25 May, 2023

Due diligence is critical for life science dealmaking because of the unique complexities and risks involved in the industry. The life science sector includes biotech, pharmaceuticals, medical devices, diagnostics, and other related areas, and these fields are subject to a wide range of regulatory, scientific, and technical challenges.

Due diligence is the process of evaluating the risks and opportunities associated with a potential investment or business deal. Life science products typically require extensive research and development, regulatory approval, and clinical testing before they can be marketed to consumers. As a result, there is a high degree of uncertainty and risk associated with these products, and investors need to carefully evaluate the science and technology behind them to understand their potential value.

In the context of life science dealmaking, due diligence involves a comprehensive examination of the target company's scientific and technical capabilities, intellectual property portfolio, regulatory compliance, financial performance, and other critical factors.

There are several reasons why due diligence is particularly important in the life science industry:

Financial Analysis: Due diligence includes a thorough examination of the financial statements, cash flows, and projections of the company being acquired or partnered with. The process identifies market opportunities for the potential target, as well as risks such as hidden liabilities, revenue recognition issues, and competitive barriers to growth.

Scientific Validity: The scientific validity of a product or technology is a critical aspect of the life science industry. Due diligence helps evaluate the scientific evidence and clinical trial results, identifying any gaps or issues that may affect the product's marketability and success.

Intellectual Property: Intellectual property is a highly valued asset in the life science industry. The due diligence process identifies any issues related to patents, trademarks, or copyrights, which would significantly affect the deal's value.

Regulatory Compliance: The life science industry is highly regulated, with complex rules and requirements governing everything from clinical trials to product labeling. Any non-compliance can lead to significant legal and financial consequences. Due diligence helps identify any potential issues that may arise from non-compliance with regulations and laws, enabling investors and partners to address them before closing the deal.

Pricing Pressures: While the life science industry is well-versed in navigating the regulatory hurdles of bringing products to market, the costs of these protocols are an element in the end cost to the consumer patient, and R&D costs are rising. Promising new treatments for oncology, chronic conditions like diabetes, and personalized solutions for rare and complex conditions will take time and resources to bring to market. On the manufacturing side, technological advances that are redefining product development and altering how drugs are manufactured are proving to be expensive. A 2020 pricing analysis estimates that the cost to develop a single drug application ranges from $314 million to $2.8 billion, with an estimated median capitalized research and drug development cost per therapeutic product at $985 million.

These cost-intensive investments cause upward pressure on end-user prices. An added dilemma is that the high cost of developing new products is occurring at a time when the patents on some of pharma’s most reliable money-makers expire, which causes increased pressure on profit margins.

In short, due diligence is critical for life science deal making because it allows partners and investors to understand the risks and opportunities associated with a potential investment and make informed decisions about whether to proceed with a transaction. Without a thorough due diligence process, these parties would be exposed to significant risks and uncertainties that could negatively impact their investment returns.

Due Diligence Requires Time, Resources, and Secure Collaboration.

On average, the due diligence process for a life science investment, partner agreement, or merger requires 18 months of work by a dedicated team. Amassing all the necessary documents and providing expert analysis is a highly collaborative endeavor with parties in-house as well as experts in remote locations. It is essential that the due diligence team has the resources to complete this complex project.

While those working in life sciences are trained to be security conscious, due diligence ups the ante considerably. The documents used not only contain trade secrets and company financial performance records but can also include clinical lab files with patient information.

A ShareVault VDR meets Life Science Security Due Diligence Needs.

Fortunately, savvy technologists at ShareVault have developed the ideal environment and tools for life science due diligence. ShareVault is an online platform with a cloud-based Virtual Data Room (VDR). A ShareVault VDR provides a central hub where the due diligence team, clinical labs, manufacturers, analysts, attorneys, and consultants can access and review materials safely and securely, from any authorized device, anywhere, anytime, including those in remote locations.

The Ultimate Secure Deal Room

  • Only a user with proper password authentication has access. For further security, the due diligence VDR administrator can require two-step verification
  • The ShareVault VDR provides maximum protection with files encrypted with AES-256, file connections are via HTTPS over Secure Sockets Layer (SSL), providing AES-256 encryption in transit
  • Page-level Tracking provides an audit of user interaction, by date/time, activity, group, user, or tag – a tool for monitoring productivity, as well as a necessary record for internal or regulatory audits.
  • Since the status of a collaborator may change, the VDR administrator can set an expiration date revoking access after a given date/time. He or she can also remotely “shred” documents, including documents that have already been downloaded.

Speedy Deal Development

ShareVault has more than 15 years of experience as the VDR of choice for life sciences, including more than $50 billion in financial transactions. Since due diligence is the backbone of these deals, ShareVault developed the Due Diligence Checklist.

The Due Diligence Checklist is a template preformatted with folders already organized into the most likely naming conventions. Other features, like bulk uploading, integration with popular file sharing apps like DropBox, Box, Google Drive, Microsoft SharePoint & OneDrive, and DocuSign, speed the initial organization of due diligence.

Additional ShareVault tools that speed the due diligence process include:

Instant Organization

  • ShareVault’s unique hierarchical tags are document hashtags that provide crosslinks, a feature that allows a document to appear in multiple folder locations
  • At any point in brief preparation, add new tags and reorder using drag-and-drop – ShareVault’s document management software will automatically update numbering.

Smart Search

  • ShareVault’s advanced full-text search engine allows an individual to locate documents quickly and easily with results sorted by relevance and with synopses showing how the searched keyword(s) are used in context.

Interactive Q&A

  • At any point, a collaborating party can click the Q&A feature on a document and pose a question, allowing a fast and easy way to get expert feedback.

ShareVault’s Collabloop Double-checks the Due Diligence Brief.

ShareVault includes Collabloop, a task management software specifically designed for preparing the final brief of a life science due diligence project. Collabloop tracks the iterations of a brief, a process sometimes referred to as “redlining”.

Collabloop starts with a project worksheet shared with the collaboration team. The team leader sets the project timeline, assigns collaborators, and records the updated status of a document. As the due diligence brief progresses, Collabloop automatically archives each revision in a ShareVault-secure central document repository, complete with dates and the names of collaborators – essential data for pharma reporting requirements. ShareVault also provides an eCTD viewer to facilitate regulatory submissions.

24-hour Support

ShareVault knows that with a deal on the line, time is everything. That’s why ShareVault provides round-the-clock support from our IT team, who can answer questions and resolve issues quickly and efficiently.

Have Questions? Let’s Talk!

ShareVault’s built-in tools and features speed up the life science due diligence process without compromising on security. Since each company has unique needs, ShareVault feature sets and pricing are customized to fit your needs. To receive a customized ShareVault proposal, contact us today!

Contact Us Free Trial