Successful licensing or partnering deals require a deep understanding of the information flow throughout a financial transaction and an extensive network of established relationships.
Expansion via Partnering and Licensing
The pharmaceutical industry is an increasingly competitive environment that, in its current landscape, insists on the partnering and licensing of assets for companies to succeed and sustain top- and bottom-line growth. As the average return on an internal R&D investment dollar declines, major players in the industry are acquiring marketing rights to innovative products developed by other firms at an exponential rate. Often, the interest in this type of acquisition materializes as a partnership or licensing deal for specific global geographies. In many cases, these agreements are lucrative for the buyer and beneficial for stakeholders as market access, sales and distribution channels, financial capabilities, and cultural insights are leveraged. This is a model with a history of success, and the partner is not the only one with a major upside: many innovators lack capital, proper personnel, or the experience to launch products effectively and rely on the strengths of a partner to commercialize their assets in foreign and domestic markets.
When is the best time to pursue a deal?
Pressure applied by board members, financiers, competitors, buyers, and substitute products can fundamentally affect the timing of an innovator’s decision to pursue a licensee or partner. We believe that it is critical to actively follow industry trends and news to uncover opportunities related to these pressures and to allow management to better prepare. However, solely heeding online releases can become myopic. In fact, some of the most effective ways to gain industry insight are to attend pertinent conferences and events, connect with thought leaders, study the competition, and build a suitable team.
Keys to Successful Licensing & Partnering
If a licensing or partnership deal is best for your company, Sosna + Co recommends the following five key considerations:
- Create a plan: Too often, companies try to execute without a plan or timeline. Fundamentally, this is failing before you start. Having a detailed plan in place and communicating that plan appropriately will relieve pressure internally and externally throughout the business development process. It is unlikely that a deal will close immediately, so preparing stakeholders for this reality allows business development teams adequate time to execute a transaction with better value.
- Perform financial analysis: It is critical to have an understanding of the value of an asset before investing time and money into a partnership or licensing deal. Fundamental methods of asset valuation, including DCF or comparable analysis, will quantify expected payoffs, define potential partners, and prepare for eventual negotiations.
- Prepare for due diligence: Before marketing an asset, it is important to prepare the proper information, personnel, and communication strategy to accompany your value proposition. Confidential and non-confidential materials, an accompanied data room, and legal preparation of template agreements make a good starting point.
- Leverage your network: The value of a relationship or contact in business development cannot be understated. Not only does the likelihood of success increase, but honest feedback from potential buyers can be obtained. This type of market intelligence is invaluable to improving your process and deliverance of the value proposition to other prospects. Organizations that lack industry relationships or adequate deal experience may benefit from an outsourced firm.
- Educate yourself: Understanding the regulatory hurdles in a market of interest is important to securing a deal. Unexpected regulation can lengthen deal timelines or kill a deal altogether, so preparation is vital. Furthermore, cultural nuances must be considered in unfamiliar markets. Representing an asset or a company in a respectful and informed manner can expedite the business development process and, more importantly, can help build a successful business relationship.
Understanding Cultural, IP, and Regulatory Differences is Critical
Most business development executives are aware of the need to evaluate differences in regulatory requirements from region to region, but they often overlook the impact that cultural differences can have on the success or failure of partnering/licensing deals. Cultural alignment is essential; partnering firms must have similar approaches to quality management, human resource practices, and all other aspects of business operations. Understanding the culture of the markets where products will be out-licensed is also important, because prescribing and use habits vary widely. In the cases of early-stage deals, it is imperative to clearly outline percentage ownership around IP should new developments arise.
There are also many nuances in regulatory requirements from country to country and region to region that can easily be missed. For instance, with over-the-counter products, stability testing requirements are quite different in the United States and Europe, and often testing must be repeated under the relevant conditions when moving from one of these markets into another. Labeling requirements are often different as well. Some countries also require products to be manufactured — at least the final drug product — in the country of origin.
If a biopharma company plans to license a product out to specific regions, there are some steps that can be taken during early-stage development that will lead to a simplified licensing process. Clinical studies can also be designed to ensure that data expected by the health authorities in their respective regions will be available. In addition, if contract research and manufacturing organizations will be used, those with global regulatory approvals are advantageous.
Global Network Facilitates Dealmaking
Sosna + Co is a boutique, outsourced business development team established to help companies execute business transactions and drive growth.
Our team of life sciences experts has over 30 years of experience creating strategic partnerships and acting as an extension of our clients’ executive management teams. Sosna + Co has executed deals valued at more than $250 million in 20 countries by leveraging our connections within the life sciences industry, expediting transaction periods and maximizing value.
As an independent third party, Sosna + Co is able to view projects from different angles and evaluate factors that our clients don’t normally consider. We facilitate the partner-selection process and bring interested parties to fruition rapidly. Our experience completing deals in different countries helps our clients prepare in advance to meet scientific and regulatory requirements for a better overall outcome.