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European Biopharmaceutical Review

Biotech Bootsale

Monetising non-strategic assets can be a valuable exercise. Michael O’Sullivan and Richard Brown at Plexus Ventures explain how divesting certain assets can actually achieve greater enterprise value

Millions have discovered that listing unwanted items on internet auction sites is a profitable alternative to cluttering the attic or putting them out in the trash. Since there is no viable biopharmaceutical equivalent of eBay, companies frequently hold on to non-strategic assets that receive little or no attention within the organisation. Whether due to a lack of internal resources to invest in them, or a belief that the asset has limited future value, the outcome is the same. Inertia takes over and the opportunity languishes. And yet, in many cases these assets can provide a growth opportunity for another enterprise. Thus, the potential exists for the owner to realise financial gain.

To maximise these opportunities, biopharmaceutical companies should have a process in place to periodically evaluate plans and projections for non-core assets so as to clearly understand their real value. In turn, biopharmaceutical and pharmaceutical companies should determine whether a given asset’s value could be increased by an interested buyer or licensee.

MEANING AND METHODS OF ‘MONETISING’ ASSETS

‘Monetising’ is the conversion of assets that generate future cash inflows into present day cash. The biopharmaceutical industry is a rich environment for monetisation opportunities due to the great variety of both real and intangible assets created in the course of conducting research and development activities and the different ways in which companies perceive the value of these assets. Nowhere does the saying, “One man’s trash is another man’s treasure” apply more than in industries which rely heavily on the creation of intellectual property. Consequently, examples of company transactions involving monetising assets are regularly observed:

  • Out-licensing compounds at all development phases in return for signing fees, subsequent milestone payments and future royalties

  • Selling rights to a future stream of royalty payments

  • Selling full development and commercialisation rights to compounds

  • Selling rights to the use of intellectual property essential to another company’s freedom to operate

  • Selling marketed products or entire business units

MOTIVATION TO CONSIDER MONETISING ASSETS

It is extraordinarily expensive and complex to try to compete in all therapeutic areas, so all pharmaceutical companies develop focused strategies that guide their research pursuits and direct their sales and marketing organisations. As a result, assets deemed less promising suffer from constrained resources, either by a deliberate decision to limit resources allocated to them or as a consequence of their never being positioned high enough on the priority list to receive optimal funding.

Astute management recognises two ways to manage underresourced assets so they deliver maximum value. They either raise the funds necessary to invest in them or they find an external party who can provide the necessary resources to maximise potential.

 


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Michael O’Sullivan is Managing Director of Plexus Ventures, based in its London office. Plexus Ventures specialises in providing Strategic Advice and Business Development services to the Pharmaceutical industry. Prior to joining Plexus Ventures, Michael served as Chief Financial Officer of Ethical Holdings plc for four years where, in addition to the financial affairs of the company, his responsibilities included corporate and business development activities. Previously, Michael spent 21 years at SmithKline Beecham, where his duties included Vice President of Finance – Europe for Consumer Products; Vice President, Strategic Planning for Worldwide Pharmaceuticals; and Controller, Southern Europe Pharmaceuticals.

Richard Brown is Head of the Tokyo office for Plexus Ventures. Prior to joining Plexus Ventures, he spent 26 years at Eli Lilly and Company, where he held positions in sales, marketing and general management. Richard served as Director, New Product Planning and Market Research for Eli Lilly Japan, Managing Director of Eli Lilly Russia/CIS, and Director, Business Assessment and Corporate Business Development. Richard received an MBA from the Harvard Business School.

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Michael O’Sullivan
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Richard Brown
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