Rachael Craig, MotionHall: Thanks for joining us on our latest in our series of executive webinars from MotionHall.
This is the second of several special editions focused on the unique times we find ourselves in, and I’m very pleased that today, Anton Gueth from EVOLUTION Life Sciences Partners will be with us to speak to his experiences and learnings building business development relationships over video conferencing.
Good morning, Anton.
Anton Gueth, EVOLUTION LSP: Good morning, everyone!
Rachael: We get really good feedback on these executive calls. We cover a lot of material that isn't generally addressed elsewhere, which makes me feel that we're doing something very valuable for the industry and that we're doing a good job bringing talented executives out to contribute to the conversation.
Rachael: Glad to be hosting us today.
My name is Rachael Craig, and I’m the co-founder and CEO of MotionHall. MotionHall exists for one reason, and that’s to help you ensure your company closes the most valuable licensing or M&A deal possible.
MotionHall exists for one reason, and
that’s to help you ensure your company
closes the most valuable licensing or
M&A deal possible.
We're a Silicon Valley technology company, serving business development in the life sciences with modern cloud-based tools. Our tools sit on top of the most comprehensive data available. To empower our premium OutMatch tool, we have a predictive partner identification and profiling tool just for dealmakers like you. Like many of you, our roots are as a venture-backed company. MotionHall’s luminary fund is Village Global, which is backed by Michael Bloomberg, Bill Gates and Jeff Bezos.
Rachael: As I mentioned, I'm very pleased that today we're joined by a special guest Anton Gueth of EVOLUTION Life Sciences Partners.
Anton began his career in the pharmaceutical business over 30 years ago at Eli Lilly. His global finance and operating experience spans the U.S., Europe, the Middle East and Africa. Before founding EVOLUTION Life Science Partners, he was a Managing Director of Burrill Securities. He is also the founder and Managing Partner of Gueth Consulting, a consulting firm focusing on pharmaceutical and biotechnology clients in the areas of licensing, early-stage financing and alliance management. While at Lilly, Anton held multiple positions of increasing responsibility, including area director of Africa/Middle East and concluding as Director of Alliance Management. Anton is a member of the board of directors at Antares Pharma. He is also on the board at the California Chapter of the American Liver Foundation. Anton received his master’s degree in Public Affairs from Indiana University and an MS in Agricultural Economics from Justus Liebig University in Germany. We're really glad to have Anton with us today. And thank you, Anton, for being here.
Anton: Looking forward to the conversation. Thank you. Discussion and Q&A:
Rachael: Anton, you and I were chatting just a moment ago about some business that you've just conducted and are now able to talk about. That was all done over video conference. Can I ask you to share a little bit about that experience, and maybe some of the learnings that came from doing that work over video?
Anton: Yes, I can. The basic story is just literally this morning, one of my clients, a Swedish based company, announced a global licensing transaction with a US Company that has a Korean parent, that we spent the last five months working on. Except for a meeting at J.P. Morgan, which thank goodness was slightly pre-Corona, we ended up having to do everything online. First of all, the communication was between a Korean, US and Swedish company. So way more time zones than mere mortals can typically handle. The folks that sell internet bandwidth had very good business over the last few months with us. But it worked out reasonably well because we had at least one meeting of the principals early on. So, it was at least a face-to-face meeting early on to build a little bit of a relationship. Interestingly enough, everything else was done by a phone call or video. It worked out much better than I had feared, and not so much just from a negotiating perspective because all of that tends to happen via trading documents. This morning at 6AM, we concluded with a major press conference at the Swedish Stock Exchange, which was a new one for even the Swedish Stock Exchange to have people from around the globe calling into a Zoom call and explaining to the shareholders of the Swedish company what exactly we did do and what the picture holds going forward. So, all in all, pretty successful in process and outcome.
It worked out much better than I had feared.
But the whole diligence process was obviously a lot more complicated than it ordinarily would have been, because you can't necessarily go and kick the tires, on CMC, clinical data and regulatory information or whatever people might be interested in or concerned about. In negotiating an agreement, not just speaking to the BD folks, you really have to think about the whole process of getting a transaction done in multiple, secondary and tertiary contexts. These typically play somewhere in the background, but all need to coalesce at the end of the day is an agreed-upon set of circumstances that you can then paper. So quite an interesting experience, let's just say a lot of sleepless nights because somebody ends up with a short straw of what time zone the call is going to happen.
Rachael: That makes sense. Something we've heard from other dealmakers who are trying to work by video, is that there's a challenge with negotiating and that you can't get a champion in the room, or you can't go yourself, and sort of bang on the table in the conference room. Did you feel that that was a challenge in this transaction?
