How Emerging Companies Can Negotiate Better Life Sciences Commercial Contracts
- Brad L. Schoenfeld
- January 9, 2020
Most life sciences companies negotiate numerous commercial contracts each year and must rely on big industry players for essential testing, supply and manufacturing partnerships. But these relationships can feel very unbalanced because large vendors seem to have far more negotiating power than any emerging company.
Less favorable terms can have big consequences for emerging companies. In addition to the material impact on when, or if, a product gets to market, unfavorable terms can stall or kill a deal when acquiring firms come calling down the road. Conversely, better agreements make for more attractive targets, and acquiring firms are regularly looking at these agreements in the due diligence process.
For these reasons, it’s really critical that emerging companies negotiate better life sciences commercial contracts, but that’s not easy for most organizations to accomplish on their own.
These challenges are impacting an increasingly large segment of the industry, as more smaller companies came to market with innovative science in 2019, J.P. Morgan senior analyst Chris Schott, recently noted.
Even long-time industry players and serial entrepreneurs – who know they’re not getting the best terms – don’t have enough timely access to the industry deal landscape to advance meaningful term changes at the negotiating table.
This problem is two-fold. First, the sheer volume of life sciences commercial contracts that must be managed is far too great for the average in-house counsel to manage, not to mention the constant ebbs and flows in demand that make it difficult to manage workflow. And more critically, even skilled in-house teams who’ve negotiated numerous deals still lack the competitive visibility needed to negotiate the terms they really deserve.
But it doesn’t have to be this way.
Partnering your way to better life sciences commercial contract terms
Outsourcing this highly specialized work can be a difference-maker, but only if you’re working with a legal partner with extensive life sciences commercial contracts experience that is deeply embedded in the life sciences industry. Only a very few life sciences attorneys know the best practices for the commercial contracts that companies enter into every day. They know the industry and its key players; they see what’s being negotiated across the industry every day, what’s fair, what they can push on, what terms to fight for, and which to leave alone.
The value and power of this industry expertise really can’t be overstated. An experienced external legal team provides an experienced negotiating guide who already knows what can be achieved with each vendor and how to get there. From pricing, ownership of IP, warranties to limitations of liability and all other key terms, this breadth of negotiation experience and industry knowledge translates to better terms for all types of life sciences commercial contracts.
“I’ve worked with Brad and his team over the years to negotiate key manufacturing and supply agreements, including agreements with some of the largest international CMOs. Brad and his KO colleagues understand that these agreements are in fact negotiable and are critical for a company that desires to be acquired by big pharma. They have significant negotiating history and really know when to push back. Brad has been instrumental in helping my organizations finalize deals to set us up for success.” said Charlie McDermott, chairman and CEO Primmune Therapeutics, former president Impact Biomedicines, former president and chief business officer, Kala Pharmaceuticals, former vice president business development, Allergan.
And ultimately, there’s something in it for the vendor too. When an emerging company gets acquired by a big pharma business, new doors open for the vendor to significantly expand their business.
In addition to serving as informed deal-makers, specialized outside contracts teams help life science companies better manage fluctuating workflow and allow for rapid scaling as opportunities arise. Experienced external legal partners allow in house counsel and non-legal teams to focus on other work, saving time and money, and putting the right resources on the right task.
Brad Schoenfeld is managing partner at Koenig, Oelsner, Taylor, Schoenfeld & Gaddis PC (KO), a Colorado-based law firm helps life science companies nationwide with specialized commercial contracts. KO is one of the only law firms in the nation with a dedicated commercial contracts team comprised of attorneys and contracts managers with significant bioscience and pharma experience. Reach Brad at [email protected].