The Science & The Art of Negotiation Christine T ... · The Science & The Art of Negotiation Christine T. Fischette, Ph.D. CEO, BioLinkUp, LLC [email protected] +1.973.978.0671

The Science & The Art of Negotiation

Christine T. Fischette, Ph.D. CEO, BioLinkUp, LLC

[email protected] +1.973.978.0671

Agenda •  Audience check •  Nego.a.on

Searching Your Soul

Ge5ng Out of Yourself

The Process

Building the Rela.onship Building Consensus

Troublesome Behaviors

•  The Happy Ending .. Or Not 2

At the Start

Before Pu5ng the Puzzle together…

KNOW THYSELF

-‐ Do u.lize your strengths

-‐ Don’t try to control the rest

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(PWC)

Reasons for Partnership Failure

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What do YOU really needWhat do YOU really want?

What do THEY really needWhat do THEY really want?

The win-win situation

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Smaller Co.

Cash

Development expertise

Regulatory Guidance

Global Commercial StructureKOL relationshipsTrained Field Force

Payer negotiations & expertise

Company Validation

Big BIOPharmaAdvanced or novel product candidate / technology

IP

Reduced development time/risk

Possible pipeline of products/add’l indications

Sales!

What Does Big BioPharma Want? Is it really a black box? (1)

–  Does it Work?

–  Is it Safe? –  Is it Novel? –  Exclusivity? –  Significant Pa.ent Benefit / Outcomes? –  Can it BE MADE to produce significant sales?

–  Can it beat the generic? Formulary Posi.oning is Key!

and finally…

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What Does Big BioPharma Want? Is it really a black box? (2)

Would YOU pay for it?

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Big BioPharma vs. Investor Priorities

–  Cri.cal to Big BioPharma:

Intellectual Property / Market exclusivity

–  Cri.cal to Investors: Management

–  Build a Product vs. Build to the next Inflec.on Point

–  Long term View vs. Short Term Exit 9

How to Approach Big BioPharma Do your homework!

–  Target the right companies: Research pipelines, strategies, senior management presenta.ons to the investor community, company websites, etc.

–  Marketed Products may not always reflect future direc.on

–  Target the right people: Most large companies are aligned by therapeu.c area; most aênd the big partnering mee.ngs, like BIO!

–  Know your compe..on! Check all sources, including clinicaltrials.gov 10

The Initial Contact

•  Know your Audience –  How Will It Fit for Them? –  Process

•  Keep it Simple and Layer Informa.on –  The Example

•  Your “USP” = Unique Selling Point –  Differen.ate Yourself -‐ Always!

•  Remember to Listen

•  What Do You Want? What Do They Want? •  Closing

BD & L Process

! Proactively scan for opportunities fitting into your strategy

! Proactively build relationships for the future

! Review of confidential information

! Technical profile

! Commercial profile

! In-depth analysis of technical and commercial potential

! Deal terms ! Deal Execution

! Communication

Alliance Mgmt Negotiation Due

Diligence

Initial Technical Evaluation

Network Building Search/Early Evaluation

Start Simple--The non-confidential package •  Execu.ve Summary 1-‐2 pages

•  Non-‐Confiden.al ppt no more than 20-‐25 slides!

•  Highlight what you want upfront!

–  e.g., “Seeking.. partnership, licensing, supply, funding, M&A” •  Main facts:

–  Product, Class, Development Stage, Mechanism of Ac.on, Expected indica.ons, Dosage Form /Packaging, IP posi.on/type/expira.on, Expected Launch, Next milestones/plan,

–  Data Summary: Pharmacology, Toxicology etc…

•  Bullet Points and/or Key Data

The non-confidential package (2)

•  Main facts: –  Market: Forecasts and Assump.ons

–  Compe..ve posi.on: Key a^ributes, Product Differen.a.on, Now/future…..Your “USP”!

–  Company Descrip.on: Founded, Facili.es, Key Assets, Revenues/Financing Round, Cap Table, Personnel, Loca.ons, Current partnerships, primary contact

•  Don’t label it confiden.al if it’s not!