Anton: Yes, absolutely. There were moments when I would have loved to bang the table and knock a few heads together, and that is unfortunately not a capability that Zoom or Teams or any of those systems have yet but hopefully, there's something like that at some point in the future. [laughing]
But kidding aside, yes, there are moments in any negotiation where things tend to go awry. People talk by each other, the emotion of the moment, whatever that is, you know that has nothing to do with the topic at hand but comes from somewhere outside, filters into the conversation. On a webcast, it's tough to tell what people are really reacting to. Is it that the words on the paper that cause that reaction, the eye-rolling on either side of the table, or really the fact that they just get a call or a text from somebody outside that added an element of emotion that wasn't there two minutes ago. So yes, it makes life a little bit more complicated. What saved us in this particular case, as I said earlier, is having at least one face-to-face meeting to have a little bit of understanding of the personalities on the other side. In the absence of that, life would have been more difficult.
Rachael: A different question, getting into some of the positives. I know that when you and I spoke last in person you said, “Hey, I need to do some of this work over video.” It was pre-coronavirus times but with many time zones to manage. You said, “Well, I'm getting good at working over video.” I'm curious what you've learned to do when conducting business development over video that's worked for you?
Anton: Well, it's a number of things. First of all, I don't go into a video conference necessarily very blind. Meaning, I have at least one or two preparatory phone calls to make sure I know roughly what I'm getting myself into. Preparation is probably more important in this setting than it would be otherwise. This idea that you can wing it sitting in your bathrobe in your home with all your paperwork around you is possible, or at least not impossible, but it doesn't make life a heck of a lot easier.
It takes a lot more preparation. It takes
a lot more effort to really listen to what’s
happening and look at what’s happening.
I think from my perspective, it takes a lot more preparation. The other thing that I've learned is it takes a lot more effort to really listen to what's happening and look at what's happening. Again, there's this visceral effect of being in a room and being able to gauge where everyone is that you almost do subconsciously if you have some experience, that's all gone now. All you have is a screen in front of you and what you're hearing. There is now less signal, a lot less signal to gauge a conversation. Therefore, you're going to pay a lot more attention. Maybe take a few more breaks here or there just to make sure you regroup and check on any of your team to make sure that you're all on the same page. The apps do allow private conversation on the site or you can just hang up and have a private call. But it does take a little bit more thinking about where everyone else is because now you don't get this immediate, visceral feedback if the team on your side is happy or unhappy compared.
Rachael: Thanks Anton. If I summarize some of the learnings that you have so far:
Is that a fair summary, Anton?
Anton: Yes. That's a good start. Absolutely.
Rachael: On preparation, can you talk a little bit more about where you felt that extra pressure to have your research streamlined? Was it to help inform the way you were thinking about the other stakeholders in the room? Did you feel the pressure to make those each meeting high value? What was the big driver of doing that extra research?
Anton: The big driver, quite frankly, is the inability to do some of the basic diligence work that you would otherwise be able to do and delegate out with in-person meetings. A licensing transaction has a lot of bits and pieces in the background. Well, it ordinarily would have teams flying around the world looking at a factory or a product doing whatever they're doing and then reporting back, generating a report that you can depend on. On both sides of this transaction, neither party was able to do the travel. A big discussion towards the end was related to financed, how it is going to get implemented? What's going to work? The financial systems are very different. The reporting requirements are very different. In the absence of being able to discuss this with a larger group of experts around the table, you depend a lot more on the paper in front of you, which means the contract has to be right. You can't adjust necessarily later, so you end up putting a lot more effort into the research. Just look at the total number of hours this transaction took, it was probably not less in absolute hours. But I spent more time actually working on the transaction, as opposed to spending time sitting on the airplane getting from place A to place B and in front of one group of people or another. It’s not more efficient from that perspective, you do have to spend the time. But you get to do it in your own time zone and probably with it with a level of alertness that you might not have otherwise have.
Rachael: That's really interesting and kind of begs the question, did you find that this transaction had more or less people hours, like face to face conversation than other transactions? How did that compare over the duration?
Anton: Well, that's a tough one because every transaction is unique and has its unique challenges. I can't say, as I don't have the placebo control here. It’s a transaction, it happened. It took a tremendous number of people hours. I would say it probably would have taken a few more if you count the elapsed time that you lose when you try to physically get people together. You know the benefit of the video system is you can do something on short notice and people actually show up because it doesn't matter which time zone they're in, they can always open a computer or listen to a phone call. Once people got over this - “what do you mean, I can’t go there? What do you mean, I can’t see these?” Once they've adjusted, it became a pretty efficient process.
