Alliances: Arm wrestling or freeride

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AlliancesArm wrestling or free-ride?

• By Anna Yarvits
• Director business development market
  intelligence Nycomed Russia-CIS

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Presentation outline

• Cross-border alliances in CIS pharmaceutical
  sector
• - lessons to be learned
• What are the common rules to construct
• a unique alliance?
• Deal engineering process
• to seize the moment
• Alliance management as a functional
• responsibility competence

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Cross-border alliances in CIS pharmaceutical
sector - lessons to be learned
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Ideal partner in CIS - key features

• Partnership is core competence philosophy
• Proven track record in successful partnerships
• Know how to deal with international partners
• Image and reputation
• Management and organizational quality
• Marketing and sales capabilities
• Market know-how in multiple areas
• Vast geographic coverage
• Strong local business infrastructure
• Adequate resources allocation to the deal

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In-licensed products share in Nycomed2001-2010
Share in total,
38
40 30 20 10 0
37
22
2001
2005
2010
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Nycomeds Current Partners in Russia-CIS

• Merck KgaA, Germany
• GE (previously Amersham), UK
• Chiesi, Italy
• Almirall, Spain
• Dansk Droge, Denmark
• LEO Pharma, Denmark

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In order to remain competitive, powerful and
independent companies need to cooperate

• Our future relies on our ability to maximize
  value of the existing products and to attract new
  ones to CIS
• In-licensed products are our priority
• Registration, pricing reimbursement
• Pre-launch and market penetration
• Dedicated sales forces
• specialist, general practitioner pharmacy
• Line extensions

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What are the common rules to construct a unique
alliance?
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Alliance assessment - McKinsey 7S framework
Strategy
Structure
Structure
Structure
Companys hardware
Shared values
Systems
Style
Structure
Structure
Structure
Companys software
Staff
Skills
Structure
Structure
Source McKinsey and Co
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Free-ride negotiations - some lessons

• Misleading definition of net sales. All other
  conditions agreed deal nearly dies on this one
  aspect
• The chairman got involved after terms were agreed
  between the negotiation teams and the deal
  nearly died
• Deal finalized between companies, licensee had
  funding crisis, deal aborted but technology
  wonderful, rationale excellent, and terms were
  win-win
• Head of pharmaceutical division personal view
  of partnering licensing department and
  meetings with the potential partners are not
  required lets get all the companies to come in
  once a year and bid/tender for the business!!!

Source PLG, Gavin Clark
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Free-ride negotiations - some lessons

• 2 months to finalize a Confidentiality Discloser
  Agreement
• 6 weeks for the partner to provide a point of
  contact name for the deal implementation
• Over 6 months, the negotiator changed 3 times,
  all previous good faith discussions were
  completely ignored and discontinued
• TO BE CONTINUED

Source PLG, Gavin Clark
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Deals implementation reasons for failure
Source Survey of 455 CEO interviews
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Deal engineering process to seize the moment
Project development
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In-licensing candidate evaluation
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1 Quality of the deal check list

• Is it implementable?
• Was it benchmarked?
• True win-win?
• How change of ownership-proofed is the deal?
• Is the project a priority during the life of the
  agreement?

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2 Complexity of the deal check list

• How easy are the rules to follow?
• Is there inflexibility in the structure?...or are
  legal mechanisms triggered rapidly and
  automatically?
• Does the deal fit well with other related
  internal activities/projects? incompatibilities/c
  ompetition?
• What factors (external internal) are to be
  monitored?

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3 Due diligence - check list

• partner, compound, IPR, structure, production
  process, regulatory status, track record in
  licensing relationships, partner stability, cGMP,
  cGLP, cGCP, NPV, competitor activity,
  manufacturing capacity, insurances, warranties,
  etc, etc, etc
• AND...

4 Project planning and management
5 Relationships with other party
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Partnering planning process

• 1 Milestones planning - PROGRESS ASSESSMENT
• 2 Cooperation business model - DO YOUR HOMEWORK
• 3 Partnership investments plan - RESOURCE
  ALLOCATION
• 4 Contractual critical path - LEGAL CONTRACTS
• 5 Tactics is important - IMPLEMENTATION PLAN
• 6 Conflicts resolution procedures -
  RESPONSIBILITIES OF THE PROJECT MANAGER

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Alliance management as a functional
responsibilities competence
Working to be the preferred partner in CIS
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Functional split

• Business development specialist
• Licensing specialist
• Alliance specialist

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Role of the business development specialist

• Minesweeper
• Process champion
• Expert on partner thinking
• Progress chaser
• Project leader
• Postman
• Fall guy
• Company Savior
• Insomniac
• Referee
• Frequent flyer

• Scapegoat
• Ambassador
• Negotiator
• Alliance manager
• Decision maker
• Problem solver
• Project champion
• Policeman
• Cleaner
• Pig in the middle
• Peacemaker

Source PLG, Gavin Clark
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Alliance management

• Post-signature implementation

• In-licensed products pre-launch activities
  co-ordination
• New products performance tracking
• Partnership mix of events management including
  regular meetings
• Signed agreement tracking (critical path)
• Shared time tables up-grading
• KPIs
• The contract is only the end of the beginning,
  David Scott

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Alliance static Top 10 reasons

• Changes in market place dynamics
• Breach of faith between partners
• Changes in the nature of the competition
• Shifts in partner strategic intent
• Shifts in own strategic intent
• Changes in number of competitors
• Change in management assigned to the alliance
• Difference in the managerial culture between
  partners
• Change in partner allocation in resources to
  alliance
• Changes in technology affecting alliance

Source Darden School, UVA
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• Three things are important products, products
  and products.
• If I had to add a fourth, it would be people,
  because they generate the products.
  Sir Tom McKillop

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Licensee vs. licensor Who is who?
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Thank you for your attention!