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Tag Archives: partnering

The Biotech Partnering Process – Questioning The Deal Structure: Part 19 of Valuation and Other Biotech Mysteries

[Ed. This is the nineteenth part in Wayne's series. You can access the whole thing by clicking here. Please leave comments or questions on the blog and Wayne will address them in future posts in this series.]

The deal structure as outlined in Part 18 of this blog series is not meant to be a perfect, detailed model, or even realistic. However, this is a model which can be easily used to change assumptions and see what the impact is on the cash flow and NPV. Here are two examples.

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The Partnering Process – Deal Structure: Part 18 of Valuation and Other Biotech Mysteries

[Ed. This is the eighteenth part in Wayne's series. You can access the whole thing by clicking here. Please leave comments or questions on the blog and Wayne will address them in future posts in this series.]

Assuming that a partnering deal is signed, what are the usual financial components?

  • Up-front cash usually has no conditions and is a non-dilutive financing. Big pharma generally does not want equity as it just clutters up their balance sheets and is an even bigger problem if the partnership gets terminated.
  • Clinical and regulatory milestone payments are fairly standard. The basic milestones are the initial U.S. and E.U. approvals but may include approvals of additional indications if they increase the market potential.
  • Sales milestone payments have become more common in the last decade. If the pharma partner does not believe the market potential, milestones can be included for reaching certain annual or cumulative sales milestones.
  • Royalties on sales are generally no longer a simple X% on net sales. They can be tiered, increasing after annual or cumulative sales milestones are reached.
  • If there is an R&D program, who conducts it and who pays for it?
  • Who executes and pays for the clinical and regulatory programs?
  • Some companies would like to retain or have an option on some sales and marketing rights in specific territories. These rights may cease to exist if there is a change of control at the smaller company.

The only way to learn about deal structures is to create a fictional deal, make the spread sheet and start looking at the impact of structural changes on the product NPV. The following assumptions have been used to create the attached Excel workbook. Read more of this post

The Partnering Process – Before Crunching The Numbers: Part 17 of Valuation and Other Biotech Mysteries

[Ed. This is the seventeenth part in Wayne's series. You can access the whole thing by clicking here. Please leave comments or questions on the blog and Wayne will address them in future posts in this series.]

Assuming that all interested potential partners know that you have a specific asset for sale, how does a licensing deal get completed?

Sellers should place themselves in the chair of the person at the potential licensing partner. From the potential partner’s perspective, there are four basic criteria which would need to be met before licensing a product or technology. Read more of this post

Some Partnering Basics: Part 16 of Valuation and Other Biotech Mysteries

[Ed. This is the sixteenth part in Wayne's series. You can access the whole thing by clicking here. Please leave comments or questions on the blog and Wayne will address them in future posts in this series.]

If partnering is basically the process of selling an asset, the first step is to let people know more about the asset which is for sale. Three initial questions to be answered are:

  • What companies do you talk to;
  • Who do you talk to at these companies; and
  • What do you tell them?

The answer to the first question is easy – you talk to all companies which may have an interest in commercializing your asset. The list of companies should be easy to prepare by looking at information sources already discussed in this blog series, including:

  • Annual reports and pipeline reviews by pharma and biotech companies;
  • Searching www.clinicaltrials.gov for all companies running clinical trials in the therapeutic fields targeted by your asset; and
  • Subscription newsletters and databases.

The people who need to be targeted are those who are both directly and indirectly involved in the partnering process. Since you can never predict which initial contact will lead to the deal, you have to target all potential contacts at all potential partners. Read more of this post

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