Deal Optimizer

When a company is planning to in-license or out-license a product, key questions for company executives concern deal valuation and deal parameters, such as:

  • Is the deal valuable to your company?
  • Is the deal value shared properly between licensee and licensor?
  • Are you confident with the way you set up deal parameters? Are they optimal?
  • Could you prove that your negotiation strategy is optimal for your company?
  • How would you optimize deal parameters in response to a prospective partner proposal?

Traditional methods of deal analysis focus on examining comparable deals, trends, industry benchmarks, etc. Then, each deal parameter, such as deposit payments, milestones, and royalties are assigned in a spreadsheet, and tuned to guarantee optimal value share. This process is often time consuming.

ORbee Consulting proposes more effective methods of deal structuring. The techniques employ information traditionally used in financial modeling for strategic alliance planning.

The difference is that deal parameters such as upfront payments, milestones, royalty rates and others, are variables within a range. Parameter boundaries are based on comparable deals, industry benchmarks, and historical information. The model successfully derives optimal values.

  • Optimization of deal parameters
  • Planning flexibility
  • Time and cost savings

Case Study 1

Company (A) develops a product. Company (B) acquires product IP, and pays upfront fees, rewards, and milestones to Company (A) for each successful phase of development and approval. Company (B) also pays tiered royalties to Company (A) depending on projected revenue level.

The goal is to optimize deal parameters and deal value for each partner, as well as to optimize the negotiation strategy (eg. optimal reassessment of all deal parameters in response to the partner’s proposal).

Case Study 2

Partner (A) has a product in early stage development, and the monetary value of the product is uncertain. Partner (B) buys this product from partner (A) and develops it through PC, Ph1 and Ph2 clinical trials.

If partner (A) opts in after a certain phase of clinical trial, profit will be shared as X/Y (eg. 50/50). If partner (A) decides to opt in after Ph2, then Partner (A) should compensate a portion of the value created by partner (B).

This implies that after compensation, the value created by partner (B) should be in certain proportion to that of partner (A).