Earlier this year, FIerceBiotech pointed out that biopharma had $1.7 trillion to spend on merger and acquisition (M&A) deals in 2022. Large pharma companies like Novartis, Pfizer and Merck & Co. have made it clear that they’re on the hunt for acquisitions, noted FierceBiotech.
These stockpiles of cash are due to many large pharma players maintaining COVID-19 treatments in their arsenal, explains PwC. Combined with biotech valuations normalizing after years of a booming market and the 2025 patent cliff rapidly approaching, the industry is currently experiencing a strong deal environment.
Biotech and Pharma M&A Transactions
M&A and other financial transactions involving life science, biotech and pharmaceutical companies can be highly complex, with hundreds and sometimes thousands of confidential documents that need to be shared among licensing partners, bidders, investors, CROs and regulators, in addition to their associated legal, finance, accounting and leadership teams.
Aside from the sharing and evaluation of corporate financial and operational documents, biotech and pharma M&A is particularly sensitive because of the due diligence involved in examining the documents related to the intellectual property (IP) of the products of the target company.
In many ways, the valuation of a biotech company’s IP is most closely associated with the valuation of the entire company. As such, the proper, timely presentation and sharing of these important documents is critical for a successful transaction to close.
Documents related to the IP of a life science or biotech company involved in an M&A transaction include, but are not limited to, the following:
- A list of all IP of products currently being marketed
- A list of all IP of products currently under development, including their regulatory statuses
- A list of filed/approved marketing applications in the U.S. or abroad
- A list of drug master files (DMFs) filed by the company
- Documentation surrounding preclinical testing of existing or pending products
Improving the Biotech and Pharma Due Diligence Checklist
M&A transactions do not occur frequently enough for companies to have a process in place that is repeatable every time a transaction is about to take place. Instead, when a transaction is imminent, they can rely on a virtual data room (VDR) to help them with document hosting and sharing. A VDR ensures that all of the necessary participants have the right access and tools to review the information necessary to make decisions related to the transaction.
Without friction and delays, participants will have a much-improved experience. Documents will be available to the right person at the right time; there will be annotation and review capabilities to keep all digital conversations within the platform. Finally, strong security features will be built in, so reviewers will not need to worry about changing their device or network security settings and the companies involved will not worry about the possible misuse or compromise of their sensitive information.
How a VDR Is Essential for Biotech and Pharma M&A
A VDR is essential for a smooth M&A transaction. Here are a few reasons why.
If a document requires signatures, the reviewer does not need to download the document, open it in another application (i.e., Adobe Acrobat Reader), sign the document, then re-upload it to the platform — signing can happen right within the VDR. This is the same for annotation. If a reviewer has questions or would like to leave notes, there is no need to download and use another application for that. All comments can be made within the VDR.
Secure Document Sharing
VDRs meet the strictest of standards for security and compliance. Stakeholders in a transaction involving biotech or life sciences companies often work for organizations with varying security policies in place. For example, the security policies of an investment bank might differ from those of a government regulator and still differ greatly from those of a university science lab.
Collaborating and Controlling Documents
The administrator of the VDR can upload, download, annotate, grant and revoke access rights, change settings (e.g., download, print), manage users and oversee other administrative features from a single dashboard. This facilitates the review process and doesn’t force the due diligence teams to leave the platform to send a message or make a comment. These features add speed to the document review process, and thus efficiency.
The documents can also be in any format, which is important in health care and life sciences transactions as there are many forms of content, such as photos, drawings/renderings and flow charts.
Assisting in Due Diligence
The document review process, carried out by the bankers, accountants, senior leadership and their consultants, is necessary for the due diligence of a transaction. If particular documents are not reviewed, or not reviewed properly in time by the right team members, transactions can be stalled or even canceled.
Managing Testing Data
Sharing documents related to clinical trials, testing or even sensitive patient data is also an important component of the document review process for a transaction involving biotech or pharma. The results of these tests can indicate to the acquiring company what future success looks like, and how those results might affect the valuation of the company and the valuation of the deal.
CapLinked for Biotech and Pharma M&A
A world-class VDR like Caplinked can ensure that highly sensitive documents can be shared securely across any platform and any device. This is key to helping mitigate some of the bottlenecks that can arise throughout the life cycle of a deal, especially during due diligence.
Start your free trial today to see how CapLinked can help streamline all aspects of a biotech or pharma M&A transaction.
Jake Wengroff writes about technology and financial services. A former technology reporter for CBS Radio, he covers such topics as security, mobility, e-commerce and the Internet of Things.