A number of simple steps can resolve these problems. The first is to solidify the link between corporate business development
and licensing staff—"turf wars" do not facilitate deals. A clear delineation of who is responsible for what is the best way
to collaborate (for example, licensing focuses on the deal per se and corporate finance looks at the financial structuring).
Plus, every deal presentation to management should contain some slides explaining the accounting and financial impacts of
the deal on the company's public accounts.
7. Achieve internal consensus
After a partnership opportunity is identified, companies must gain the support of the different internal functions to move
the evaluation and discussions forward. While the scientific/medical debate may be fractious, very often a significant—and
surprising—source of delay comes from the sales and marketing teams, which are generally the most action oriented.
In the case of licensing opportunities, most Big Pharma protocols dictate that, following the headquarter team's financial
valuation, the numbers be validated with a half-dozen key affiliates. Here is the crux of the problem: While headquarter numbers
tend to overestimate future sales, local affiliates most certainly tend to underestimate them—often to the point of making
the deal unattractive.
Operating affiliates often "low-ball" these figures because they are afraid of getting stuck with a forecast as a future budget
target that they can't hit. Taken at its most ridiculous, one company in the mid-1990s, hoping to co-promote Warner-Lambert's
Lipitor (atorvastatin) in the United States, came up with a $700 million peak sales forecast. They simply couldn't see their
ability to make big sales, so they did a "haircut" to get the forecast back into its selling comfort zone—and out of any chance
of a deal. All this back and forth with numbers to ensure "buy-in" wastes a disproportionate amount of time. And while consensus
is important, sometimes a bit of old-fashioned banging of heads between licensing and marketing gets faster resolution.
Another slightly more gentle approach is to "stress" the P&L inputs with a range of sensitivity tests for each parameter—a
common technique used in other industries, such as banking. Having identified and agreed upon what really affects valuation,
it is then easier to focus on reaching consensus on specific inputs, such as pricing, which drives the top-line forecast,
or the absolute promotional spend required, rather than a percentage-of-sales approach.
8. Involve your CEO
Possibly the strongest card any company can play in deal-making is to involve the CEO— but only if business development executives
seriously want the deal, and can't get the partner's attention without it. CEOs should limit their contact to an initial call,
with the second interaction reserved for if and when the going gets tough—and there is still no meeting.
The impact on deal momentum of a CEO-to-CEO call cannot be underestimated. It demonstrates commitment and can rapidly resolve
stumbling-block issues, like the size and timing of milestones/royalties. The only codicils are: Make sure it's the right
time, the boss is fully briefed, and the required objectives are quite clear. Then, after the contact, this CEO intervention
can be supported by reinforcing to your partners that the CEO is following the deal and that you have their attention. In
this way, the CEO's presence is clear but behind the scenes throughout the deal process.