Regulatory Due Diligence: Ensuring Full Term Investment Success
David Rosen, Co-Chair, Life Sciences Team, FoleyJeff Miller, Vice President, Regulatory Affairs and Quality Assurance, Icon Clinical ResearchDoug Carsten, Partner, Foley
Practical Advice for ConductingRegulatory Due Diligence
Topics for Discussion
• What is Regulatory Due Diligence?
• Why Is It Conducted?
• Is There Exposure to Liability?
• Getting Organized
• Practical Advice
Greetings from the Nation’s Capitol
The President and Cabinet Send Their Regards
Why Conduct Due Diligence??
• There is lots of money/equity involved• People are anxious• To ensure it is the right
deal/investment• To minimize potential risk• To understand the current state of the
business• To appreciate the cultural environment
Typical Scope of Due Diligence Review
Intellectual PropertyEnvironmental FDA RegulatoryLegalFraud and Abuse [Health Care - contracts]Government Supply ContractsOccupational Safety and HealthReal EstateLabor/EmploymentSecurities
Potential Issues/ Liability
• For either the acquirer or acquiree– material information might come to light late in
the acquisition negotiating process
• Consequence– lengthy (and costly) re-negotiation of the
acquisition agreement– material revisions to the terms (including
financial) of the transaction– complete abandonment of the transaction after
time and money has been put into the process.
Potential Issues/ Liability
• Breach of a representation and warranty– Note - Representations and warranties should only
be made after careful due diligence is conducted.
• Consequence– Often the recourse for the acquirer against the
former owners of the acquired company in the event a representation or warranty is breached
Monetary damages (indemnification or loss of held back acquisition consideration).
Potential Issues/Liability
• Failure on the part of the acquired company to facilitate the conduct of proper due diligence on itself
• Consequence– Monetary losses– Failure of the former owners to capture the full
amount of the consideration offered by the acquirer.
Potential Issues/Liability
• Acquirer - may not have full recourse against the former owners of the acquired company
• Pitfalls for a failure to conduct proper due diligence include:
– monetary losses due to necessary expenditures to correct the problem due diligence missed
– potential formerly unknown liability to third parties,
Potential Issues/Liabilities
• More pitfalls (for a failure to conduct proper due diligence):– potential inability of the acquired company to
conduct certain activities and realize resulting revenue
• (especially true in the context of regulatory and licensing issues)
– general failure to recognize the benefit of the bargain for the acquisition (acquirer paid too much in light of the issues due diligence failed to uncover).
Bankers / Underwriters Typically Request an Opinion from Legal Counsel
• No untrue statement of material facts
• No omission of a material fact so that any statement is not misleading
• No lawsuit, regulatory proceeding, pending or threatened brought by or before the FDA, except as disclosed
• No lawsuit, regulatory proceeding, pending or threatened brought by or before any other federal regulatory authority, except as disclosed
FDA Regulatory Due DiligenceWhat to Expect
• Due diligence document request list • Lots of information is requested• Checking to see the state of regulatory
compliance• Expect that a significant amount of questions
will be raised • Be prepared to provide explanations and
additional documentation• Long days
FDA Regulatory Due Diligence Getting Organized
• List of each drug/device presently offered for sale,the model number and dates of marketing
• Drug/Device Listing Form
• Current federal establishment registration for each facility and current state operating permits, if any
• A copy of all NDA/ANDA/510(k)s or PMAs
• Copy of the FDA approval or clearance letter
When Are They Going to be Done -I Need to Get Back to Work
• Copy of each change order for the product and documentation supporting the decision to file, or not file, a supplement, amendment or new 510(k)
• Copy of the current package insert/directions for use, and all promotional, sales and other literature
• Copies of SOP for review and clearance of promotional material/advertisements, and Company Website any letters from FDA and Company responses regarding promotion/advertisements.
I Can’t Believe Someone Really is Going to Look at all of This!
• Copy of all ADRs/MDRs and complaints, and all documents relating to all follow up actions, including investigations and corrective actions
• Company's Standard Operating Procedures• Copy of all device service documents reflecting
discussions with customers about malfunctions or other similar problems
• External/Internal audit reports• Copy of each IND/IDE filed, all correspondence,
reports and other documents pertaining to the IND/IDE, including correspondence with the IRB and with FDA
This is Really Getting to be a Pain in the @#%!
• A list of all recalls, current status of the recall and decisions as to whether or not to conduct a recall or similar action
• Communications with or from or documents pertaining to interactions with FDA's CDRR/CBER/ CDRH Office of Compliance
• Copy of all FDA-483's and the Company's response and any other follow up
• Copies of Annual Product Reviews
• Trend Analysis
Finally - the First Round is Over!
• Support for decisions that no reportable ADR/MDR events can arise with the use of the product
• List of internal company audits and list of supplier audits
• Copies of all Warning Letters or other Correspondence from FDA and all Company responses
• Copies of all minutes of meetings, telephone conversations and communications with FDA
• Company analysis of Part 11 (Electronic Signature) issues and any report on compliance.
Practical Advice
• Keep complete records - documentation
• Get and stay organized
– (detailed document index)
• Establish the document room and update as needed (consider electronic documents)
• Be prepared to make lots of copies (or to deny copies)
• Expect all your documents and decisions to be reviewed, discussed and questioned
More Practical Advice
• Keep your sense of humor
• Work with the hordes of people invading your facility (even when it is apparent they don’t really understand your business - yet!)
