By Stefan Fischer, expert-trainer of The Pharma Business Development Course.

Business Development (BD) has become systematised over the last decades, particularly in large companies where the three pillars of Search & Evaluation, Negotiation and Alliance Management have taken root. Each function is staffed independently to different levels of specialism depending on the individual company’s design.
Smaller companies however cannot devote such a concentration of resources on BD, meaning that one or two people must cover the whole range of activities needed to achieve successful transactions.
The things which cause the most headaches to business developers everywhere are the intangible activities where deduction and reasoning are not enough to ensure success. The three main problem areas are Profiling, Search and Valuation.
 

1. Profiling

   Profiling is key to successful Business Development. If a company hasn’t formed a view of what characteristics a product, research collaboration, partner or company for acquisition must have to advance corporate development, searching will be either random or opportunistic. The company’s objectives will only be served well by a clear strategy for business development, and that requires a detailed description of the opportunity to be sought. Today profiling also must extend to whether there are diagnostic tools and biomarkers to detect, characterize and monitor the progress of therapy and whether these can be provided in a form which can be transmitted electronically to augment the therapy.
    

2. Searching for opportunities

   This opens a world of issues. Information is widely distributed, incomplete and often out of date. The sheer volume of data concerning patents, products, companies and research is overwhelming. To overcome these difficulties, a structured plan for searching is required, including the creation of a database for contact reference and communication throughout the organisation, of whatever size. Evaluation can then be undertaken against the criteria identified in the profile and the compatibility of the opportunity established. The advent of “Social Media for Business”, where opportunities are pooled and republished in searchable form, is improving the marketplace but relies on systematization of descriptions which may not fit novel offers.
    

3. Valuation

   Valuation is where the most contentious issues lie. The robustness of the data which make up the model and the forecasting methods used to estimate cash flows are sensitive to many variables. Consequently, significant differences in the confidence limits between upper and lower cash flow forecasts can seriously affect the estimated value. The most key variable is the price of the product in the market around which a spreadsheet model pivots. Price sensitivity is now a political issue, not just a commercial concern. Allowances for pricing and reimbursement levels plus the time for reimbursement approvals in each major country affect the basis for negotiating the value of the transaction. The valuation method therefore must accommodate this crucial factor.
    

Knowing what you want will help in locating and recognising the right opportunity. Placing a value on it and achieving the right price and structure in the negotiation come from solid data, realistic modelling and forecasting methods.

Last update: March 2023

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