preparation for negotiation national research council - february 14, 2001 presented by: marcus...

Preparation for NegotiationPreparation for NegotiationPreparation for NegotiationPreparation for Negotiation

National Research Council - February 14, 2001

Presented by:

Marcus Brady, Vice President Corporate Development Neurochem Inc.

TopicsTopics

• Getting Started.. Begin with the end

• Objectives and decisionmaking

• Deciding what information to get

• Sources of information

• What to do with it now that I have it

• Getting Started.. Begin with the end

• Objectives and decisionmaking

• Deciding what information to get

• Sources of information

• What to do with it now that I have it

Opportunity Favours the Prepared Mind

…bring the Pieces of thePuzzle Together to Reduce Uncertainty

…bring the Pieces of thePuzzle Together to Reduce Uncertainty

Patients

CompetitorsFuture Events

Fit??Fit??

Getting Started…Begin With the EndGetting Started…

Begin With the End• Decide on the objectives & information

requirements• Who is your client, what decisions must

be made• Packaging the results:

– information a model ongoing resource/system

– presenting the findings

Decide Early on Your Objectives

• Assist in meeting strategic objectives– Find/value /dispense with a product(s)– Prepare for forthcoming negotiation

• What do I need to make/influence the decision

• How will the information be used/ presented & by whom

Potential Objectives

• Securing a new product/technology• Enhancing competitive position • Potential benefits

– Brand name– Block out competition– Revenue – Pipeline

In any event, the qualitative and quantitative evaluation of product value must be determined

What Information Do I Need?

• Analytical due diligence

• Confirmatory due diligence

• Key data may include– Potential new products, partners– Insight on the other negotiators– Info on traditional deal structures – Value of product

• sales, competitors• technology, performance

Taking Stock of Your Resources

Internal• Budget• Scientific and

business reports, conference proceedings

• Staff, Employees• Time• Head office

External• CHLA & other

networks• Subscriptions,

databases, studies• Grants• Web• Consultants, lawyers• Interviews

Setting the Stage for Research

• Understanding your negotiation position and that of your client/partner

• Laying a solid foundation for the desired end result

• Packaging the info• Deciding when you

have enough• Preparation,

Preparation, Preparation

What does it take to get the answers?

• Double the time and increase the units– 2 hour estimate = 40 hour reality

• Always have three alternatives

• Plan for success & for failure

Let Your Priorities Guide the Information You Gather

• Time sensitivity of decision, negotiation, information needs

• Price

• Inter-company synergy

• Competitive advantage in negotiation

• Product: stage, size of market, risk, therapeutic area, market movement, fit of product in the marketplace

Gather Internal Information Needs First

• Pipeline analysis– Revenue analysis

• Time available• Criteria for

selecting product– Funds available– Product searches– Hurdle rate

• Define internal capabilities & resources

Qualify Both Internal & External Information Needs• Short & long term objectives

• Identifying & qualifying alternatives and Critical Success Factors

• Short & long term corporate & product SWOT

Pipeline AnalysisPipeline Analysis

• Objective - Bring the highest potential products to market fast.

• Determine product potential through model building.– Where do you want to be?– Where are you going?– How can we get there faster?– Are resources in line with direction?

• Objective - Bring the highest potential products to market fast.

• Determine product potential through model building.– Where do you want to be?– Where are you going?– How can we get there faster?– Are resources in line with direction?

Lacking Search Criteria

• The product should be– Stage– Medical or market

performance– Patent status

• Product holding company should be– Stage– Experience– Product mix

Decide early how much information you want out there about your needs

An Example: Late Stage CNS Product for Canadian MarketStage Dbase Consultant NetworkDiscovery

Preclinical

PI

PII

PIII

Launched The earlier the product the moredetective work you will need to do

Risk : Reward on Information Sources

Source Accuracy Time CostWeb Variable +

ProfessionalNetwork

Good +

In house Good +

Consultants Variable -

Databases Variable +

Track people from your target company to companies with which you are affiliated

Costly Reports and Low Cost Alternatives

Costly (My order of Q)• Scrip PJB• Windhover• Connect• DR Reports• TMG• SRI• D&MD• D&B• Theta

