Vifor Pharma: Partnership Valuation in Pharma - What Really is a Good Deal?




At the international forum Partnership valuation in Pharma in December, Dr. Roland Pfeiffer - Head Commercial Development Europe at Vifor Pharma Ltd. in Switzerland, will take a holistic perspective on analysing successful deals. We had the chance to interview our speaker before the event and to discuss unsatisfactory deals and how to prevent them.

Rainer Stenzenberger: At the international forum on Partnership Valuation in Pharma in December, you will hold an interesting presentation which examines unsatisfactory deals and how to turn around poorly performing partnerships. Could we start by looking at what you consider is a good deal?

Dr. Pfeiffer:  Having worked in this field for 15 years, I find that there are quite a few different views on what a successful deal actually is. In the first place it must be profitable for the company. And here again you will see that there are different ways of looking at things. Then you will find in quite a number of cases, that it is not just about profit, but rather, topline. And there can be many reasons behind it. It can be, for instance, that the company wants to be seen as a big player in a certain field. If you look into the press recently, there is a change going on in the pharmaceutical sector and there are a number of deals that make you think – how did they calculate this? How can this be profitable for them?

If you want to, for example, position yourself as a pharma company that has a strong focus on Europe, you will need to be present in the top five markets. To sum things up quite simply: A good deal depends on the goals you have. The problem here might be to have clarity as to the management strategy.

Rainer Stenzenberger: If we move on to your next bullet point in your presentation, how to improve unsatisfactory cooperations. That is probably a very big issue. What happens if it doesn’t work out?

Dr. Pfeiffer: Firstly you need to understand why it is not working out. We need to determine what we mean by what is unsuccessful. Here you need to know what your original expectations were, and why one or both parties feel that it is not a success. You need to understand – where the original expectations really realistic?

Then of course you want to have the chance to turn this into a success. For this you need to be as honest as you can with your contractual partner, because after all you are depending on his cooperation. If possible, then, moving on to a new contract might be ideal. The problem is if you change your existing cooperation, one party will probably have to forego certain rights or opportunities. So this works only if both sides have a long term view. If the cooperation is so messed up that either side is only trying to get the maximum out of this bad cooperation and then part ways , then you end up in court and we cannot
do much. You can only hope that your contract is protecting your interests as much as possible.

Rainer Stenzenberger: What would be a way out of an unsatisfactory deal? Going to court is one thing, you mentioned, but what are the other ways?

Dr. Pfeiffer: Talking openly and in good faith. Usually, and this is my experience, you get rewarded. It depends a little bit on the country of course, and the culture, but overall it helps being open. And if your partner is not fulfilling his part of the agreement, then you tell him very clearly that you are not satisfied, which of course requires that you know your levers. You may not believe it, but many times people don’t really know what is included in
the contracts!

Try to understand the constraints of the other side. This can be an important bargaining pledge. If the contract is set up wrong from the beginning, and you don’t see any possibility to improve it, try to buy yourself out. In my experience, most companies would prefer to settle early, for a certain amount of money, rather than to risk lengthy battles and ongoing corporation and whatever that entails.
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Rainer Stenzenberger: Typically then, if you talk openly and address the issues, normally it should be possible to resolve them without any long lasting battles in court, right?

Dr. Pfeiffer: The most important thing is to set up a solid and good contract, and secondly, know the contract and the legal environment. You should furthermore ask for updates from the legal department, because whatever you have in the contract may not be valid anymore. Perhaps because the legal environment has evolved in the meantime, and there have been court rulings that makes some clauses non-feasible.

Rainer Stenzenberger: That is an interesting point you mention here, because we are mostly dealing with development issues and financial issues, but the legal department is also of high importance, particularly in these kind of situations. Coming to the last point:
the learnings from the past years. How would you summarize them? Have there been a lot of situations where it was necessary to get out of a contract?

Dr. Pfeiffer: Fortunately not. There were a few I have had very mixed experiences with. In one case we were about to go to court, in other cases we were able to settle.Again, the paramount thing is to have a good contract. Don’t let yourself, as a business developer, be talked into a quick contract, because your marketing and sales department wants you to. Ultimately it works out in 80% of the cases, but in the 20% cases were you don’t have a good contract it can be very expensive.Make sure that the partner that you cooperate with appears trustworthy and sound. Because you can have the best contract set up by the most expensive lawyers, but if your partner is malevolent, then he has many ways of fooling you.

Similar, when you are dealing with certain emerging markets or countries with a less clearly defined legal environment, do not only rely on the intellect. Rely also on your gut feeling. If you cannot trust these people or company try you get some information on their reputation In the end it is a mix of professional and businesswise habits, alongside your own common sense.

Rainer Stenzenberger: Thank you Dr. Pfeiffer for taking the time for this interview, I am looking forward to your presentation on-site

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