Due Diligence for Cell Therapy Company Formation

The Ask

A prospective investor client approached DHC with a fast-turnaround request for an assessment of a business proposition: merging two cutting-edge CGT technologies to spin out a new cell therapy company. One asset had promising early clinical safety and efficacy signals for its early clinical stage cell therapy products. The second target asset had a state-of-the-art technology that would enable a next-generation approach to those products. The ultimate goal was to combine these two technology platforms to be able to build out new therapeutic pipeline products. DHC needed to consider both of these assets from the perspective of CMC, nonclinical, and business risk, evaluate terms of manufacturing agreements, and consider the scientific rationale for merging these two platform technologies. Additionally, DHC advised the client on the intended budgets, hiring plans, timelines, and milestones for the new entity.

The Impact

The client considered both assets sufficiently de-risked to warrant finalizing the purchase, especially considering the adjustments DHC recommended making to the deal.

Dark Horse also provided the client with sufficient confidence regarding assurances of what quality, CMC, and regulatory needs the program would likely require and how long they were expected to take. Another outcome of this diligence experience was that the investor now has a better understanding of what will go into completion of a successful licensure, providing more control over the future of the asset.

DHC’S Approach

As with most due diligence projects, the timeline of this request was accelerated to align with the predetermined deadline for either agreeing to the deal or walking away.

A key element of the request was to evaluate business risk: specifically, the overall cost projections for continued future development of each asset. The client had prepared a draft financial business plan that DHC was to review to ensure alignment with industry standards. A first step was to consider whether the costing proposal was sensible: did the numbers represent realistic cost expectations?

DHC performed a deep dive review of data rooms supplied by both target assets, allowing for a detailed look at the CMC and nonclinical current state and future development plans. This review included nonclinical data packages that had been previously generated in addition to budget, timelines, and past regulatory correspondence (for both US and non-US health authorities). DHC summarized the merits of the investment, identified potential development risks, and aligned on appropriate strategies and proposed partnership opportunities.

On-site diligence included DHC travel to current sites for both assets, as well as to the intended manufacturing partner for the new company. This enabled a technical and quality review of all facilities and ongoing operations in addition to an in-depth business strategy discussion with leadership for both target assets. Leadership for all parties involved attended this onsite quality and technical review, which allowed for strategy partnership and business discussions between investors and both target assets with DHC present. This offered a high degree of transparency for all parties.

This client ask evolved over time, with DHC eventually becoming responsible also for evaluating and providing input on the documents for the agreement itself. Although Dark Horse Consulting does not provide legal advice, we reviewed and evaluated the master service agreements and key elements of the deal from a quality, technical, and business perspective in partnership with the client’s legal advisors.

In the final stages of the discussion, DHC met daily with the client and their lawyers to assist in finalizing documents to broker the deal, ensuring that they could meet their deadline.

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Early Clinical
R&D / Nonclinical
Gene-modified Cell