Avoiding the Train Wreck - Pharmaceutical Executive


Avoiding the Train Wreck
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  • scientific merit—the compound's technical merit and the appropriateness of the small firm's scientific approach to technical challenges
  • strategic fit—the compound's fit with Roche's strategy and its R&D and commercial portfolios
  • risk—including technical, manufacturing, regulatory, data package, and other elements
  • value—the opportunity's net present value and strategies for sharing the risks and rewards between firms.

The bulk of this work is done before starting the formal due diligence process using the biotech's confidential information. Open questions are collected into a questionnaire and sent to the biotech firm in preparation for the due diligence team's visit.

Assembling The Due Diligence Team The due diligence questionnaire informs the team selection process. Subject matter experts are drawn from internal and external sources. Although resource constraints affect large pharma's ability to field a team, these same constraints can quickly overwhelm the biotech firm. The challenge for both firms is to balance team members' due diligence responsibilities with their normal job demands. Senior management's role is to ensure that the due diligence team is staffed with highly qualified members who understand their roles and responsibilities and have adequate authority to carry out the task. Utilizing outside experts can help solve the resource problem.

The team selection process is directly related to building strong relationships between firms. Successful companies utilize as many firm managers as possible who will have ongoing alliance responsibilities if the agreement is signed. The due diligence process is a time of close interaction, giving team members from both sides the opportunity to build the interpersonal relationships that are so important to ongoing alliance success.

Once the team is in place, each side is informed of the focus and expectations of the due diligence process, the rules of engagement, and each member's legal responsibilities as a participant.

Preparing the Partner for the Process An early responsibility of the large pharma team leader is to prepare the other side to participate in the process. This includes providing details such as defining data requirements and agreeing on how data will be collected and handled, where it will be kept, who will have access, and other related issues. Early preparation minimizes confusion and prevents misunderstandings.

This stage is another opportunity for relationship building. In recent years, companies such as Eli Lilly, Roche, and GlaxoSmithKline created specialized groups to facilitate alliance implementation when agreements were signed. Depending on the opportunity, large pharma management may introduce these implementation experts during the due diligence process to assess cultural fit, decision making style, and communication preferences. By actively participating in the due diligence process, these managers prepare key groups inside the large company to work with the smaller partner.

Managing Interactions Between Firms The most sensitive stage in the due diligence process is assessing each company's proprietary intellectual assets. These exchanges are carried out under carefully crafted nondisclosure agreements and material transfer agreements. Although the content of these documents is outside the scope of this article, at a minimum they must describe each company's responsibilities to protect the other's proprietary information as well as each one's rights to use disclosed information.


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Source: Biopartnerships,
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