Relatively Cheap • Federal Government• Economic development

offices• Disease associations• Clinical experts• In Vivo/ Biocentury• Tech. Transfer

Conference & AUTM• Attlas Directory

Other Useful Internet Resources

• Company home pages• SEC’s EDGAR Database (sec.gov, edgar.online.com)

• Mailing Lists and Newsgroups (Dejanews.com)• Analyst reports (stockinfo.standardpoor.com, moodys.com,

dbisna.com)

• Research Databases (Dow Jones, Reuters, Knight-Ridder)

• News delivery (pointcast, excite, biospace, newspage, yahoo, Nasdaq)

Web Sites of Considerable Utility

Site Financial Sales GossipCompany

Medical

Web resources

Edgar Online

Biospace

Recap

Analysts

Efficient use of Consultants

• Define roles and responsabilities– finding products– pricing / valuing the product– preparing negotiation position, market

evaluation….strategy– participation in negotiation

Steps in Due Diligence

• Set up due diligence team

• Size and fit of counterparty/technology

• Financial potential

• Intangible assets

• Validity of dossier

• Quality transactional elements

• Last minute probles

Often Overlooked Pieces of Your Network

• Government (Labs, Industry Canada, Regulatory Bodies & foreign equivalents)

• Legal and accounting counsel• In house recruits• CHLA & Industry associations• Venture capitalists

Take a minute and reflect. Buy a contact manager.

Setting the Network Size in Proportion to Risk

Enlarge It• Secrecy lost• Less control over

message• Increased

opportunities• Too much

information • Inventors galore

Contract It• Too few

opportunities- too late

• Late stage products• Secrecy

maintained?

Try to Use Company Resources & Head Office

• Develop & maintain your network early (Marketing, HR, Sales, Clinical, R&D)

• What info. really makes a difference

• Selling to management- – Knowing what they really want & sell that

back to them– Research the social styles, buying

influences and objectives of internal market

Maintaining Credibility with Targets

• Knowing your own firm and its weaknesses

• Ask. Yes Ask.

• Focus on the product not on the price

• Know competing products and their strengths & weaknesses

• Be prepared to back up “Shadows on the wall”

Serial Contacts-Definitely Contact Multiple Companies

• Put your needs and expectations on the table

• Research internal alternatives both standard and creative

• Ensure proper mix of benefit, price, time to market

• Always develop a plan B

Target Company Package & How to Evaluate it

Set Criteria First ConsutationInternal External

Valuation

Market & salesdata

Science

Risk

Intellectualproperty

Regulatory review

Quantitate Financial Potential

• Revenue potential• Gross margin potential• Operating margin potential• Type of deal to target• Development costs (of technology/product)• Fields of use• To swap or not to swap

RevisionsRevisions

$36.3 Million

$100 Million

What to Do With The Info Now That I Have It

• Reports

• Models

• Lists

• Negotiating strategy

• Timing of decision

• Team evaluation

Plan for Problems

• Overbidding

• Technology or patent problems

• Accounting policies & irregularities

• Foreign currency considerations

• Regulatory issues

• Ownership structure & corporate culture

Reporting Structure & Impact on Internal Marketing

• Corporate Needs– Funds– Sales– Recognition– R&D funds– Equity– Timing of deal– Partner and PR

• Social styles of all involved– Considerate– Direct– Spirited– Analytical

Crisis-Time is Gone, Information is Incomplete

• Establish criteria for completion early

• Plan ahead for this contingency– consultants, additional staff– time, money, pre-approvals– get essential information first & its costs

• What can be done– Stall– Re-evaluate your needs & risks

Information is always incomplete

Caveats

• Encourage your partner to perform this exercise too

• This must be an ongoing activity

• Use your network. Let your hair down.

• Get a PIM/Contact Manager

• Avoid a commission, but ensure that you leave enough time to do the job.

Did I mention preparation and practice

Want more information?

The price is one jokee-mail me

mbrady@neurochem.com