In our view, there are two basic types of biotech business development-related due diligence. The first is external , where the team gathers and analyzes data about a target company or technology exclusively using external data sources, such as market & equity research, physician interviews and surveys, conferences & symposia, and so forth. The second is internal, where the team is reviewing and analyzing the internal data from the target company itself, in the context of the learnings from external due diligence work.
[The aforementioned definitions assume that there is a core business development strategy in place, and that there is an active, ongoing process of gathering information on markets, technologies, and prospective business development targets (technologies, companies, or markets).]
The reality is that external and internal due diligence cannot be separated. They are linked because no matter how good the external analysis, internal analysis will invariably raise questions that need more external work. Thus, much of the external business development due diligence work has to be reviewed in light of internal findings, or gaps in the external work have to be filled with additional (original) research.
Additionally, biotech due diligence has to be placed in its strategic and transactional context. For example, does this particular opportunity fit within the overall business development strategy? Again, assuming there is a strategy in place? Would this transaction take the company a step closer to its goals as outlined in its strategy? Basic questions like these are critical elements of any due diligence process.
Thus, there really isn’t a specific time when biotech business development – associated due diligence begins. It’s more of a continuous process, with various phases and levels of intensity, such as: