The dos and don’ts of scientific due diligence
Partnering, mergers and acquisitions, and product licensing require careful preparation, particularly when it comes to complex therapeutic products. Both parties need to put in the time and effort with the planning process, including preparing scientific, technical, as well as regulatory information.
There are some very important dos and don’ts of scientific due diligence when seeking partnerships to ensure a smooth and successful business marriage.
What does good due diligence look like?
Companies seeking a partner should be ready to demonstrate their assets and differentiating factors, with clear and accurate data. Document the execution of a well-planned development process and resulting data thoroughly.
Work on this process every day, not just when looking for a partner. Ensure you understand the data and are prepared to explain it and address any questions in a timely manner.
Make sure you have the right resources available for the process in terms of capability and capacity. Your knowledge should extend to insight into competitors and any possible infringement on your product.
Be honest with questions and answers, then be prepared to address potential issues openly – and be aware, no asset is free of potential issues. Having risk mitigation strategies in place will allow you to address those potential
issues effectively and thereby create trust. Ensure you have the appropriate internal resources to foster mutual understanding of data, issues and mitigation strategies. To better support this interaction, any questions and
issues should be channelled through a single point of accountability from each party.
Work on this process every day, not just when looking for a partner.
What causes deals to fail?
There are many reasons why an M&A or partnering agreement might fail, but poor preparation and missteps during scientific due diligence are major factors. Distrust is inevitable when there is a lack of transparency or,
worse yet, when critical issues are hidden from the other party.
IP is key for any pharmaceutical business, therefore it’s paramount to ensure key rights on the technology and/or product belongs to the party seeking to out-license their product, and that there are no possible setbacks.
When one party steps back from the data review process, leaving the other party to work through information alone, there will inevitably be resentment and mistrust. So, it’s important to work together, particularly as more data is added to the due diligence process. Collaborative due diligence can also help to avoid a stop-start process.
As with any negotiation, communication is key and poor interaction during the due diligence process can undermine a deal. As important is good documentation. Failing to properly record what was agreed and discussed can become a problem, particularly as the personnel involved may change over time.