Strategic Partnering: Pros and Cons As an invited panelist at the January 18, 2011 meeting of Pharmaceutical Consulting Consortium International, Ronald Rothman addressed the question of strategic partnering for CD Diagnostics, a start-up biotechnology company. In these times of tight funding, the allure of capital – or even preservation of capital through shared costs – might be very seductive. The question is: What are you getting for what you are giving up. And how will it affect your later needs (i.e. follow-on funding, additional resources), and ultimately your exit strategy Early partnering makes sense if the company obtains expertise or access to proprietary technology that would expedite product development, and thus getting-to-market sooner. Some issues to consider prior to entering a partnership: (1) Is the partner a dominant player in the market? Or do they view this as an area with growth potential; and are interested in expanding into orthopedics by hitching their wagon to you success? (2) A partner’s motivation will affect their stamina and commitment. Will they be engaged and supportive; or bail out during challenging times, by liquidating prematurely? And how would partnership liquidation be viewed during follow-on funding? (2) If later on you need additional resources, how would a potential future partner view dealing with a competitor, and sharing secrets? (3) How will partnering affect your exit strategy? Would your partner block acquisition by one of its competitors? Admittedly, these issues can, and should, be addressed by how the partnership is structured. At a later stage of product development, you may have more leverage for preferable terms. For example, insistence upon time constraints would defend against a right of first refusal. Bottom Line: Is there an adequate sharing of risks and rewards? |