Due Diligence in Life Science Transactions, 2nd Edition

Published by: Drug and Market Development Publishing

Published: Oct. 1, 2007 - 74 Pages

Table of Contents

Chapter 1: Executive Summary

Chapter 2: Introduction

What is Due Diligence?

How to Use this Guide

Chapter 3: Due Diligence and Life Science Businesses

The Role of Due Diligence in Life Science Transactions

Goals for Due Diligence

The Due Diligence Process

External Parties that can be Tapped for Expertise as Needed

Examples of Due Diligence in the Life Sciences

Eli Lilly and Centocor

Important, Common Traps to Avoid

Not Enough Expertise on the Team

Lack of Coordination

Inadequate Confidentiality Coverage

Too Specific/Too General a Request for Information

Relying Entirely on Seller-provided Information

Chapter 4: Investigation Areas

Corporate Information

Corporate Information Summary

Corporate Information Questions

Transaction Rational

Company Structure and Founders

Management / Shareholder Relations

Business Vision

Investor Composition and Relations

Equity Structure

Subsidiaries and Affiliates

Stock Restrictions

Corporate Information Checklist

Financials …

Financials Summary

Financials Questions

Financial Statements

Accounting Issues

Profitability and Expenses

Burn Rate and Funding

Extraordinary Financial Events

Liabilities and Debt

Taxes

Financials Checklist

Products and Market

Products and Market Summary

Products and Market Questions

Current Products

Customer Satisfaction

Data on Marketed Products

Competition

Marketing Strategy

Sales Techniques and Channels

Products and Market Checklist

Research and Development

Research and Development Summary

Research and Development Questions

Group Structure and Talent

R&D Strategy

Product Development

R&D Technologies

Bioinformatics

IP and Publications

Research and Development Checklist

Intellectual Property

Intellectual Property Summary

Intellectual Property Questions

Patents and Ownership

Freedom to Operate and Infringement

Patent Coverage

Trade Secrets

IP Processes

Third-Party Agreements

Intellectual Property Checklist

Operations

Operations Summary

Operations Questions

Suppliers

Manufacturing

Distribution

Information Technology

Asset Valuations

Operations Checklist

Legal and Corporate Issues

Legal and Corporate Issues Summary

Legal and Corporate Issues Questions

Corporate Minutes

Stock Purchase Records

Contracts

Ownership of Assets

Litigation

Permits

Conflicting terms

Antitrust

Legal and Corporate Issues Checklist

Human Resources

Human Resources Summary

Human Resources Questions

Organizational Structure

Executive Background

Executive Teamwork

Executive Compensation

Employees

Human Resources Checklist

Chapter 5: Independent Investigation

Creative Sources of Information

Primary Sources of Information

Internal Primary Information

External Primary Information

Secondary Sources of Information

World Wide Web Precaution

Secondary Source Listing

Company Background

General Databases

Financial Information

Management Information

Life Sciences Industry

Chapter 6: Conclusion

Chapter 7: Appendices

Example Confidential Disclosure Agreement

Example Request for Information (RFI)

SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Example Memorializing Memo

Example Due Diligence Report Executive Summary

TABLE OF EXHIBITS

Exhibit 3.1 Life Science Transactions Requiring Due Diligence

Exhibit 3.2 Venture Capital Investments in Various Sectors of the Life Sciences Space

Exhibit 3.3 M&A Activity in Terms of Number of Transactions and Amount Paid

Exhibit 3.4 Due Diligence Steps for a Buyer

Exhibit 3.5 Top 10 Due Diligence Flags for Venture Capitalists

Exhibit 3.6 You Can’t Know Everything

Exhibit 3.7 Due Diligence Issues in Select Recent Life Science Deals

Exhibit 3.8 Beware Royalty Stacking

Exhibit 5.1 Tips for Conducting Primary Interviews

Exhibit 6.1 Possible Results of Due Diligence

Exhibit 7.1 Example SWOT Analysis of a Hypothetical Company

Abstract

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