Exit, Stage Left

Posted By: Jon Lavietes Member Resources, ASAP Roundtables,

Strategic alliances don’t last forever. Although many last several years, particularly in biopharma, faulty science, changing dynamics in your market, shifting internal priorities, or even successful commercial launches can potentially bring collaborations to a close. 

The end of a partnership is as important as any other stage of the alliance life cycle. ASAP’s editorial content team has dedicated a good portion of its time to exploring the subject over the last several months. Last year, our Q3 2023 Strategic Alliance Quarterly article “Exit Gracefully” outlined some key tenets for a successful wind-down. Last week, three separate breakout sessions brought even more great insights around the topic in the latest ASAP roundtable, “Breaking Up Is Hard to Do—but It’s Easier If You Do It Right.” 

The End Starts at the Beginning 

According to a group discussion led by Andi Gardner, CA-AM, director of alliance and program management at Biogen, a smooth exit starts “pre-deal.”

“Even before we enter a collaboration, we should make sure that everything is going to be planned beforehand,” said Gardner, stressing the importance of “incorporating the exit perspective into the initial alliance design.”

One participant likened the architecture of a partnership’s dissolution protocols to a “prenup.”  

“This should not come and bite us in the bum,” said another attendee. 

What Are Your Options?

Gardner’s group also urged stakeholders to be extra sure that a breakup is the correct decision before putting the gears in motion. 

“Termination shouldn't be the only way of going. What are the other options? Exit is just one option,” noted one individual in Gardner’s group. 

Gardner added, “Think twice because you could transform or evolve, you could innovate.” 

In Sickness and in Health, Keep Monitoring the Relationship 

Of course, the middle stages of the alliance life cycle often contain clues that the end could be near. Gardner’s conversation unearthed the critical role alliance health checks play in detecting signals of distress that could derail a partnership—the group recommended conducting them annually.

“There's all sorts of things you need to be looking at constantly—it's not a one-hit wonder,” said one person in Gardner’s session. 

Everyone in Gardner’s breakout group agreed that it’s important to rip the Band-Aid off and tackle the tough work of dissolving the partnership immediately once it becomes clear it isn’t salvageable.  

End It Today for an Easier Tomorrow

“I'd rather know what's happening, the sooner the better. There's no bad news or good news—I appreciate timely news,” said one participant. 

“That unnecessary postponing of the exit destroys value,” Gardner noted. “The sooner we communicate to the partner, the better off the relationship is going to be.” 

Given the potential sensitivities that come with terminations, empathy is of the highest order. 

“Exits have implications for those working on the team in smaller companies or bigger companies,” said Gardner. “It's very, very important, again, to preserve the relationship and have that trust factor. We never know what tomorrow will be holding, waiting for us.” 

On-Message Before, During, and After Breaking the News

A number of other great points came up in a discussion spearheaded by Andrew Ferguson, PhD, director of global oncology R&D alliance management at Takeda. First and foremost, if your company is the one moving to end the relationship, then get your ducks in a row before breaking the news to the partner. One individual recounted convening internal meetings with “the folks that had made the decisions and also senior management within the alliance management team to help me work on the messaging.” 

Another participant espoused composing a Q&A document. The person also found success refining the messaging with their alliance manager counterpart before sharing the news with the rest of the partner organization’s alliance team, something to consider when you have a strong alliance-manager-to-alliance-manager relationship. 

The alliance manager’s work isn’t done after disclosing their company’s decision to fold the partnership. With such heavy news, it’s critical to conduct follow-up meetings because questions will arise when all parties have more time to absorb and ponder what has transpired. 

 “[This process] worked well because they understood, and they had the opportunity to ask questions and understand why we terminated,” the person said. 

The Contract? Burn After Reading

Although few, if anyone, would deny the importance of understanding the parts of the contract that pertain to a breakup, it was unanimously agreed that the contract shouldn’t be the foundation for your discussion.  

“Copying and pasting clauses from the contractual agreement in a meeting is a recipe for disaster,” said an individual in Ferguson’s conversation, who added that citing contract language adds gasoline to the fire. “As soon as you start interweaving clause acts—‘on page whatever, it says such and such’ and ‘we don't need to do this and we don't need to do that’—you're taking a bad situation and making it exponentially worse. It is your role to try to deliver the message in the most suitable way possible.” 

It's a Small World—You Can Make It Sweeter! 

This takes us to another important tenet: go above and beyond in providing partners as soft a landing as possible. If the contract stipulates that parties must provide a month’s notice of a decision to terminate, give them two or more. Or give them other “sweeteners”: for example, try to find another initiative to collaborate on, or offer extra resources for another existing one—again, companies often have multiple joint irons in the fire. Perhaps you can help come up with the most positive spin for the associated press release, regulatory filings, and earnings calls. 

“Ensure that you're not burning a bridge for a future potential relationship,” said an interlocutor in Ferguson’s discussion. “This all works in your company's favor long-term. If you can be the person that brokers [a smooth transition], that enhances your personal credibility. It is a very, very small world, and the probability of you working with a partner again, or a particular alliance manager in the future, is fairly substantial.”

Give a “Commercially Reasonable Effort” or Find Another Project

Jarrod Midboe, CA-AM, director of clinical affairs and vendor and alliance management at Upsher-Smith Laboratories, summarized three main takeaways from the conversation he moderated. First, his group hit the same note about finding other projects the partners can work on, particularly when it’s a matter of the science not working out rather than a fundamental relationship incompatibility. 

“If it's a solid relationship, and there's other options to collaborate, you really want to get in front of that,” said Midboe. “Can you get adventurous, salvage teams, maximize the return on investment? Are there other things to collaborate on?” 

Midboe’s group also got into a contract discussion, but theirs centered around the term “commercially reasonable efforts,” a legal phrase that is often inserted into contracts to foster a good-faith effort on the part of all parties to make a collaboration work. Of course, the term leaves plenty of room for interpretation. Midboe’s group recommended eliminating that gray area and agreeing on the meaning up front—and continually measuring and monitoring each partner’s efforts to adhere to that definition through the life of the partnership.  

“You could probably see [the end] coming if you're aligned on what ‘commercially reasonable efforts’ means,” Midboe noted. “Maybe that's a good metric to align on early and keep track of throughout your relationships, so it's not a surprise when you get to the end.”

High Five, We Did It!

Midboe’s group issued the reminder that not all endings are bad. Team members will change as the needs of the alliance change. 

“When you see it coming and you've had a successful relationship, your team alignment might change. You might need different stakeholders, different team members to close this thing out,” said Midboe. 

Then, there’s only one thing left to do: celebrate! 

“That's good timing to probably reflect on [the partnership] and have a bit of a party,” said Midboe, “[and] bring people together and take an opportunity to give high fives virtually.”