Rachael: That's good. Anton Gueth says we need more data! I think in the next few months we may get that in terms of what it's like to transact over video.
Anton: We will! I'm in the middle of three or four more transactions, which I hope to close by May or before BIO. It will be a virtual BIO, I'm not sure what that's gonna look like. But anyway, the experience will be generated, and I suspect the industry is going to retain some of this. I think some of how partnering gets done is going to go back to in person meetings, but a lot of this, I think is here to stay.
Rachael: How about looking at this from a different angle? I know we talk a lot at MotionHall with other dealmakers and with folks on our calls about what in the shift to virtual meetings could be good for the industry. I've had a number of dealmakers and CEOs say to me, “Well, I think we have to find the opportunity in this.” One comment that I thought was particularly interesting was, “Well, it sort of levels the playing field, doesn't it?” If all of us are sort of no longer bound by geography and taking these virtual calls perhaps that could be a good thing. If you're going to pick potentially good long-term side effects of this shift to video, what do you think it would be?
**The shift to virtual meetings could be good for the industry.**
Anton: Big picture, you don't spend a huge amount of time traveling. I’m speaking for myself, I'm a lot more rested than I typically am because I haven't been on an airplane in three weeks. I haven't had to change timezones in three weeks. It makes a huge difference. So, my productivity certainly is much better despite the fact that I've had some odd hour phone calls or video conferences. For one, I certainly would start there. That goes for everyone else around you.
Does it level the playing field, I don't necessarily think so. Experience and personal contacts will continue to play a significant role, in my own experience in the last six weeks. In those situations where I had a personal relationship, where I do have a read on the other person, however imperfectly that may be, a video call or a phone call is much better and is much easier to initiate. So, for cold calling purposes for initiating discussions, I still think that is tough. I mean, obviously, we're going to learn to do it. I'm not debating that. And what you also will see, quite frankly, is a bit of a generational divide. I have a daughter who has hundreds of friends that she's never met in-person and feels very comfortable talking to. I don't have any of those. People I call friends, I know, and I've met and have shaken hands with. I certainly have a higher hurdle to get into this. You said earlier in the introduction, I spent a number of years managing Eli Lilly’s Middle East-Africa business. Trust me, I wasn't in all those countries all the time. So even before this recent crisis we had experience working long distance. Technology makes it a little bit easier. So, I think we'll be just fine.
We just need to get to get used to potentially having less information available in these types of processes. As I was talking about the secondary and tertiary elements of business development, all the stuff that is not business development still needs to happen. You know, think about your whole broad diligence process. All of that is a little bit more complex to organize, but it can be organized, and people need to trust documents and data rooms and other virtual information exchanges much more than they do today.
**All of that is a little bit more complex to organize,
but it can be organized, and people need to trust documents
and data rooms and other virtual information exchanges
much more than they do today.**
Rachael: Appreciate that experience is always, especially in our industry and with transactions as complex, is really important. What about in a geographic perspective? If we don't have to gather at conferences and central hubs, at least for a little while, do you think that could open up the frequency at which people are building relationships across borders? I would say that I feel that in my conversations with the industry, but it's hard to know how far that will go and if it will stick.
Anton: I don't know how far it will go and I don't know what it will stick. It certainly feels like it should be a little bit of a paradigm shift as we live through this and reduce the travel industry as it were, related to biotech pharma business development. We'll see. That remains to be seen.
I personally like the conferences because that's the one opportunity where you get to see everyone and then everything else happens virtually. I certainly would not want to go totally virtual. But again, I'm perhaps old school on that one. But generally, happy hours on FaceTime are only so much fun at the end of the day. [Laughing] I think this could absolutely be a paradigm shift for how this industry works, and for that matter any other industry that is intensively traveling, and the industry could be better. As far as I'm concerned, pharma biotech hasn't necessarily been as adoptive if you want of modern technology as some of the other industries like the tech industry. It’s a high time that the industry steps up and re-thinks the way it does business.
I think this could absolutely be a paradigm shift for how this industry works,
and for that matter any other industry that is intensively traveling,
and the industry could be better for it.
Rachael: We're talking about just that process of building relationships over video. The question I have here is have you started in completely new relationships over video? If yes, what was that like?
