Navigating M&A Complexities - Pharmaceutical Executive


Navigating M&A Complexities

Pharmaceutical Executive

Common Pitfalls – Regulatory Re-registrations

In the M&A or carve-out, the deal makers typically do not fully appreciate the re-registration workload or timeframe. This task typically falls to technical executives after the deal is signed. All too often, the acquiring firm has limited staff and minimal budget to manage the implementation in every country.

Regulatory considerations include the following:
State licenses for drug manufacturer/distributor
Certificates of Authority, Free Sale, and Origin
FDA notifications such as:
New Drug Establishment License
Change of Ownership of an Application
Transfer of IND Ownership
Transfer of Drug Master File (DMF) Ownership
Change of Drug Listing Information with Labeling
International regulatory requirements in each country of business

Any of these can vary from a simple fax notification to a year of re-registration, product testing, and new government approvals.

Understanding the re-registration process early can curb any potential revenue delays. By anticipating the potential delays, quantifying costs, and identifying gaps in testing or technical data the acquiring organization can factor these costs in to the deal price or the post-transition agreement. For example, the TSA may require the seller to manufacture product and/or maintain the registration for sufficient periods of time that varies by country. The buyer would then aggressively manage the re-registration process to complete the approvals prior to the expiration of the agreements.

Common Pitfalls – Quality & Regulatory Systems for a "Newco"

Another common mistake, especially in carve-outs, is for the new company, "Newco," to blindly adopt the legacy company's quality and regulatory systems without regard to their smaller size or scale. While the legacy company has established quality and regulatory departments with employees to implement the procedures, the Newco finds itself with few, if any, quality/regulatory personnel and a full plate of required procedures. They are suddenly "not following their own procedures," a risky situation for anyone facing FDA inspection (which is often triggered by a change of ownership).

Some solutions include engaging experts to right-size the new quality and regulatory systems to fit the Newco size or negotiate with the legacy company to develop the right-sized quality/regulatory system on behalf of Newco prior to the split. In all cases, Newco needs to quickly establish, and show progress towards, a plan demonstrating their compliance intentions.


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