Run like clockwork

In a climate of transparency and collaboration, building successful partnerships with scientific due diligence has rarely been more important

Partnerships, mergers and acquisitions must be carefully planned, especially when they involve scientific, technical and regulatory information about complex therapeutic products.

For biotech companies and academic developers wishing to partner with larger firms, the process of assessing the potential for a partnership or licensing agreement is perhaps best regarded as scientific due diligence.

Whether your biotech company is looking at licensing products or technology platforms, or at a partnering agreement, you need to be able to show your worth to potential partners and equity providers.

The primary purpose of academic researchers is to create scientific knowledge from their research and publish the results. But additional skills are needed to translate this knowledge into commercial biopharmaceutical products.

For growing biotech companies and academic developers, the experience and resources of larger pharmaceutical companies are invaluable in late-stage drug development, and the authorisation or commercialisation processes. Small companies that launch a first product on their own often face issues when it comes to product uptake and launch value. A McKinsey report found that the median first-time launcher reaches just 63% of expectations, compared with 93% for the experienced equivalent.

Partnerships have been shown to drive up the success rate of EMA marketing authorisation applications with, whole company acquisitions having a higher success rate than product acquisitions or partial licence agreements. It is clear that collaboration with larger companies may be a more effective strategy for smaller companies to bring new products to market.

More deals are being made in the climate currently and there is an increased need for due diligence, so both academics and early-stage biotech companies should get ready for it. Small biotech companies will reach a stage where they need to consider the prospect of a merger, acquisition or partnership – or the next investment round.  It is never too early to plan ahead and prepare to convince new and existing investors that more funding is required for value generation.

Academics have a very different culture from start-ups. In the academic world the focus is on scientific kudos and being published to maintain grant funding. There is less emphasis on readiness for due diligence and documentation relating to partnerships or funding. Most universities have technology transfer offices that can offer some support. But often they don’t have the time or depth of knowledge to prepare a comprehensive scientific due diligence package to prepare the asset for partnering.

On the seller side, underestimating the significant effort that it takes to prepare for due diligence is common. Naturally, small companies tend to focus on day-to-day operations. Sometimes not enough time is set aside to prepare for due diligence properly.

And due diligence is not just a one-time occurrence. For the completion of one deal, a seller may need to undergo up to ten due diligences by interested parties, so research and development plans, including reports, should be prepared for due diligence readiness. Raw data should be ready for assessment by external parties.

As part of translation from academic research to biopharmaceutical drug development, programmes also need to comply with GxP requirements. Smart start-up companies address these requirements during set-up of their governance and operational systems.

Whether you’re an academic or an early-phase biotech looking to partner with a larger company, you have to be ready to provide full and accurate scientific, technical and regulatory information relating to the business and/or products.

Clear and accurate data presentation and documentation is crucial to give prospective investors or partners a complete picture of assets and to make sure that both sides get what they are expecting. There are some important factors to achieve optimum scientific due diligence outcomes for the seller and buyer side to build successful business partnerships.

Before you begin discussions ensure that you have created a target profile of your ideal partner. Sellers should think about what a potential partner wants to see, and prepare for scientific due diligence every day. Know your plans and data and be prepared to explain them. Set up a good quality data room structured by disciplines comprising all important plans and results and make sure that information is collated and organised.

Furthermore, make sure that key rights on technology and/or products belong to the party seeking to out license or which is the target of the projected share purchase: intellectual property (IP) is key for any biopharmaceutical business. Ensure that ownership rights are communicated in a transparent manner. Maintain current intelligence on the competitive landscape – including potential infringers.
  
If you are a buyer, consider a top-level asset screen before progressing to full due diligence and identify red flags early on.