The Example •  Partnering proposi.on: Seeking partnership

•  Product Name: XXX

•  Class and Mechanism of Ac.on:

–  ABC-‐123, An X-‐Blocker •  Development Stage and next milestone:

–  Proof of Concept established, Ph 2 to ini.ate Q3 20XX •  Expected Indica.ons:

–  RA, IBD: What’s first, other possibili.es

•  Dosage/Packaging: –  Oral, 1X/day

•  IP posi.on:

–  X patents issued / filed, (composi.on of maêr, etc.), date, geographies/jurisdic.ons, other IP

•  Expected Launch: 20XX

Layer the Information: Peeling the Onion —Confidential Data (1)

•  Confiden.ality Agreements (CDA) –  Scope must be well defined (product/specific program, Phase,

Indica.on, Term) –  Must Pass Research and Legal Screen before executed

•  Confiden.al Presenta.on & Due Diligence

–  Set up Data Room –  Sec.ons for different speciali.es –  In-‐Depth Material for Technical Review –  In-‐Depth Material for Commercial Evalua.on

Layer the Information: Peeling the Onion —Confidential Data (2)

•  Structures –  If published-‐-‐it should be in the non-‐confiden.al –  If proprietary-‐-‐maybe not yet

•  Manufacturing –  Biotechnology –  COGS, now / later, ra.onal –  Process, synthesis, number of steps, research vs. scale up lots, etc.

•  IP List

•  Then, Maybe a Confiden.al Presenta.on / Mee.ng

Your “USP” - Differentiate yourself

•  How do you stack up to the compe..on?

–  Broaden your defini.on of compe..on

–  Address issues directly •  Avoid Overused Marke.ng terminology

–  “Unique Plaoorm Technology”

–  “Not a typical biotech company”

•  What really differen.ates you? No, Really

–  Remember the audience

–  Products, People, Technology –  Comparison chart on key a^ributes

Choosing your Partner – Remember to Listen

•  This is your chance to learn about your prospec.ve partner

–  Companies change; People change, what is wriên holds!

–  Partner’s strategic plan going forward –  Philosophy/Culture, Capabili.es, Size, Therapeu.c areas –  Processes are important: realis.c .melines (10 months not

uncommon)

–  Who is the main contact, decision makers, and influencers

•  Learn who is most likely to partner with you and bring your product successfully forward

Preparing the Term Sheet

•  What do you Need vs. Nice-‐to-‐Have?

Grant of Rights, Field of Use, Territory, Manufacturing, Development, Commercializa.on, IP, Financials

•  Control Expecta.ons Internally

–  Benchmarking, but “No two deals are ever the same” –  Bio Dollars vs. Upfront/Near Term Milestones

–  Most NEVER get to Bio Dollar Sum!!!

•  Look at your Alterna.ves

•  Timeframes

•  Deal Structure –  Iden.fy Preferred Deal Structure –  Consider Op.on Agreements: It’s a Star.ng( or ending ) Point

Term Sheet Dynamics

•  Think Long-‐Term Strategy

•  Should you go first?

–  Psychological first mover advantage vs. maybe limi.ng

•  Include Financials or not? •  Establish Lead contact person on both sides

–  Agree that ALL communica.on goes through 1 designated party on each side. Require “CC” at least from all cons.tuents on your side! This may be harder than you think, but it is necessary to “control” the nego.a.on process

•  Communicate Timing expecta.ons

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Negotiating the Agreement - Internal Considerations

•  Agreed Term Sheet / Leêr Of Intent is the founda.on

•  Who does the first drap? Same issue as Term sheet, as discussed before

•  Discuss internally:

–  “Throw the kitchen sink in?” and Take it out later.. –  What is realis.c?

•  Do not include BATNA / “walk-‐away”

•  Leave room for compromise – You will need it!

•  Get management priori.es established, reconfirm must haves vs. nice-‐to haves; Align your side, communicate with stakeholders early and open

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Deal Parameters (1)

•  Scope (Grant of rights) / Field •  Co-development/co-commercialization or other deal structure •  Geography •  Potential for future collaboration •  Non-compete •  Financials, etc.

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Deal Parameters (2)

•  Governance – who makes final decision? At what stage? For what area?

•  IP

•  Reps & Warran.es

•  Change of Control •  Breach

•  Bankruptcy

•  Term

•  Termina.on -‐ Beware of Deal Fever!

Probably the most overlooked of the cri.cal sec.ons, yet the most likely to occur. Who gets what? Who can use what? Can opera.ons con.nue? Who pays for what?....

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Housekeeping / Process

•  Define Next Steps

•  Set up dates/loca.on for next mee.ng

•  Be clear about .melines

•  Control expecta.ons internally and externally

Negotiating the Agreement - External Considerations

•  Build rela.onships, especially with Lead on other side

•  Establish trust

•  Discuss .ming – set expecta.ons

–  Be wary of sta.ng drop-‐dead deadlines – you could lose nego.a.ng power

–  e.g., Ph 3 planned to start XX; Budget cycle woes •  When you hit a roadblock, find out why your opposite is demanding it

•  Be crea.ve – try to find another way to meet your opposite’s goal

HARD on the issues, SOFT on the people!

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The Deal Zone TARGETBATNA

Theirneeds

TARGET BATNA

Yourneeds

*multidimensional

ZOPA = "Zone of Possible Agreement"

DealZone

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Investigative Negotiation -‐Don’t just discuss what your counterparts want – find out why they want it

-‐Seek to understand and mi.gate the other side’s constraints -‐Interpret demands as opportuni.es

-‐Create common ground with adversaries

-‐Con.nue to inves.gate even aper the deal appears lost

-‐Effec.ve nego.a.ng requires not only selling your own products and services but also requires a strong focus on the other side’s interests, priori.es and constraints

REFERENCE:: Malhotra & Bazerman, HBR Sep 2007

Negotiating the Trouble Spots

Different View of “the Facts”

–  Be cognizant of the science/development milestones

–  How will a result affect approvability, the label (package insert), reimbursement, sales, and ul.mately the financials?

–  Aâch different milestones/royal.es to one outcome or the other

–  If M&A, consider Con.ngent Value Rights (CVR’s)

–  If last resort, consider going back to the drawing board and revise deal structure for an Op.on agreement

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Bidding Against Yourself

Opposite claims demand is outrageous and “orders” another proposal

Explain your ra.onale Request a counterproposal in wri.ng

Might be done once, but beware of undermining your own posi.on

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Passive Aggressive Opposite

“Silence is Golden” Some.mes the best nego.a.on tac.c is saying nothing

Be pa.ent and wait

Harder for some of us than others

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UNCONSTRUCTIVE Behaviors –(If you are a parent, you have an advantage)

OVERLY AGGRESSIVE / NON-‐COOPERATIVE BEHAVIOR

"  try to discover reason for behavior; do you have a blind spot? Are you not understanding the other side’s issue?

"  try to resolve issue in private to allow person to save face; reiterate “focus on the issue, not the person

"  LAST resort: may need to contact superior on the other side or walk-‐ out, but expect and plan for repercussions

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THEATRICS

Let them spout; listen carefully; you may find the real reason for the outrage which is not stated or obvious

Maintain silence

Do not engage; speak soply

Take a break; reconvene at another .me

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THREATS

Are they trying to save face?

Ignore? Paraphrase the concern

S.ck to the issue

Assure other side management has your back (and make sure of it)

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INTERAL DISCORD -‐ Your side this .me… and this one is really tough! Everyone wants to be at the table

Communica.on with Senior Management is impera.ve

Establish who is on the deal nego.a.on team; who needs to be present vs. who needs to be informed

Communicate to Stakeholders what management’s goals really are

Fine line: Involving stakeholders in the nego.a.on who will be key to implementa.on, but insula.ng them from the sharper discussions which may ensue. This is a .ghtrope!