• Keep a list of restaurants that have decent carry out food and who deliver
• Make sure all coffee cups taken in the document room have lids
Strategic Drug Development
What ICON Development Solutions Performs
• Product Development Plans– Clinical Development Plans– Pre Clinical Development Plans– CMC Development Plans– Regulatory Strategy/Development Plans
• Due Diligence– Individual disciplines– Regulatory Compliance– Across disciplines
• Ad hoc consulting
• Short to mid term dedicated client support
Services
Ad Hoc ConsultingLarge Pharma
Partial Product Development PlansAd-Hoc ConsultingShort to Mid Term Dedicated Support
Small to Mid-Size Pharma
Full and Partial Product Development Plans
Small Emerging Pharma/Biotech
Due Diligence Full and Partial Product Development Plans
Venture Capitalists and Start Ups
WHATWHO
Due Diligence: Value To The Client
• Understand the value of the asset• Independent expert evaluation• Ability to ask cross functional questions• Ability to understand impact of gaps
with respect to costs, timings, scientific and regulatory hurdles in an integrated way.
Approaches to Diligence: Homework
Define the Goal & Diligence QuestionsEstablish Team, Timing, DeliverablesAppreciate circumstances for target confidentiality-what are the “guard rails”?Electronic Access—FTP sites, share files
The Site Visit
• Introductory SessionMeet Participants at Site-review general logistics; BD frequently organizes this for sponsor work
• Make sub team assignments Situational: separately review DMFs, clinical data files, Regulatory Correspondence, Quality documents, SOPsMay need to split to different rooms/settings for access
• Team Check-in points during the day(s)Verbal: redirect on relative value of time spent on items, share preliminary findings (especially “surprises”)
Hosting Diligence
• Exercise Best Practices for all concerned while maintaining confidentiality
Obtain advance legal/business clearanceProvide clarity on who hosts which role of diligence visitor (RA, Clinical, CMC, QA, Stats, PK, etc.)
• Organize Electronic Access (read only)Get your IT dept. on board early
• Provide Intro & Overviews if and as appropriate
Regulatory Goal
• Establish the diligence targets & define key goals
Simple Case Data Review: open portion of DMFMore Data Review: related systems for QA & CMCComplicated: big files, legacy systems/data, clinical efficacy or PK data, Quality: review public available info on Warning Letters, Inspections, etc. Request copies of relevant info (some redaction common: 483’s, EIRs, corrective action)
Regulatory Dossier Considerations
• What is the Target Label (package insert)?
Fit the goals of review with what is being added to the sponsor’s dossierAre the details of the protocol design and analyses suitable to Agency’s expectations for that topic?What gap(s) may exist in data, and if they exist, are the gaps manageable?
Visit Close
• Understand Who on Team Closes and HowAsk for 30 minutes internal discussion prior to close with hostIdentify concerns to be shared and howDelineate follow up deliverables, responsibilities and timingProvide appreciation for time and consideration—it is difficult for all parties to arrange diligence and detracts from normal business
ICON IDS Worldwide Team
USA (Maryland & Calif.) & UKMel Affrime, PharmDRalf Brueckner, MDLincoln Bynum, MDCyril Clarke, BSc, MBBS, MFPMJohn Connell, PhD Gill Le Du, BScColm Farrell, PhDAbraham Leung, MDThomas Ludden, PhDStuart Madden, PhD, FRSCJeff Miller, BScSandra Nino, PharmDJim Noveroske, PhDAlan Phillips, PhD, Cstat
Due Diligence: IP Rights
Conducting Due Diligence
• Few Hard and Fast Rules• Technology Dependent:
– Small Molecule or Protein Product– Treatment Method– Diagnostic Tool– Research Tool
• Goal Dependent:– Pre-Commercialization Investment– Identify/Address Potential Blocking Rights
Sample Approach
• Determine Technology Landscape• Identify Others in Technology Area• Identify IP Rights• Identify Potential Weaknesses• Develop Strategy for Strengthening IP
Rights or Exploiting Weakness in IP Rights of Third Parties
Sample Approach• Determine Technology Landscape
Technology Landscape
• Determine Technology Landscape– What is the technology area?– Is it a multidisciplinary approach?– Are there any key steps to the technology?– What is the goal?– What other approaches exist?– How far along is approach?– Explore other approaches?
Identify Others In Technology
• Identify Players in Technology Area– Who are they?– What is their investment/interest?
• SEC Filings
– What are they doing?• Posters/Publications• Patent Filings
– US– International
– What IP assets are under their control?• Issued Patents?• Patent Applications?
Identify IP Rights
• Assess Existing Internal IP Rights– Patent Applications– Issued Patents– Trade Secrets– Trademark Rights– Other IP Rights (such as copyright)
Identify Potential Weaknesses
• Where are Key Scientists?• Do Patents/Applications Meet
Disclosure Requirements?• Are Claims Broad Enough / Too Broad?• Were Patents Prosecuted Correctly?• Any Previous Technology Disclosures?• Any Previous Litigation? Results?
Develop Strengthening Strategy
• Work With Experts/Key Scientists Regarding Disclosure Sufficiency Issues
• Work With Patent Prosecution Counsel To Address Any Claim Scope Issues
• Work With Prosecution Counsel to Address Any Patent Prosecution Issues
• Obtain Previous Court Filings or Testimony From Previous Litigation
Exploit IP Rights Weaknesses
• Determine Strategy to Address:– Licensing– Litigation
• Identify Weaknesses in Any Key Third Party IP Rights– Use as Leverage in Licensing Negotiations– Use as Leverage in Litigation
Contact
Doug CarstenFoley & Lardner LLPSan Diego, California(858) [email protected]
Jeff P. MillerPrincipal Consultant, Regulatory Affairs & ComplianceICON Development SolutionsRedwood City, CA(650)[email protected]
David L. Rosen, B.S. Pharm., J.D.Foley & Lardner LLPWashington, DC(202) 672 [email protected]