Doing The Biotech Deal - The Three Keys To Success Are Teamwork, Teamwork And Teamwork!

Wednesday, September 1, 2004 - 01:00

Representing a life sciences client in an acquisition might not be characterized as "rocket science" although many such deals can be quite complicated. The foregoing quote by the National Aeronautic and Space Administration (NASA), though referring to space projects, is, as the reader will observe, highly germane to the manner in which a law firm should gear up for these transactions. When handling a life sciences acquisition or any other complex corporate transaction, or even a complicated litigation, a law firm must frequently draw upon many different areas of expertise to meet the client's objectives and carefully coordinate the efforts of the legal team members, in much the same way as NASA is required to manage and coordinate many different types of engineers, scientists and others.

For example, assume that Biotech, Inc. of Princeton, New Jersey, is a small but dynamic research and development company that has come up with a process and a drug for effectively treating colon cancer without the need for invasive surgery or significant recovery time. Because it has no expertise in marketing its process or products, Biotech must look to a large, more established company that has experience in successfully marketing similar products and processes and which knows the relevant marketplace. In addition, Biotech and some of its employees are currently defendants in a trade secret misappropriation suit in New Jersey federal court which they consider to be baseless.

John Casey, the President of Colzone, N.V. in Amsterdam, The Netherlands, has closely watched the development of Biotech and is now interested in collaborating with it due to Colzone's success throughout Europe and the United States in marketing similar goods and services to the health care community. After six months of discussions between the companies, both decide that Colzone will purchase Biotech in exchange for some Colzone stock, some stock options, and some cash. In addition, for a period of time, Biotech's key management members and scientists would remain as Colzone employees but located at Biotech's Princeton, New Jersey facility.

Colzone then retains a New Jersey law firm, such as Sills, Cummis, Epstein & Gross P.C. to represent it in this transaction. The firm was selected by Casey due to its experience in these types of transaction and also its ability to move quickly to help close the sale. Clearly no one lawyer can handle such a transaction due to its complexity. Among the diverse substantive subject areas implicated by the Biotech-Colzone transaction are: corporate, securities, intellectual property, employment and labor, tax, litigation and international trade.

In considering how to represent Colzone in the best and most cost-effective manner, the above quotation followed in principle by NASA for large space projects is instructive. Expertise in each of the subjects at hand is indispensable, for sure. But it cannot succeed, nor will Colzone be properly represented, if six or more lawyers, each with special expertise, are running around like three blind mice. How is this result to be avoided?

NASA's advice is as relevant to the Biotech-Colzone transaction as it is to the development and launch of a space mission. That is,

1. "Expertise in the subject at hand is indispensable." The law firm's team members must each have sufficient qualifications and experience to understand the subject matters assigned to them, recognize the issues and devise the appropriate solutions or devices to attain Colzone's business objectives. In the Biotech-Colzone matter, Colzone's counsel must be concerned with a variety of legal and practical issues which require careful consideration, negotiation and resolution.

There certainly will be intellectual property issues that must be addressed and "IP due diligence" to be performed. What patents, trademarks, trade secrets and copyrights does Biotech claim to have? Have they been properly protected? Are the protections sufficient should Colzone want to expand the trade areas for Biotech's offerings? What will the domestic and international tax consequences be? What are the employment issues that need to be considered, including employee agreements, ERISA issues, and insurance matters? Are there pending or threatened litigations or other proceedings that must be assessed? How should the corporate transaction be structured to meet Colzone's business objectives? Are there regulatory issues such as FDA issues? Are there Sarbanes-Oxley or other securities implications? There may even be real estate matters that must be addressed. This is only a partial list of the issues one would expect to arise. Each of these matters requires a high degree of expertise and experience contributed by many different members of the legal team.

2. "Know how to work as a team." The lawyers on the team should have sufficient "team experience" so that, as we were judged in grade school, they "work well with others." Each of the team members described above may have their own preconceptions about the deal, their own working habits and their own workloads. They must be able to work together as a team for the transaction to be successfully concluded.

3. "Plan." As Publius Syrius said in 42 B.C, "amid a multitude of projects, no plan is devised." But to do this, the team and all its members must have an accurate and comprehensive vision of Colzone's business objectives as well as the structure of the transaction and the details that the parties themselves negotiated and agreed upon. Without a shared vision, successful teamwork among lawyers will not exist. Moreover, it is up to the leader of the team - whether a corporate or other lawyer -to take charge and make certain that all team members understand these matters.

4. "Conduct good meetings." The lawyer acting as team leader must schedule and conduct regular and structured meetings where progress reports can be given by others, and where the transaction's critical path can be reviewed, modified, where required, and followed. The keys here are organization, communication and continuity. The team leader or leaders must strive to achieve these objectives.

5. "Manage logistics and details." The lawyer leading the team, perhaps with an assistant team leader, must manage the logistics and details, just as NASA has advised. After all, we have all heard the phrase "the devil is in the details."

6. "Gather and analyze useful data." This includes not only the facts underlying the Biotech-Colzone transaction but also any relevant legal principles, as well as techniques currently used by practitioners in these types of transactions.

7. "Communicate the results and implement the changes." Of course the results of the different analyses being performed by the lawyers must be shared with each other and, at appropriate times, with Colzone. In a loose sense, the attorney-client relationship is like a partnership where both the law firm and the client play important roles, each contributing its own expertise, experience and wisdom to the transaction so that, here, Colzone's business objectives can be achieved. In this transaction, such effort results in an acquisition agreement that addresses all the important points that the lawyers and the client have advanced, and a successful closing.

By now it should be clear to the reader that NASA's advice is quite germane to the law firm representing Colzone in this transaction. The teaming methodology outlined above, while still oversimplified due to a lack of space here, is absolutely required for Colzone and its law firm to succeed in meeting Colzone's business objectives. Admittedly on one level representing Colzone in this hypothetical transaction is very different from launching a space station, a space shuttle or landing on Mars. But, the fundamental precepts underlying organization and team management bear a striking resemblance that careful corporate practitioners must always keep in mind.

Marc S. Friedman is the Chair of the Intellectual Property Practice at Sills Cummis Epstein & Gross P.C. in Newark, New Jersey and New York City. He helps lead the Firm's Biotechnology and Life Sciences Practices, and he is the Chair of the Intellectual Property Section of the New Jersey State Bar Association.

Please email the author at mfriedman@sillscummis.com with questions about this article.