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The Art of Getting Acquired

By Toban Zolman

November 10, 2009 | Nothing Ventured | Early this year, a small West Coast biotech company began to think seriously about its infrastructure and data. Until then, the company had focused on the science of cancer, but as two of its oncology therapies entered phase III clinical trials, management needed a business plan to support the presumptive market launch of the drugs.

A big part of the plan was to prepare the organization for regulatory approval. To that end, two critical business functions needed to be brought into compliance with industry standards. First, massive amounts of clinical data had to be managed according to the standards of the Clinical Data Interchange Standards Consortium (CDISC). Second, business processes were to be aligned to facilitate regulatory submissions in electronic Common Technical Document (eCTD) format.

After due diligence, the company decided on a blended organizational model. Rather than build or acquire the technology and resources to bring data and submissions into compliance, they outsourced the CDISC conversion and deployed a software-as-a-service (SaaS) hosted model to gain an eCTD solution. Vendors were brought in to reshape the submission process. Meanwhile, the biotech company was acquired by a global big pharma looking to bolster its position in the oncology market, in one of the top acquisitions this year. Although the acquisition was driven by the oncology pipeline, it was important that the biotech company had adopted industry standards. Adoption of standards allows for more-streamlined consolidation of data, content, and supporting systems.

Today’s economic difficulties place the biotech industry in a precarious position. Major advances in biomedical development—such as stem cell research, genomics, and personalized medicine—are opening doors to opportunities for higher-value therapies. However, with venture capital scarce and development costs rising higher, biotechs are having a difficult time sustaining the business behind the science.

According to an ISI survey of emerging biotechnology companies, more than one-third of respondents identified tight budgets as the biggest business challenge to overcome over the next two years. Biotechs are trying to do more with less, but they are also hard-pressed to come up with the estimated $1 billion it takes to develop and market a drug in the U.S.

One route for funding the costly development cycle involves either acquisition by or collaboration with a big pharma, but how is big pharma evaluating biotech for acquisition?

Surprisingly, it’s not all about the compounds. Pharma companies are looking beyond the potential of a drug and into a biotech’s business—particularly the data and infrastructure—to determine how ready the science is for integration into the pharmaceutical company and for development into market therapies.

Ready for Acquisition
So what steps can biotech companies take now to ready for acquisition later? According to ISI’s survey, they are beginning to think along the right lines. Most respondents stated that the industry standards—such as eCTD and CDISC—that manage drug-related data would have a significant long-term impact on their business. Although corporate readiness to comply with such standards varies, most surveyed have not yet put comprehensive solutions in place.

For progressive biotechs, there are three pain points that should be addressed:

  • Standardizing data early in development. Historically, partnerships have been struck during the drug application process. In today’s economy, however, M&A and development and marketing partnership deals are happening earlier in the drug development phase. Whether or not a young company plans to take a drug through to a New Drug Application, it should migrate and standardize its data—from clinical documentation to submission—as soon as possible in a drug’s lifecycle. This is fast becoming a requirement for pharma. Adoption of standards early on reduces the cost of integration and provides greater flexibility during a merger.
  • Deciding on a model that is light on capital investments. Emerging biotechs are hesitant to incur overhead costs, add to employee head count, and dip into cash reserves. A variety of delivery options are in place—SaaS, outsourcing, and a blended model—to enable companies to obtain the technology infrastructure needed to ramp up their data and submission capabilities without totally building up the functions in-house. This approach speaks to the current investment mentality of pharma, which is not looking to make major capital infrastructure investments as part of their acquisitions.
  • Choosing a vendor that supports standards. Biotech companies would be best served by partnering with vendors that support industry standards, particularly those that have not only adopted open standards in their software but have developed, tested, or advocated for standards within the industry.

Toban Zolman is director of consulting services at ISI. He can be reached at

This article also appeared in the November-December 2009 issue of Bio-IT World Magazine.
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