Anton: I have not. In terms of any outreach I have done, I have certainly met new people for the first time over video conferences, Zoom, Teams and others. And so far so good. I mean, it is a different relationship, I would say. It's more linear. It's not as broad as it possibly could have been had we met in person. Hopefully, we will meet in person at some point. So, it's a little bit more focused, quite frankly, than it would otherwise be. That's neither good nor bad. It just is. You don't get the full breadth of the other person. But yes, there's a number of relationships that are new that are basically phone and video-based only at this stage. I certainly have met a bunch of interesting lawyers over the last two months in the context of this transaction that we just finished.
Rachael: That's excellent. I think from my end, I've been encouraging our membership and some of the folks that we're meeting as they come into the company to take advantage of the fact that global executives are at home. A lot of people would like to talk, not everybody's there. Some people have too many worries with family and other things. But for folks who would like to talk and catch up, it's a really unique time to connect remotely and build relationships. So, for me personally, I know this weekend, I spent a lot of time taking virtual coffee meetings from my apartment. I've got a treadmill so I said, “Okay, this is walk and talk.” I met a lot of people for the first time, shared ideas and started relationships that hopefully come to fruition later. Is that something you'd recommend that dealmakers and CEOs do in our industry as well?
It’s a really unique time to connect remotely and build relationships.
Anton: Absolutely! I mean, you got to go with the times. Right now, you can't afford to sit back and wait for the world to go back to normal. It may go well in a few months, it may not. At this stage, business doesn't go on hold. This whole industry is going to get clobbered right now when you think about all the clinical trials on hold and all the related stuff that's happening. We haven't seen the worst of it yet. But you gotta be proactive, you got to engage, you got to prepare for either this being the new normal or for a time when we go back to what was the normal at the time, who knows? But one way or another, you got to be very active. Right now, that means using every tool available, including the virtual ones.
You can't afford to sit back and wait for the world to go back to normal . . . Right now, that means using every tool available, including the virtual ones.
Rachael: Here's a prediction for me. I'm curious what you think about this, Anton. When I'm tracking the industry and thinking about how things might go, my feeling at the moment is that it's going to be Q4 that we really see recovery. If that's right, we're going to have a lot of people trying to accelerate deal closes ahead of JP Morgan. Usually December is one of the busiest months of the year to close. Hopefully, if you built your relationships and foundations ahead of that, then my bet would be that you’re in better shape to accelerate those conversations in Q4. I'm curious if you agree, disagree, not sure, or how would you react to that question?
Anton: I certainly can't contradict it. You have every chance being right on that one. I don't see it necessarily all pushing into Q4 because there's a natural cadence to deal making. I have a number of transactions that the ELSP team has been working on for a few months that will hopefully continue to move forward. Yes, everything is slowed down right now and anything that requires significant financing certainly will take a step back. But licensing type transactions, clinical work and anything that isn't necessarily directly impacted by the financial markets should and will go forward.
The flip side of this situation is it will create new opportunities which we may not be able to see right now. But I fully expect some companies to go by the wayside, less in our industry than many others. Therefore, it would behoove those dealmakers and management teams in general to really keep a very close eye on what's happening around them because there may be some opportunities that present themselves that they should be acting upon. Yes, it will probably take next quarter, Q2 for people to find their step as it were. But I expect come August or September that you'll see an acceleration of activity that hopefully will end up coming to fruition by the end of the year and into J.P. Morgan.
It would behoove those dealmakers . . .
to keep a very close eye on what's happening
around them because there may be some opportunities
that present themselves that they should be acting upon.
Rachael: How do you believe buyers will react to video specifically, the question is, will they be able to focus and transact in the current environment particularly large buyers who already have complex internal coordination processes that are potentially feeling distressed by the market environment. How do you think that will go? And do you think that it'll be possible to get deals done with those large players over video?
Anton: Is it possible? Yes, I'm an inherently optimistic person. While I can't quite explain and see how it will get done, I fundamentally believe that folks will figure this out. I spent almost 20 years at Lilly, and the last three years heading up the alliance management function. It was all about how does a large company work with a smaller company, to keep the smaller company healthy and engaged and able to deliver whatever they signed up to deliver. The large companies have been, even in those days and that's like 10 plus years ago, very good at making this happen.
Historically they used a lot of personal interactions with meetings and what have you to create and manage the relationships. Replacing that with video conferences is inherently possible. You just have to get over this hurdle of inherent trust in, “Do I really know everything I want to know about this transaction before I actually transact before I sign on the dotted line?” This idea, you can walk the hallways and kick the tires, look at the factory, walk the laboratory and whatever, that goes away. Absolutely.
