Turning a Walk-Away Into a Stronger Deal

Situation

A biotech CEO was ready to abandon a long-running licensing negotiation, convinced the economics offered for the company's enabling technology fell well short of its worth.

His breakthrough manufacturing technology had the opportunity to greatly improve the financials of the pharmaceutical company that wanted to license it, but the terms were more than 3x apart in eNPV terms. Lacking any compelling comparable deals (as no similar manufacturing precedent existed), the two teams were proceeding under different assumptions and were on the verge of halting discussions.

What We Did

We took apart the partner's proposed terms and the assumptions beneath them, and showed the technology's value had been understated: it not only improved the partner's margins, which the partner already acknowledged, but also sharply reduced capital expenditure, which had gone unrecognized. Credited properly for both, the technology was worth far more than the offer reflected.

Outcome

The partner returned with greatly improved terms, a 50% increase in upfront and milestone payments and a 30% increase in downstream royalties. We advised the client through to a successful close, which then enabled our client to make a large capital raise to fuel further growth.