Breaking a Cross-Border Licensing Deadlock

Overview

A European biopharma and a US biotech had spent months negotiating a cross-border licensing arrangement but had reached an impasse. Neither side could agree on terms, because neither could agree on what the two assets were worth. Revenue projections were more than 2x apart in peak sales for both assets, upfronts and milestones were so far apart that both sides considered ending negotiations.

What We Did

In preparation for a multi-day in person meeting between the two teams, we built defensible “middle of the fairway” revenue forecasts and probability-adjusted asset valuations for both products: our client's asset in Europe and the counterparty's in the US. Once we got together, it became apparent that we had a substantially deeper and more objective analysis than the other side had brought to the table, so the negotiating team decided to use our analysis as the basis for calibrating deal terms.

Over several days of direct negotiation, Michael led the valuation and deal-terms discussions that resulted in both parties adopting a common quantitative basis as the shared benchmark for the agreement. We then bridged the gap between the competing deal terms and found a middle ground acceptable to both parties, which turned out to be highly favorable to our client compared to the last term sheet provided by the counter party.

Outcome

Once both sides worked from a valuation they trusted, terms shifted materially toward our client, a swing of more than $5M in upfront payments and more than $10M in probability-adjusted milestone value between the counterparty's opening position and the final agreement. The complex cross-licensing transaction closed on that basis with both parties feeling they had gotten a fair deal.