But what you can harness on the flip side, especially in the larger organization, you do have a lot of individual relationships with the outside. You may have to get very smart about looking at your own internal employee pool. Who knows company X? What do you know about company X? Can we build not just a financial legal document here, but can we get a little bit of an emotional read on the organization? What's their culture? How do they function before we jump into the deep end of the pool? You just have to get a little more creative but it's doable.
Rachael: We got a couple of minutes left for this call for Q&A. Bob, do I see you looking to lean in on the conversation?
Bob Marino, Noven Pharmaceuticals: Absolutely. So first of all, thanks, Rachael and Anton. My name is Bob Marino. I'm the head of business development at Noven Pharmaceuticals. For those who don't know Noven, we're a transdermal drug development and specialty drug pharma company in the US. I had the great fortune of working in the past with Anton. If anyone's thinking of choosing an advisor, he’s terrific and he has a great network. A question for you, Anton. You kind of alluded to it. This was out of necessity, and you did have one face-to-face meeting. But as I think of deals that I've worked on, I'm sure the deals that many on the call have worked on, some of the best work has been done at dinner meetings and obviously in more informal settings. Did you find that relationship building and creating trust was much more challenging, and if this had been, and I don't know the background or the details, but if this had not been a win win for both parties, that was very clear would have been more difficult to get this done in the way that you had to get it done?
Anton: Excellent point, Bob. Thanks for bringing this up. Yes, it would have been. In this particular transaction, the one that closed literally last night and was announced this morning, had we had the ability to have at least one dinner with the principals sometime in late February, early March, I would have saved myself a couple of sleepless nights. We had to, essentially had to use the lawyers to find a lot more language to build the kind of relationship on paper that we would have had, had principals been able to have dinner or at least have a cup of coffee together and get to know each other a little bit better. So that element of “who is on the other side really…and do I trust them?” In the absence of that you put the onus on the contract instead of depending on the trust you might have built up and believing you understand the party on the other side a little bit better. So that part I think was a more difficult. I would suspect that's one part that I'll see coming back if and when this Corona thing is behind us.
Bob: One follow up, tied to the question I just asked. Oftentimes if you've done one deal and develop those relationships with a party that you've gotten to know well, for three or four months, you often go back at some point in the future to that partner. Do you think because those relationships were not built in the same way, that momentum that you may have built through the bridge building, the personal relationships may not exist as much going forward for these two companies?
Anton: Again, another excellent point. I don't think that's necessarily as much of a concern because while doing a business transaction does build a certain model of trust engagement, the reality of life is people change rather frequently in this industry. Quite frankly, “what have you done for me lately” is a lot more important than “what did you do for me three years ago?” As long as people deliver against the agreement and work with the project, with whatever they need to do, that is a critical element of ongoing trust building that you can build on. As long as that is solid, then follow-on activities and broadening of the relationship is the natural thing to do because you know those people on the other side, as opposed to going out and building a new relationship from scratch.
The other important part in that scenario is that the subject matter, the technology, the product that both sides are working on. It's a lot easier to build on, versus than starting over. So, I'm less worried about this, though we're prognosticating here. The initial “getting over the hump” especially when there's a difficult discussion or a difficult point to negotiate, if you can’t complement it with a bit of personal relationship, then you put more trust into your lawyers. I suspect that's one thing that will happen. Contracts probably will get a little bit longer to reflect that.
Rachael: Such is the time that we find ourselves in. Okay, so that's great. I'm gonna wrap things up from here, we're at time.
So, it sounds like one way we could summarize this call is, Necessity is the mother of invention, right?
One way we could summarize this call, ‘Necessity is the mother of invention'.
Anton: There you go. That’s a very true statement.
Rachael: So first, I want to thank our audience and everyone who filled out the survey in advance. It's great to have those questions to help us get started and focus.
I also want to thank Anton and EVOLUTION LSP. For those of you on the call, if you want to learn more about Anton's work and EVOLUTION, you can find him at www.evolutionlsp.com.
We're also going to send you that address and Anton's details in the follow up email from this call.
Likewise, if you'd like to learn more about MotionHall or how we can help you, please find us at www.motionhall.com or again, contact us using the follow up email.
For those of us on the call, who are already MotionHall members, if you would like to talk to us as a member about ways that we can help with your remote relationships and business development during the pandemic, of course, we're here for you.
Thank you everybody for attending. Take care, please stay safe. We'll see you next time.
I think I can speak for Anton and myself both. Please don't hesitate to reach out. We'd be happy to talk to you.
Anton: Absolutely. Thank you, everyone. Bye.
Rachael: Thank you!
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