Comment: Finding an alliance partner that will maximise the value of your assets

By Marcus Bain, Managing Director of Wescadia Group.

A recent article in Australian Life Scientist highlighted the trend of Australian biotechs shunning licensing deals and going it alone to bring their products to market.

This trend illustrates that biotechs are scrutinising the value of entering into alliances. If biotechs do decide to partner, licensing surveys by consultancy firms show that biotechs seek to partner with big pharma.

However, partnering with big pharma does not always guarantee success and in some cases partnering with a smaller and niche player may actually generate the best value. Although the financial and commercialisation strength are aspects that are often considered when considering a partner, some of the less obvious aspects include the following:

How will our asset fit with the partner’s portfolio? For example, if the asset is a backup to the partner’s assets then your company’s products may not get the focus that you believe it deserves.

On the other hand, if your asset will replace the partner company’s leading assets or programs or will have a leadership position in their portfolio, then the product is likely to receive a genuine focus.

What is the partner’s vision for the asset? How does this compare with your vision? If there are differences, what are the reasons for these? Can these differences be compromised? For example, you may have a vision for your asset for it to be used in a broader population of patients than what the partner company has.

The partner company may have its reasons for focussing on a narrow population of patients in line with its strategy for the asset. But it is essential for a partner to understand your vision for your asset and to ensure discussion on any differences.

What are the synergies that the partner can realise for our asset? Synergies can be realised by using a partner’s existing infrastructure (e.g. R&D resources, sales and marketing, or administrative) which will allow the partner to extract costs from a transaction. By understanding all of the synergies that can be realised by a partner, you can have a better understanding of their assumptions for the profitability of the asset.

A partner that can realise more synergies will be in a better position to pay for a higher price for the asset. A partner that has an R&D or commercial infrastructure that it can leverage with an asset will mean that it is more likely to find synergies than for a company that does not have the infrastructure and may need to build these capabilities or acquire the infrastructure.

What is the partner’s approach for handling disagreements? There are bound to be differences in the culture, thinking and vision between companies, which at times may bring about conflict in an agreement. While disagreement from time to time is inevitable, the way in which both companies handle the disagreement is a key issue.

A governance structure can bring a formal framework in providing oversight of an agreement but there still needs to be the reassurance that disagreements can be worked through in a pragmatic and mutually agreeable manner. It is important to consider how the partner has dealt with disagreements with you previously or with other alliances and understand whether they will listen to your point of view.

Will the partner actively look to realise value from our alliance? A key role for alliance management is to maximise the value from a transaction. This may be through identifying ways in which cost can be reduced for an asset (e.g. through cheaper manufacturing), label extensions or developing the asset for other indications, generating data to demonstrate the evidence of the asset, or synergies with their own intellectual property.

It is useful to consider the partner’s resources for realising the value from an asset, their track record in realising the value from other agreements and their vision for your asset.

How do both organisations complement each other? For instance, can you realise value in other aspects of your businesses? Entering into an agreement with a partner may be a stepping stone for future agreements of your other assets. Taking on a broader view of the agreement will ensure that this option has been considered.

A checklist of questions can provide insight when considering an alliance partner. What are the ways in which you identify the optimum partner for your assets?

Marcus Bain is Managing Director of Wescadia Group, a healthcare consultancy firm that works with life science organisations to help them achieve sustainable growth, bring innovative treatments to market and maximise the value of their assets.