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Biotech Valuation Enhancers Cheat Sheet by

Biotech Valuation Enhancers: Preparing For Big Pharma Due Diligence
big     valuation     biotech     due     diligence     preparing     enhancers-     pharma

Introd­uction

we evaluated hundreds of potential assets to add to our portfo­lios. Now that we’ve graduated from Big Pharma and are consulting or doing venture investing, we are frequently asked by biotech companies for advice on what Big Pharma is looking for in potential partners or acquis­itions, and how biotechs can put their best foot forward. If you want to attract more suitors and maximize the valuation of your asset or company, the first rule is to do good science. This is a given. After that, follow these nine rules:

1. Know the Buyer Landscape.

In addition to unders­tanding your product and data, you should also understand how your asset fits into your potential partner’s portfolio and strategy. Are buyers looking to build on a strength or fill a gap? Are they looking to add or mitigate risk in their portfolio? The stronger the fit, the higher the valuation will likely be.

2. Pressue Test the Data

Blind spots are a big issue for any size organi­zation, so it’s important to critically examine your data and get an external perspe­ctive before you get it from your potential buyers. Having an external expert perform a detailed, objective assessment and ask the tough questions will help you identify blind spots and develop a road map to address issues before you engage with potential suitors.

3. Address Shortc­omings Head-on

Pharma­ceu­tical develo­pment is incredibly challe­nging, and every asset or develo­pment program has its flaws. So don’t try to hide or minimize those defici­encies; instead, acknow­ledge and address them head-on. Any attempt to hide or mask defici­encies will eventually be uncovered, and will result in damaged credib­ility, loss of trust, and suspicion that there are more surprises yet to be found.

4. Identity Fast & Efficient Pat to PoF

IDENTIFY A SPEEDY AND EFFICIENT PATH TO PROOF OF CONCEPT.
As with all drug develo­pment activity, the greater the certainty, the higher the value. For early-­phase assets, a biotech that is well on its way to demons­trating clinical proof of concept is a much more attractive partner than one that still has a way to go.
 

5. Assess How Datasets are Structured

Keep in mind that ultimately all safety data related to your asset will have to be integrated for submission to regulatory author­ities, and in most cases that will require electronic transfer of the data to the acquiring company’s safety database. Especially for later-­stage assets with large and fragmented datasets, this assimi­lation of safety data can present a signif­icant (and expensive) challenge to your partner. Just as poorly organized data can have a negative impact on negoti­ations and valuation, well structured datasets can be a signif­icant positive.

6. Manage the number of Develo­pment Partners

It may be tempting to hire a host of CROs to speed up the develo­pment process; however, more partners means more data sources to assimi­late. For late-phase assets this will mean a complex network of datasets and a nightmare for acquiring life sciences companies. As you go through develo­pment, keep the end in mind and carefully manage the number of develo­pment partners you use.

7. Have Your Intell­ectual Property House in Order

One of the biggest and most time-c­ons­uming challenges for your pharma partner during the due diligence process is often sorting out the IP and freedo­m-t­o-o­perate status of your asset. Before getting into discus­sions with a potential partner, engage with an IP attorney to ensure everything is in order.

8. Think Bigger

Once you have interest from a potential partner and understand its portfolio and strategy, think carefully about additional ways your asset can add value. Are there additional indica­tions or combin­ations that could be pursued? Look at immediate and future applic­ations, and paint scenarios for them. The more a biotech can think about how they can bring value to the acquiring company, the more the partner will understand how it can fit the asset into its longer­-term portfo­lio­/en­ter­prise

9. Be Transp­arent During Valuation

When valuing your company, it’s extremely important to be transp­arent about your assump­tions. Show exactly how you arrived at your valuation so both sides can sit down and reconcile their term sheets. Remember, there will always be dialog and negoti­ation. Knowing exactly what the starting point is for each party will create greater unders­tanding and a much more cordial enviro­nment and efficient process.

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