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European Biopharmaceutical Review

Preparing to Succeed


As mergers and acquisitions become an increasingly important part of the biopharma landscape, hiring a chief business officer can be a savvy way for organisations to drive through the process while maximising shareholder value.

In recent years, as the amount of risk and time to reap significant returns for investors have increased, the biotech initial public offering (IPO) window has essentially been closed. At the same time, pharma’s need for innovation and drug discovery has opened doors for biotech firms, and it is perhaps natural that mergers and acquisitions have become commonplace in the industry, giving emerging biotechs an attractive, alternative exit strategy.

To avoid getting lost in the shuffle as the industry continues to consolidate, organisations of all sizes have come to recognise the need to proactively position themselves for potential M&A events. However, they do not always take this seriously early enough, and there remains a tendency for companies to rely on their advisors or outside consultants in order to help build a plan that provides for a merger or acquisition as a potential exit for the company.

Factors driving M&A in biotech

  • Stringent and evolving regulatory environment means FDA approval is more difficult to obtain, delaying the overall time to product approval and return on investment
  • Relative lack of innovation within Big Pharma is driving even the most established companies to augment their portfolios by buying or acquiring other assets
  • General apprehension among financial sponsors in the current climate to commit vast amounts of capital over extended periods of time is forcing liquidity events more rapidly

Why Leadership Counts

While this can work in some cases, these options are not ideal in today’s environment. Outside and/or part-time executives may not be able to provide the day-to-day continuity and relentless effort that would enable them to effectively build and execute a strategy and secure buy-in across the company. The job requires a level of influence that people who are not full-time, in-house employees might struggle to achieve. In addition, these individuals often do not possess a deep enough understanding of the organisation’s culture and assets – not only in terms of its products, but also its people – that would be needed to thoroughly evaluate the suitability of prospective buyers or partners. Finally, outsiders may not have an extensive enough network of contacts to foster productive partnering discussions with key constituents.

The good news for growth-oriented biotechs is that they are particularly well suited to infuse strategic, deal-oriented thinking directly into their organisations almost from the moment of their inception. This will help companies to move from a reactive posture to a proactive one, or to evolve into a more independent, prepared and sophisticated enterprise within a shorter timeframe.

While the CEO can often fill this role initially, quickly identifying an executive who can help to shape salient corporate and business development strategies will ultimately maximise the likelihood of a successful exit. Depending on the firm’s needs, this executive could be a deal-oriented chief financial officer with a banking background on one end of the spectrum, or a former management consultant and strategist capable of helping to divest or acquire assets on the other. Preferably, a dedicated slot will be created for an expert chief business officer (CBO), who has substantial experience in closing deals and is able to look at assets and portfolios through both strategic and commercial lenses.

Ideally, the CBO will possess the following skills and attributes:

  • Strategic acumen and critical thinking, including the ability to understand and negotiate unique deal structures
  • Scientific knowledge and a strong grasp of technical concepts that are specific to the industry or therapeutic area at hand
  • Analytical expertise coupled with the ability to build and evaluate complex financial models
  • A background in biotech and/or pharma, with the corresponding contacts at the proper levels
  • Crisis and communications know-how – that is the ability to divine how the overall strategy will impact public perceptions of the company’s potential and navigate through volatile scenarios such as a hostile takeover

Factors affecting the success of M&A in biotech

  • Therapeutic synergies
  • Economic efficiencies
  • Long-term pipeline value
  • Product opportunities
  • People/talent acquisitions

In every case, it is important to ensure that there is a strong cultural fit. Growth-oriented biotechs require employees to be deeply engaged at all levels, and the CBO needs to be truly prepared to work in such an entrepreneurial environment. A central challenge when attempting to identify and attract executives who ‘know what finished looks like’ is that the skill sets outlined above are often found in executives from pharma, where the culture is markedly different from start-up biotechs. The pace, ambiguity, stress, and resource constraints that often characterise biotech may be foreign to most pharma executives. When recruiting these individuals, it is important to look for evidence that they have an entrepreneurial disposition or have successfully operated in a ‘start up’ situation before, even if it was within the context of a larger organisation. To minimise risk, the ideal situation would be to identify someone with early career experience in a larger organisation, followed by more recent success in a smaller company setting.

Maximising Value

Hiring the best people capable of thoroughly assessing the parameters of all available options (such as partnering, M&A, joint venture, asset divestiture, or remaining independent), prioritising, and then acting on their findings in order to maximise shareholder value is one of the smartest investments biotech companies can make. Without such strategists on board as early as possible, organisations risk flying blind and selling themselves short.

In addition, now that the traditional biotech funding model has generally become a thing of the past, the industry at large has responded and invented alternate value creation events. The more organisations make room for the CBO role and encourage their ingenuity, the greater chance there will be to uncover and take advantage of transactions that enable the most compelling synergies to satisfy shareholders. These may be based on either the value in the pipeline, which no one else is thinking about or paying for yet, or major product opportunities that will lead to breakthroughs.

Skilled business and corporate development executives can readily recognise companies with assets that might be better than or ahead of their own. Depending on the specific circumstances, they will consider individual products from both small, underfunded players as well as larger, more mature organisations that may be open to partnering or being acquired, and forge new partnerships accordingly. Whereas an acquirer’s primary interest in a single asset often leads to the acquisition of the entire company and all of its assets, increasingly skilled CBOs are helping organisations to carve up or spin out non-core assets into new vehicles that can be partnered separately in order to maximise their value. They will also be able to undertake the due diligence required to evaluate the viability of pursuing what otherwise may appear to be a hostile situation and figure out how to turn it into a ‘win-win’, for example.

Tapping into new value creation possibilities like these is one way to foster a climate in which scientists and innovators can create new companies and drugs and at the same time drive shareholder value. As investors continue to demand relatively quick returns on their investments even while regulatory agencies approve fewer and fewer products, the appetite for accessing innovative products continues to grow. Preparing for and capitalising on novel value creation events is no longer a luxury – it has become essential.

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Erik Lundh is Managing Director at J. Robert Scott Executive Search, where he specialises in providing leadership consulting and executive search services to clients ranging from global multinational corporations to early-stage companies alike. Prior to joining J. Robert Scott, Erik was the Managing Partner of another global retained search firm’s biotechnology practice. He has also worked in roles spanning corporate strategy, business development, sales, marketing, and operations. Erik began his career as a molecular biologist and cardiovascular research scientist at Berlex Biosciences, Inc, the North American affiliate of Schering AG. He currently serves on the boards of SentiSearch, Inc and the Bay Area Council, and is a strategic advisor to ChinaSF. Erik holds a BSc in biological sciences from Santa Clara University. Email:

Erik Lundh
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