companies focused on commercialization cite unrealistic goals and market factors as the two most prevalent reasons their deals fall apart post-signing. Larger companies tend to place an incredibly high expectation on each and every deal, expectations that pigeonhole the deal into becoming the crème de la crème of deals. Unfortunately, every new deal cannot be in the top 10% of deals ever signed. The bottom line: In-licensers should not assume their partnerships will fail, but greater success will come from placing more realistic goals on individual deals.
The second most-cited reason, market factors, is a regrettable side effect of the need to produce more deals to fill gaping holes in the pipeline. Market factors have become harder and harder to predict in recent years. Even so, many deals can still find success when markets shift. In fact, this reason relates to the first; with such pie-in-the-sky goals set for the deal, even the tiniest change in the product’s market can have a profound effect on deal success.
On the other side of the table, development-oriented companies see more concern in factors that relate to post-deal management. According to survey results, their top reasons for lack of success are poor communication and coordination, lack of leadership involvement and clashing corporate cultures. These problems relate to other issues, such as the product’s development stalling at in-licensing companies and the out-licenser’s impression that their concerns are not being addressed adequately by the partnering company. Having well-structured management plans defined in the contract will help alleviate some of these problems. However, attention should be paid at regular intervals to ensure that the needs and goals of both companies continue to be met as the deal matures.