Sell-Side Due Diligence: Why is it Important in BioPharma Companies?

Generally, many companies, including those in the biopharmaceutical industry, are becoming more innovative through acquisitions and partnerships. The past few years have seen many acquisition deals come to light and massive volumes of private capital directed toward businesses of all sizes, not only a select few standout players. According to Fortune Business Insights[1], The BioPharma market has an estimated value of USD 401.32 billion in 2021 and is expected to reach USD 534.19 billion by 2027. Private equity investors have played and continue to play a critical role in the growth of this industry.

However, few have the expertise to assess BioPharma companies when making M&A transactions. You might think you are ready for the transaction to draft an inclusive M&A contract and raise the necessary capital. But are you aware of what investors want? Due to the lack of adequate research and evaluation, the finish line in M&A transactions has become more elusive than ever before.

This is where sell-side due diligence applies. Due diligence is a comprehensive process that often starts with the prospective buyer. It is a thorough procedure that examines the current condition of the target company, from its financials to its projected product line to its general corporate culture.

It is usually a challenging and time-consuming process. So having a long-time and experienced M&A partner is definitely worth it. This is especially true if you take the current trend of milestone-based transactions. These transactions depend on the drug product’s progress toward regulatory evaluation.

If you are a BioPharma company searching for external funding, you are probably brand-new to the M&A scene. As you begin your search for investors, there are a few crucial areas to watch.

Know the Process and Who They are

The sell-side due diligence process is quite lengthy as it involves several rounds of interviews and the preparation of reports. In fact, one completed deal usually requires at least ten due diligence by all parties involved, showing that it takes plenty of time and effort to complete.

One of the most critical aspects of sell-side due diligence is knowing what to look for in an investor. Have an idea of the goal profile for your ideal investment partner. As a seller, you must consider what a potential partner might want to examine and make daily preparations for scientific due diligence.

Consider whether they are a strategic partner or private equity. A strategic partner is one with experience in the BioPharma industry and is ready to provide you with the expertise to diversify your products. On the other hand, a private equity partner is one with vast resources from high-net-worth individuals and businesses in various fields ready to invest in private enterprises. Many sellers prefer private equity due to its increased flexibility, discipline, and concentration compared to a strategic partner.

It is also critical to note the current process of your potential investor. Are they in planning mode, conducting screening of potential investments, reaching out, or ready to have formal conversations? Answering these questions will help you be more prepared when sharing data about your BioPharma company. It is also worth considering whether your goals align with your potential investors. This will help you identify red flags early on, saving valuable resources.

Is Your Product Going to be a ‘New Therapeutic Area’ or ‘Bolt-On’ for Your Potential Investor?

Does your product strategically fit into the product line of your potential investor, or are they investing in a totally new product line? A bolt-on investor is often viewed as a safer, faster, and easier to absorb option. However, they may not align with your investment goals as they may only want I.P. rights or a potentially lesser form of participation in your company.

Alternatively, a partner investing in a new therapeutic area (T.A.) may have a more significant impact on your company. This is because it is likely to offer you more long-term leadership roles and be more milestone driven to reduce risk.

Are They Ready to Partner?

If you have already identified your potential investor, you should also ascertain whether they are ready to partner. Review their past deals and the process conducted to make them successful. Note that it is best to have an investment partner who is as passionate and dedicated as you are to your company. They should also have almost similar procedures for easy merging and overall operations.

Understand How Investors View You and Address Critical Areas

A large part of M&A transactions is understanding your company data and objectives and presenting them to interested parties. By reviewing your company information, you can clearly define the current status of your business and evaluate potential investors in accordance with this data. There are several key areas that you must address when conducting sell-side due diligence before an M&A transaction.

In terms of your product line, you must consider:

  • P. and patent rights
  • The primary objectives of the order, including market assessment, goal of investment, and Target Product Profile (TPP) status
  • Difference between your product from that of the competitor
  • Manufacturing considerations; whether specialized, CRO, or other
  • Current or anticipated hurdles related to the product
  • Third-party review of the product

Potential investors also look for comprehensive details about the technology used in your BioPharma business. As a result, you must be ready to address the following key areas:

  • Whether you have a proprietary biotechnology platform or any lab-centric technology in place
  • An overview of your company’s information technology landscape and established roadmap
  • A comprehensive assessment of your information security system
  • Compliance evaluation
  • Plans for remediation

The Importance of Working with an Experience Deal Team

When dealing with partnerships and M&A transactions, ensure that your deal team is knowledgeable and prepared because there is a high expectation for information, data access, data room creation, and sharing best practices. Having a group of impartial and experienced advisors by your side to evaluate risk, suggest workable solutions, and contribute a critical skill is essential for success. They must also be willing to invest long hours and partner with you for the long haul.

Deal teams in M&A transactions require plenty of time to prepare the relevant information for potential investors. Liberty Advisor Group has the experience and expertise to handle BioPharma M&A transactions. Our team focuses on efficiency and speed, allowing our clients to realize the value of their money while reducing unnecessary noise.

When you bring on board a team of seasoned strategists and consultants with proven operational competence and deep industry knowledge, like us, you gain plenty in terms of cost planning and awareness. Contact us today to get the most out of your BioPharma M&A.


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