What are the best practices for conducting due diligence on biotech partners?

From the perspective of looking for a product development of a technology proprietary to my org: 1. Application of my tech in their product development- Technical assessment of their product development and the application of my tech 2. Commercial value of the application enhancing the partners product value- track record from their past partnerships 3. Trust in the relationship- Track record of their partnerships in the past 4. Growth aspects in 3 years vs 5 years vs 10 years

Biotech projects are complex and require wide variety of expertise in different domains, so most smaller companies will need to partner/outsource some part of the business. This could include manufacturing, QC, validation, clinical trials, marketing, sales,... In current environment it is possible to run entirely virtual company (e.g. all wet work outsourced) but with each partner you are adding a new point of failure that you don't have complete control over.

In short? Getting the right team. Because biotechnology is complex, no one person can be expert enough in all aspects of product development through launch plus operations and financial management of the firm. Where you want to start is looking at the team onboard or the team you can bring onboard both at the firm and on your due diligence team. You can't get a good understanding of a biotech's value without that. Then consider what do you want from acquiring or doing a licensing deal with this firm? What are you short and long term goals? What stage is the biotech firm at on it's journey? Could it realistically meet your goals?

1. Getting recommendations from a known and trust worthy contact is a great way to narrow down the choices 2. Hiring management consultants 3. Commercial success of their partnerships in the past

You can find basic information about many biotech firms through publications or online news and databases, especially if the firm is public. There are a number of paid services that gathers information for deal makers on biotechnology firms. These data platforms are very expensive, but are used by venture capital and private equity firms. Getting information on a private biotechnology firm is difficult, especially if like many early stage startups, they are in stealth mode.

Addressing the unmet need is one of the most important criteria while searching for the right candidate (target). One of the important thing to focus is the portfolio/ pipeline depth of biotech companies. Ex. Now most of the companies focusing on obesity market. While there are 100s of potential targets, you need to balance your long-term and short term need by selecting a biotech with GIP agonist/ dual agonist.

Evaluating technology is my favorite part of assessing an acquisition or licensing deal. Usually when the deal is in the evaluation stage, the private equity firm or venture capital firm will set up a deal room, an electronic, secure space on a platform where confidential documents can be shared. You will want to review early stage research, which is usually pre-clinical, lab bench study data on the potential therapeutic molecule. You want to understand what is known of it's toxicity, it's potential mechanisms of action and expected biological activity. How could it be produced? Is it a large or small molecule? Is it hard to scale up and produce? Is it expensive to produce? How does it compare to existing therapies in the space?

In my experience most partnership involved two companies where their skills were complementary. For example one company did the basic R&D and the other focused on manufacturing and marketing. Sometimes this relationship can be true partnership (e.g. profit sharing at the end) and sometimes the relationship is more customer-provider (for example contract manufacturing organizations).

All of the points in the write up are valid and it is essential to pay attention to them. One often overlooked risk is not delivering an objective on time. Biotech projects involve many parts that often need to happen sequentially (research, discovery, small scale manufacturing, clinical trials, commercial manufacturing, validation,...). If any of the parts are significantly delayed, the whole program might be terminated due to funding running out or being beaten to the market by a competitor.

Assessing the risk is exactly what due diligence is all about. Due diligence occurs in every industry when partnering, but for biotechnology there are extra considerations. Because regulation is such a big part of biotech, conducting regulatory due diligence is critical. If regulations aren't being followed, your sure bet new drug could become a hard No when approval time comes. Another key difference for biotechnology is intellectual property such as patents. Who owns the product? Are there other licensing agreements? Finally, consider timelines. Biotechnology takes up to 10 years to get to market and produce revenue. The burn rate during this time is high. Make sure you check all factors, especially biotechnology unique factors.

Thorough due diligence is essential for a productive & mutually beneficial partnership, that aligns with ur goals & objectives. My advice is to assess how promising “new investigational biological drug”is for treating a specific disease and compare it to existing treatments on the market. If other treatments are already working well for patients, your new drug might struggle to find a place in the market. So, consider this aspect carefully before making huge investments. Also, it’s imp. to assess the capabilities of your potential partner in various areas (technology, science, regulations, finances, and reputation & legal matters) & make sure they can handle risks effectively by developing strategies to minimize potential problems.

Best practices we have seen include a team that is sharing information and using risk based thinking along all the axes that could derail the program. Where many projects fall short is consolidating these risks and performing a gap assessment of what it will take to execute on the program. These could impact the financials of the deal and help identify the resources needed after deal closure. This will be an initial "lite" assessment. Once the deal closes, this exercise needs to go into much greater detail and planning. This sets the program up for success and greatly reduces the risk of delays and missing financial targets.

Communication is key for any stakeholder interaction including partnerships. The frequency of meetings depends on the size of the project or deal. Often meeting happen monthly or twice a month. More frequently during intense due diligence and negotiation phases. Ensure your messages are clear, consistent, concise and timely. Negotiation involves multifunctional teams. Lawyers can create contracts and agreements but special experts need to provide input on scientific or regulatory matters.

I recommended talking to other people you know who may have done business with this firm when conducting due diligence on a biotechnology firm to understand the firm's values. To have a strong partnership you need to have shared goals plus shared values.