As our current situation continues to evolve, it is critical that your out-licensing and/or financing business plans and presentations account for COVID-19. This should be communicated to prospective investors and licensing partners, especially during advanced due diligence.
But what should this update include?
Here are a few suggestions:
Service Providers
Your current and future plans may include outsourced work. Now is the time to check with all of your critical path vendors and ask:
1. What is your current status vis-a-vis COVID-19? Are you operating at full capacity? 50% capacity?
2. Are any delays in timelines and deliverables expected? When and why?
3. How are you maintaining social distancing?
We are finding the last one to be an interesting question to ask. It’s open ended and vague. So pay close attention to the answer.
For example, has the vendor limited entrance to their facility to key scientific and animal husbandry personnel? What tools are they using to stay in touch with each other? And how often?
Are there specific areas (or locations) in the organization that are handling the pandemic better than others. What are the local governments recommending or mandating?
Pay close attention to your vendors with far-flung operations. Having everything proceed relatively smoothly and with minimal disruption in Germany does not mean this is the case at a facility in Northern Italy, for example.
Key Employees and Consultants
From an investment perspective, key employees and personnel are always important. How are they operating during this crazy time? What processes and systems are in place to keep the workflow on schedule? Are there any risks? What if key personnel become ill?
From an out-licensing perspective, the problem is slightly different. Are your due diligence systems and processes fully operational? If video was not part of your data room management process, is it available now? Has it been thoroughly tested? Do those involved in the due diligence process have adequate home office equipment to participate and not cause delays due to poor internet connections or related problems?
Time Course Considerations
It is difficult to project how long this pandemic will end and, perhaps more importantly, when business will revert to a new normal. For the US at least, various models suggest we will peak sometime around April 10-20, 2020. But about other countries? What happens when the Southern Hemisphere enters Winter?
It may be sufficient to craft a contingency plan for the remainder of the calendar year. But executives should be prepared to revise these plans as the situation unfolds globally.
Common Sense? Of course.
We concede that much of what we are saying here is common sense. It is fairly basic.
But any investor or licensing partner will want to make sure that the current pandemic will not have major impacts on their diligence process or operations after the transaction.
Now is not the time to forget the basics and consider potential adjustments to your plans and timeline.