Communicate, Communicate, Communicate 35


Almost there, but not quite – the “Package Deal”

Reserve for last stages of nego.a.on Far apart on a number of issues, but s.ll hopeful deal will go forward:

"  List all issues in the package "  Determine which are true deal-‐breakers on your side AND on the

other side

"  Compromise on some "  Be crea.ve on others "  Trade "  Seek Senior Management input

" Walk out, if necessary 36

Hitting a Major Roadblock: One Last Try The Option: (Starting or Ending)

Consider a License (or M&A) Op.on

Reduces Risk

Small upfront; Pre-‐agreed deal terms; more generous upfront on exercise of op.on

Implica.ons:

Licensor gets immediate cash to get to next value inflec.on point

Licensee reserves full payment – noncommiâl – un.l data set achieved

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The BATNA: The Best Alterna.ve

to a Nego.ated Agreement … or the Deal Breaker or the Walk-‐Away

Always know what this is for your side; it may change during the course of the nego.a.ons

Always nego.ate for the good of the project, not the people, not one side or the other

Do not let people’s behavior get in the way of a ra.onal idea – leave the ego at the door … yours and theirs

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Near The End

•  Execu.on – once finished nego.a.ng, sign ASAP!

•  Regulatory Issues & The Press Release

•  Start circula.ng draps of press release near end of nego.a.on

•  Leave .me for both IR/Communica.ons groups to go through normal review

–  Material? Disclosure required if a public company involved

–  Exclusive commercializa.on? For USA need Hart-‐Sco^-‐Rodino (HSR) approval; guards against monopolies; may request internal documents/ppts describing the deal in circula.on during nego.a.on;

–  Avoid: “By doing this deal, we will own the market!”

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The End

•  THE PARTY!.....but you are not done

–  Celebrate, but con.nue to help build rela.onships among stakeholders from both sides

–  Stay involved as you con.nue with the project or hand off to strategic alliances

–  Alert your side to “sensi.vi.es” of the other side

–  Many Deal Structures Evolve to more integra.on or M&A

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Spectrum of Transaction Alternatives HIGHEST Degree of Integration LOWEST

Full Acquisition Structured Acquisition

Majority Investment Plus

Licensing/ Collaboration

Joint Venture Minority Investment Licensing

# Full control of development and marketing

# Full upside potential

# Synergies captured

# Aligns incentives for both parties

# Bridges value gap

# Opportunities to creatively structure future upside (Royalty trust, Spin-out/carve out)

# Rights to specified products/ technologies

# Board/committee representation

# Reduced exposure vs. full deal whilst securing options for full ownership

# Joint control of specified products/ technologies

# Reduced financial outlay/reduced dilution

# Shared risk

# Reduced financial outlay/ reduced dilution

# Possible options on pipeline products or whole company

# Aligns incentive for both parties

# Rights to specified products/ technologies

# Minimized financial outlay

# Minimal dilution

# Minimized risk exposure

! Greatest financial outlay/ greatest dilution

! Full risk assumed

! Integration issues

! Valuing contingent incentives / value rights

! Employee retention

! Accounting treatment

! Complicated governance - minority shareholders

! High financial outlay/high dilution

! Financial consolidation

! Governance issues/ complexity

! Duration/exit provisions

! Lesser degree of control

! No rights to other products/ technologies

! Reduced influence

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Have fun, good luck and remember…

1) NO deal without a meal!

2) It’s a small world – you may meet again!

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Contact:

Chris.ne T. Fischeê, Ph.D.

CEO, BioLinkUp, LLC

[email protected]

973.978.0671 mobile

linkedin.com/in/chris.nefischeê

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Documents

The Science & The Art of Negotiation Christine T ... · The Science & The Art of Negotiation Christine T. Fischette, Ph.D. CEO, BioLinkUp, LLC [email protected] +1.973.978.0671