March 8, 2023

The Importance of Conducting Due Diligence in an Economic Downturn

Companies in the life sciences sector, whether it be Biotech, Pharma, or Venture Capital, all understand that there will be ebbs and flows in the market. So, when downturns occur, as they frequently do (2020, 2008, 2001, etc.) it’s surprising that rather than doubling down on implementing strategies, panic ensues.

In a sector known to go through cycles, why does this continually occur? Human Nature.

Fortunately, Kineticos has the solution.

An experienced life sciences consulting firm is known for conducting successful due diligence projects for Biotech, Pharma, and Venture Capital companies. We have the capability to help design strategies in all three arenas. Below is a high-level overview of the techniques we use to conduct due diligence and identify potential strategic moves.

Competitive Landscape and Market Analysis

Regardless of therapeutic area and any other specific considerations, it is imperative to understand your competition. Kineticos understands the importance of this and helps our clients form a competitive analysis based on current market conditions while also looking to the future and considering things like:

  • Company overviews
  • Mergers and Acquisitions within the space
  • Companies looking to expand into the space
  • Niche areas where companies can distinguish themselves from competitors

We conduct market analysis and competitive landscape research in virtually every type of project we work on with an eye for identifying competitive advantages and areas of weakness, to give clients the best information possible when making tough decisions.

Regulatory Strategy

If drugs and devices cannot get approved, they cannot make money. Kineticos can utilize proprietary databases and experience from recent projects to develop effective regulatory plans. We analyze clinical trial design, FDA letter correspondence and our team of Operating Executives to give our clients the necessary information to implement a successful regulatory strategy.

Expert Opinions and Outside Opinions

Our advisory team is comprised of individuals with various backgrounds (PhD, PharmD, MMB, etc.) and experiences across the life sciences. Along with our direct team, our senior leadership has built lasting relationships that allow us to call on Operating Executives with decades of experience in every therapeutic and functional area previously mentioned.

Clinical Development Pipeline

How a company’s pipeline is positioned is critical when there isn’t abundant access to funding across the industry. Specifically, being aware of these factors and understanding how to leverage them to weather the downturn is key:

  • Positioning of the asset relative to both clinical and commercial competition
  • Awareness of pre-clinical programs coming down the pipe
  • Prioritization of a lead asset and regulatory challenges it may face if not yet approved
  • Manufacturing bottlenecks and how they can be avoided

Kineticos takes all these factors and more into consideration while conducting due diligence work.

Company Financials

It is a common refrain that biotech companies should raise capital when they can, not necessarily just when they need it.  Seasoned biotech and small pharma executives know this and hopefully have positioned their companies financially to be able to advance key programs to value-building milestones even during the difficult market environment.  Companies in a less fortunate cash position may need to prioritize their pipeline and ensure that the capital used advances programs to meaningful outcomes, demonstrating real value to patients and payers.  Kineticos works with companies to ensure outcomes are designed cost-effectively and appropriately to achieve the greatest value.

Alternative financing options should be considered when needed.  That may include private placements with existing investors that have a vested interest in the company’s long-term success, royalty deals for existing or future revenues, and partnerships – particularly those that might include territories or regions of the world that are not vital to the company’s success.  Finance options should be carefully considered and need to be effectively executed.

Company Management

Company management is always an important consideration when evaluating an asset that needs to run the gauntlet from clinical stages all the way to commercial. It is essential when considering the current economic conditions.

Specifically, does the company leadership have experience going through an economic downturn in the past? What strategies were implemented? Were they successful? These are all key considerations we consider when evaluating companies.

Decide on a Strategy

In a tumultuous market where funding is low companies are going to continue to be conservative. Due diligence is not an area to cut costs. Proper due diligence can cost thousands of dollars but has the potential to save millions that would be wasted with poor planning.

Ultimately you need a plan. Will you invest now? Wait until the market turns? Prioritize Asset A over Asset B?

No matter the question Kineticos can help. Check out our website and case studies to learn more about our capabilities.