As mentioned in our first article, the information gathered through due diligence intends to bring C-level executives of life science companies to a point where they can make a fully informed, unbiased decision regarding optimal strategies. The more understanding, the greater likelihood of mitigating failure, making good choices, and realizing a return on investment (ROI)[1].

Although due diligence in this industry is often linked to M&A, the decision to assess information beforehand is of great importance in other areas as well. Commercial due diligence, for instance, checks the commercial feasibility of a drug by performing in-depth analysis of the value chain and product life cycle, market niches, financial margins, regulatory and reimbursement landscape, market trends, among other important aspects that plays a role in the commercialization phase.

Below are a few examples of the extend and scope of commercial due diligence.

Addressable Market

The addressable market is defined by the intent-to-treat patient population drawn from the set of clinical data included in its regulatory approval package[1]. Getting a better understanding of the market is essential before venturing new geographic areas or investing in a new asset for your company’s pipeline. If the product candidate truly addresses an unmet medical need and is supported by a product label and approval package, then there is a high probability that third party payors will fully cover or assist with the cost of the medication.

However, though likely, this is not always the case. Therefore, commercial organizations often conduct marketing studies by interviewing or questioning practitioners in surveys to learn where current treatments are insufficient or non-existent[1].

Here at Solem often conducts KOL/payers’ interviews and advisory boards with international highly-qualified experts to support biotech’s who want to venture the European market.

Competition

Understanding product competition in the life science industry is complicated as a variety of factors play a role in whether a product has competitive advantage over others. As the landscape is continuously changing, the more information you have regarding your competitors, the better.

To understand a product’s competitive landscape, one should consider doing due diligence to identify products in development and currently available products marketed and sold[1]. Although information on current standard of care might not bring enough answers though as the ability to achieve significant market share for products in the life science industry is often based upon significant improvements in either:

• efficacy (ability to address unmet medical need)
• safety (reduction of side effects)
• relative market exclusivity to pharmacoeconomic benefit (cost savings to the consumer and health care system), or
• any combination thereof.

A proper due diligence in this aspect should compare (amongst other points [1]:

• current and future standard of care at projected launch dates
• experts in the field’s opinion
• the ability to gain access to worldwide markets
• time to market

Product Value

To justify the significant investment required to develop a new therapeutic drug, one must understand that the ROI depends on what the total value of the product is reasonably projected to be in the marketplace. This, in turn, is determined by how the product will be paid for as well as the price to the consumer, size of the addressable market, projected revenue, and the period of exclusivity[1].

Moreover, revenue modeling, forecasting, analysis of strengths, weakness, opportunities and threats for a product and/or a company (SWOT) can be supportive in evaluating an opportunity[1].

Another relevant consideration that may impact the overall cost of drug development involves government-sponsored programs that provide incentives to partially offset the substantial costs of bringing a product to market[1].

Lastly, getting a better understanding of pricing and reimbursement also enables companies to model the potential revenue of their product[1]. By comparing the total cost of bringing a product to market and the size of the market opportunity, a due diligence analyst can understand to what extent the product will be profitable, which will directly influence future decisions within C-level executives.

Solem’s European navigator will provide you with this valuable financial forecast to check the viability of commercializing your drug.

Manufacturing

The manufacture of product candidates is often an area of due diligence to which many investors and drug developers should pay more attention. A significant number of products fail to undergo review or get final approval due to chemistry, manufacturing and quality control (CMC) issues[1]. Therefore, understanding the risks of producing a product is an important element of the due diligence process.

For commercially viable products, manufacturing must occur under Good Manufacturing Practices (GMP conditions) [1]. Because of the importance of manufacturing in the success of a product, manufacturing cost, regulations, quality, storage, and distribution deserves more attention and commercial due diligence could support a better plan when the time comes to bring a drug to market[1].

We have local experts and teams of people on the ground all over Europe to make sure things run smoothly and in compliance with the nuances of each European country.

Conclusion

While the process of due diligence is complex with each scenario bringing its unique aspects, commercial life science consulting companies like Solem can dig through your target’s most crucial commercial and operational issues to reveal strengths, weaknesses, and opportunities.

While each route to market has its advantages and disadvantages, Solem leverages a series of proprietary assessments tailored for life science companies, enabling them to map out a clear path towards realizing the full value of their assets under development.

A proper due diligence should not be as simple as a checklist, or as complicated as a bunch of data in excel. Information is only powerful when it is understandable and clear enough to trigger solutions and guide decisions.

If you’d like further information about due diligence and how we can help your organization, please email us at info@solemglobal.com

References:

[1] https://novinalab.dana-farber.org/uploads/1/1/2/8/112805345/01_mermelstein_layout_1.pdf