Mergers, Divestments and Acquisitions

Mergers and acquisitions (M&As) have long been a vehicle for life sciences industry growth. They allow major pharma and biotech companies to rapidly expand their R&D pipelines and grow their portfolios into new therapeutic areas, while giving emerging companies a quick and profitable exit or the opportunity to become part of a larger brand.

This trend has rapidly been increasing in recent years due to economic uncertainty due to Covid-19 and Brexit therefore companies are looking for new sources of revenue. Blockbuster drugs are reaching their patent expiries rapidly and Biopharmas are looking for proven marketed drugs and new breakthrough therapies and devices to expand their current portfolios.

Big pharma mergers are always over achingly project managed by the “big” management consultancy firms however, senior management in BioPharma’s fail to anticipate the deep operational complexities surrounding transfer of ownership of such highly regulated drugs and medical devices—which can take many months to complete with many pitfalls encountered along the way. When they don’t factor in all of the cross-functional and regulatory activities required to successfully transfer marketed products, it can add months-long delays, lead to hefty fines for missed acquisition milestones and regulatory deadlines, and prevent acquirers from generating revenue from their newly acquired products. This is where it’s vital to bring on board a regulatory consultancy to sit on the cross functional workstreams and provide valuable input in to the process.

Management consultancy and senior management decision-makers focus primarily on the legal and financial aspects of the deal, and they limit the number of stakeholders involved in pre-deal discussions to maintain confidentiality until the contracts are signed and any antitrust period ends.

However, it’s vital to include a regulatory affairs function from early discussions to advise them on the potential regulatory challenges of completing the assets transfer and to be involved in the negotiations.

Deadlines set are most frequently unrealistic given the regulatory complexities of an assets transfer, including the transfer of product licenses – also known as Marketing Authorisation Transfers (MAT). We have sat in numerous meetings where the decision-makers often assume the MAT transfer will require little more than a pile of paperwork, and thus can easily be completed in a few months. In reality, a large global merger or divestment project – with 50+ countries in scope – can take anywhere up to 5 years to complete!

Internally staffed regulatory and compliance professionals may lack experience of the MAT processes. A vital part of an MAT involves strategic input into regulatory and cross-functional readiness to take over the responsibilities that come with the products’ ownership transition.

An existing regulatory department is often expected to assume a leadership role on these transactions while continuing to fulfill their regular “day job”. This approach can set up regulatory and other functional teams for failure, putting a company at risk of non-compliance which can result in fines, cost increases, inability to continue supply to patient, loss in revenues, and severe reputational damage that can as a result affect investor confidence.

A MAT in most countries is indeed an administrative procedure and accomplishes a transfer of ownership of an asset, formalising the fact that the new Marketing Authorization Holder (MAH) now has regulatory and legal responsibilities over the product. However, prior to the transfer, the acquiring company must have robust systems and processes in place to comply with all relevant laws and regulations in each market involved in the acquisition and/or divestment – including pharmacovigilance requirements.

The required MAT process varies with each deal and we take into account the type and number of assets transferred, acquirer readiness, the countries/territories in scope, supply chain factors, product regulatory status, and compliance requirements in every market, to name just a few.

Companies also need to consider technical issues related to data transfer and the likelihood that incompatible platforms will require added steps to proceed. These are all regulated activities, subject to compliance oversight, and must be conducted in coordination with other functions e.g. quality, safety, manufacturing, supply and commercial. The time and cost of the MAT will depend on all of these factors and can only be adequately determined if regulatory and compliance experts are part of the initial due diligence process. Failure to define the MAT workflow, cross-functional dependencies, realistic scheduling and risks before the contracts are signed could put the entire deal in jeopardy. However, when companies make regulatory planning part of the pre-deal due diligence, many of these risks can be mitigated if the right stakeholders are involved at the outset.

When regulatory experts aren’t part of the M&A decision-making processes, things can quickly go wrong. Due to the complexity of the tasks involved in a MAT, many companies looking in to a M&A consider bringing in outside regulatory experts to ensure a fast, smooth and compliant transfer.

Working with a partner to manage the MAT ensures that the company has experienced professionals overseeing every aspect of the assets transfer, while freeing their regulatory and other functional staff to focus on the existing pipeline development efforts, ensuring minimal impact on dayto-day workflow. Outsourcing creates a streamlined approach to assets transfer which can mitigate transition-related risk, and ultimately save companies time and money by bringing in the appropriate expertise and staff at the right time.

Due diligence of the marketing authorisations being “bought” is vital. We have come across an instance where we were bought on board by a start-up generic pharma company to complete the MAT process for a non-marketed single product MA. This was being acquired from an EU based generics company. We strongly advised on the significance of carrying out due diligence on the regulatory records however they opted out of this service. After the MAH was transferred and submissions were made to the MHRA to register their own livery the company were informed that the product cannot be marketed as the MA granted has a condition attached to it which requires 3 years of stability data to be submitted to the MHRA before the product may be marketed. The MA was only 12 months old. The acquiring company then had to go through expensive litigation and hire our services to reverse the MAT as they had bought an MA that they could not do anything with for another 24 months.