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VACCINATINGBIOPHARMA/DEVICEPRODUCT LICENSINGAND ACQUISITIONS:Advanced Operational Issues in Pharma productlicensing and acquisition
August 20, 2018
Gary Gamerman, MS, JDPresidentSeraphim Life Sciences
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AgendaProduct licensing, acquisition, and partnering transactions are the lifeblood ofbio/pharma and medical device companies. Most business development teamsand counsel understand the IP and other common transactional issues. Oncethe deal is signed, however, operational issues spring to the forefront and causemany disappointments and disputes. When not well-considered, these issuescan make issue prevention, resolution or deal unwinding very difficult.
This webinar will overview some common operational issues typically missed ormisunderstood in agreements with real-life examples.
• Product Transfer, Supply, and Supply Assurance – where are the hidden issues andmythological rights
• FDA Issues in Product Transfer – what are you buying, what are you getting, wherecan it go wrong
• Distribution transition – can you keep or escape the channel and its currents
• Reimbursement – what needs to happens in the handoff, what can happen
• Indemnification and Insurance – whose tail is covered
• Windup and exit -- why cold stops don’t work for anyone
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The Deals … what could go wrong?
• Acquisition / License of complete drugproduct rights
• Co-promotion rights for medical device
• Exclusive rights for marketing of biologicin defined therapeutic areas
• License and supply of specializedmanufacturing and formulation/deliverytechnology
• Asset based purchase of pharmaceuticalcompany
• Collaborative development and marketingventure
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A Contract usually is…?
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Which usually ends up….
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A Contract should be…?
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Product Transfer, Supply, and Supply Assurance– hidden issues and mythological rights
• Supply, Order, Delivery, Repeat…or not Product supply provisions in most agreements
are works of swiss watch precision based onwell-established standard language
Reality is that supply chain operation and assurance executiondepends on the product, parties and relationship
What is the real forecast order to delivery operational cycle and capacity
What are the critical dependencies and disruption risks on both sides?
• What is really fault vs stuff that happens?
How will exceptions/risks to delivery or capacity be alerted and managed
International trade issues
Is what the contact says is what can or will really happen?
• Product Inspections and deviation handling
• Production progress notices and deviation handling
• Finance and payment – management of cost reviews and changes
• Audits and issue resolution7
Product Transfer, Supply, and Supply Assurance– hidden issues and mythological rights
• Transfer, March-in, take-over, and alternate supply/market provisionsare often non-operative due to insufficient operational considerationand preparation in both contract terms and operations
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Product Transfer, Supply, and Supply Assurance– hidden issues and mythological rights
• What does it really take to execute?
In hand capability Internal technical / management competence and capacity
Contracted and/or internal supplier onboarded
Special technology, equipment process, knowhow
Ongoing maintenance of competency and capacity
Timeline and operational barriers Regulatory and technology: Regulatory status (NDA, BLA, PMA…) and product complexity
• Impact of new site and/or transfer and changes under regulatory approval
Materials, scheduling, ramp up….
• API, excipients, special packaging, reference standards, process and methods
Third party IP and other dependencies Securing access to IP and critical materials and vendors
Ex-US IP controls
Customer, and Payer considerations Will change impact current reimbursement or customer (new NDC, P&T review)
Impact of changes on customer (changes in appearance, coding…)9
FDA Issues in Product Transfer – what are you buying,what are you getting, where can it go wrong
• Application and Technology Transfer Handover of Marketing Application
Who is going to be responsible for what and when
FDA user fee impact and thresholds
• Any planned submissions in the queue?
Change of name, NDC --customer, payer and other impacts?
Ongoing product investigations, close in annual reviews
Existing product in field
Historical and institutional knowledge
Production Control and Changes
DMF and material/component supply access
Tooling and specialized equipment
Process and test methods
DSCSA status, serialization data
Validation Support
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Distribution transition – can you keep or escape thechannel and its currents
• Do not assume take over / acquisition will have smoothdistribution transition Distributor agreements on both sides
Consents and springing rights
Is there specialty distribution?
Are the government, GPO and other agreements or marketrequirements
Wholesaler exclusivity agreements
Returns Responsibility
DSCSA serialization data
Will margin be impacted by change
Big 3 deals – 5% vs 13%+
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Reimbursement – what needs to happens in the handoff,what can happen
• Reimbursement is the engine of life sciences products…great when higher performance and running wellexpensive and a real problem when it is not
Government pricing history and handover Will you get the data
What lies beneath the waters… baselines, springing penalty
How will product turnover process affect rebate liabilities
• End/start, conversion and stocking process
Product Flip New NDC?
Recycle through the P&T and formularies
Second bite for payers and PBMs What are the product agreements and terms? Will they continue?
Continuity for customers and patients?
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$$$
Indemnification and Insurance – whose tail is covered
• Indemnification and insurance provisions are frequented byoperatively unhelpful boilerplate
What is actually covered? Investigations and avoidance actions
Business interruption
Party fault or “to the extent”
Consider what is fault in a regulatory context
Caution on limits of liability clauses, and standards especially “gross” and “willful”
Do you want the indemnifying side to control defense and indemnification? What will be the conflict of interest and desire to self-protect / cost-contain
• “Real estate agent” risk
Capacity and competence
Cooperation and costs
What will insurance really cover – (hint it is always hypothetical)
Which policy types cover what you think will happen
What exclusions, limits and endless escape hatches
Maintenance, tails and assurances of coverage
It is always best to ensure your own coverage is right13
Windup and exit -- why cold stopsdon’t work for anyone
• Exits happen, but they do not have to be a (total) mess
• “Cold stops” are commonly encountered and usually a problem
Inventory in hand and field -- value paid but not realized
Customer and patient disruption
Downstream regulatory and contractual obligations
• Provide for workable windups…consider the stakeholders
Operational (supply, distribution)
Regulatory and compliance
Customers, Patients
Dealing with continuity Supply, Quality, Regulatory
IP
Reimbursement, rebates…
Marketing, sales
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Rules and Tools
• Rule 1: Understand the agreement as an internal insightand communication tool What do you need fundamentally and at technical/operational levels
Force internal understanding and awareness of operative reality
• Build map of key needs and the required operative reality
• Involve technical SMEs – they need to truly engage
Is the need effectively communicated and established
• Rule 2: Consider the bigger world Customer, Agencies, suppliers, distributors, payers usually have key
role –the agreement terms need to consider the full reality
Map out the critical elements and the key process flows
What is the regulatory status and technology level – how will that impactsagreement details
Does the flows in the agreement map to practical reality
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Rules and Tools• Rule 3: A contract is only a paper thesis
Litigation is at best a theoretical path, never a solution
You only get what you can operatively implement or force
If you can’t usefully execute, it is not leverage
Self due-diligence is as important as target due diligence
Success requires the operational team establish an operative plan
• Rule 4: Where possible create a relationship rather thanresentment Conduct during dating and wedding planning don’t get better in marriage
All negotiations are a sales function
“Leverage” and enforcement are usually illusory
If there will be a relationship, seek a fair and livable one
• Rule 5: Learn broadly, deeply and continuously Understand the 80%, be able to spot and test the remaining 20%
Don’t stay blindly in your swim lane16
