Transferring a pharma product, the Simple way
Transferring a pharmaceutical product from one company to another is a long journey.
Finding buyers and negotiating the transaction can take up to a year. Closing it takes a few more months. Then, three to five years of hard work are needed to complete the transfer operationally. The first 80% of the integration tends to be straightforward, fatigue sets in for the next 15%, whereas the final 5% is seemingly interminable.
We’ve lived through it multiple times and think there’s another way. We created Simple Pharma to serve that purpose: making product divestments simple.
There is indeed a lot to do.
The transaction architecture is extensive. There are often three or four different contracts that cohabit. The Asset Purchase Agreement covers the transaction itself.
The Supply Agreement is there to ensure supply continuity until the new supply chain has been established. Meanwhile, the Transitional Service Agreement (TSA) deals with the interim period between the deal closing and the completion of the transfer in terms of operational support.
Indeed, pharma product transactions are counter-intuitive: the cash transfers at closing, but the assets themselves transfer after months or years. It often takes multiple years to complete everything across Legal, Quality, Pharmacovigilance, Regulatory, Supply Chain, and Finance.
Practically speaking, the TSA ties in the seller to provide services for which there is no upside, whereas the buyer’s freedoms are restricted until the products have fully transferred.
That’s a lose-lose: the buyer is frustrated because they can’t do things their way and the seller is frustrated because they’ve already moved on and no longer have skin in the game.
Simplifying the transfer process for the seller.
Our goal is to make selling a pharmaceutical product as easy as selling your car. To do so, we focus everyday on simplification, knowledge and communication.
Designing the transaction for simplicity.
Rule of thumb: if you think something is clever and sophisticated beware — it is probably self-indulgence.
― Donald A. Norman, The Design of Everyday Things
We draw on our experience of handling the acquisitions, divestments, and integrations of over 800 SKUs in 40+ markets to rethink how transactions are done, simplifying both the negotiations and the execution.
Simple Pharma takes a novel approach and goes as much as possible without a TSA and interim period of services. The cash is put in escrow and transfers when the product transfers. The benefits of this are:
- Simple transaction documentation — a straightforward asset purchase agreement
- The product transfers when the buyer is ready, aligning incentives to put things in order fast. In the meantime, profits are the seller’s
- As the cash is held in escrow, the seller is certain to be paid
The resulting transaction process is a lot simpler — one contract governs all, and all economic incentives are aligned. This allows sellers to consider smaller, targeted transactions that would otherwise not be economical.
Making knowledgeable decisions.
Information is not knowledge.
― Albert Einstein
Pharma companies often struggle to access high-quality fact bases to make decisions. Knowledge is siloed in different functions, scattered across countries, held in foreign languages, and is not easily searchable.
We’ve been on countless conference calls with fifteen or more people, trying to solve a problem, and not being able to piece together a good knowledge of the facts and constraints. New facts are surfaced when probing solutions, or worse, when implementing them.
At Simple Pharma, we have codified the global rules of asset transfers into an internal wiki, giving both ourselves and our partners access to the information needed to make smart decisions. The project teams are ruthlessly focused on delivery and have all the tools they need to execute a rapid transition. For example, if we are transferring an oncology product in Luxembourg, any project team member can by themselves consult the requirements, build the plan, and drive it to the finish line.
Ensuring the right communication.
A product transfer is an exercise in coordination of multiple organisations and individuals within them. It’s easy to lose track of what has to be done, and there is lots of dead time with tasks waiting in someone’s queue.
Simple Pharma’s project teams rely on our internal wiki to build an execution plan, complete from A to Z, and then communicate heavily to:
- Provide clarity on what has to be done, by when, and by whom
- Lay out the steps ahead to allow the project team to plan capacity and promote on-time delivery
- Ensure that all the key facts are surfaced and available
Towards lean services.
In the 80s, Toyota invented lean manufacturing, which demonstrated that small streams of daily improvements delivered superior quality than top-down planning. Before that manufacturing was not as efficient, hopelessly complex, and laden with quality defects.
Great companies with a strong lean vision are working daily at getting on with doing a small number of important things consistently — day in, day out, week after week, month after month, year after year.
We believe the time of lean services has yet to come. We’re building Simple Pharma with the goal of bringing that vision to the pharma industry, improving patient access to medicines globally.