

With Great Disruption Comes Great Opportunity



Even when these companies have the necessary capital and science for a potential health care solution, they often lack the industry know-how to implement it. These entrants therefore are seeking out innovative partnerships with traditional players, such as health systems, providers and payers, to provide the market expertise they lack. Health industry leaders are thus increasingly faced with a choice: take a gamble and seize the opportunity to innovate and grow, or continue business as usual and risk stagnation.

Valuation and Intellectual Property

In the current deals landscape, rising valuations can be a challenge for buyers. Increasing money from overseas, including sovereign wealth funds, contributes to this trend. Conducting thorough pre-clinical due diligence can help verify the efficacy of the outcomes and therefore help determine the real value of a potential deal. Even when there is stiff competition to close a deal as quickly as possible, taking the time to truly understand the science at issue is an important step to mitigate risk.

Intellectual property (IP) is also a key component for deal valuation. In a commercialization partnership, where one party has a product and the other has a channel, defining roles and documenting IP ownership in the partnership agreement is often fairly simple. Where it gets more complicated, however, is when parties are co-developing a solution. The partnership agreement must carefully document data sources and clearly allocate IP rights and IP property protection.

On the health care acquisition side, due diligence to prove the IP value of a deal—including what kind of IP is involved, and who owns it—is essential. Sometimes the patents involved are at the core of the solution and central to the valuation of the deal (as is the case in most life sciences deals, for example). In other instances, the IP rights issues are far more complex because the patents may not extend to cover the commercial use cases.

On the seller side, careful planning can ensure that the value of the solution is fully protected, particularly where a technology or protocol shows a dramatic benefit and costs less than the product it replaces. Legal counsel can advise on difficult questions related to protecting artificial-intelligence-based software without disclosing trade secrets in a patent application, and appropriately valuing and protecting non-patentable IP, such as employee know-how.

Elements of Successful Partnerships

Once a partnership has commenced, it needs the right people in the right roles in order to be successful. For example, a partnership needs a strong internal voice to guide the development team. The product manager usually fulfills this role, tracking what the team is building and how to get it out the door, and maintaining the value and integrity of the science being developed.

The product manager in turn needs a strong business-oriented team member(s), and that’s usually the alliance manager. The alliance manager ensures that the relationship is cordial, collaborative and progressing as planned. In innovative partnerships between tech companies and traditional health players, the alliance manager is invaluable in bridging cultural differences and managing expectations.

If a partnership has pieces working together, it has a good chance of success. Without these elements, however, it almost certainly will encounter problems, regardless of the strength of the science.