Michael J. Martin
MicroDose Therapeutx, Vice President, Licensing and Business Development, Monmouth Junction, NJ, USA
Start your engines and look for the checkered flag! Lets’s face it, product and technology licensing negotiations between pharmaceutical and biotechnology companies are challenging, difficult and protracted. From initiating a transaction to ultimate contract, it can take more than a year, numerous term sheets and many contract drafts! The process is wearing. Negotiations involve a myriad of financial, regulatory, supply, development and operating hurdles which have to be addressed and not to speak of the personal egos involved. Further, this does not address the internal approval process which adds anxiety to the negotiations. The Business Development Officer engages in a diplomatic joust between these internal and external pressures.
The purpose of this article is to focus on the key “Deal Breaker,” the “Almighty Buck!”–or in licensing vernacular: valuation and allocation thereof. More specifically, the article discusses key financial issues and provides a methodology to identify and resolve such conflicts. These conflicts will be discussed in the context of who has the negotiating leverage. For brevity, key contractual negotiating issues such as Field of Use, Intellectual Property Issues, Territory and Termination Provisions are excluded from discussion. No, this is not designed to be a “cookbook” process to resolve various negotiation differences, but to provide a framework to guide discussions which may lead to resolution and reduce confrontation. The key points which will be discussed are:
• Valuation
• Deal Structure (Allocation of Value)
• Resolving Disputes in Valuation
• Understanding Specific Financial Disputes and Suggested Remedies
• Key Financial Contractual Issues.
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