Due diligence is a thorough investigation and evaluation of an asset before finalizing an investment, partnership, or acquisition. It is one of the last and essential steps before a formal investment is committed. The process ensures that there are no hidden issues or risks that could affect the investment's success.
In the (bio-)pharmaceutical sector, due diligence encompasses a multi-dimensional assessment of scientific, regulatory, financial, and legal parameters to identify and quantify material risks and opportunities. This process is particularly critical in drug development, where the complexity and uncertainty of clinical and commercial outcomes necessitate rigorous scrutiny. For investors and acquirers, due diligence validates the scientific merit, developmental feasibility, and commercial potential of a therapeutic asset, reducing the risk of investing in suboptimal or non-viable technologies. For startups and scaleups, the due diligence process is an opportunity to demonstrate the robustness of their development strategy, the integrity of their data, and the scalability of their operations. A successful due diligence outcome can facilitate fundraising, licensing agreements, or acquisition deals.
Key Focus Areas in Drug Development Due Diligence
Due diligence in drug development typically spans several domains. Scientific and clinical due diligence evaluates robustness of non-clinical and clinical data, including non-clinical safety/efficacy observations and their translation into a clinical setting. Chemistry, Manufacturing, and Controls (CMC) assessments focus on manufacturing processes, formulation stability, and scalability. Regulatory reviews involve regulatory strategies and prior correspondence with regulatory agency (FDA/EMA).
The Role of Mock Due Diligence
Mock due diligence, or gap analysis, is a simulated third-party review that identifies deficiencies or risks before formal investor or partner evaluations in advance. For emerging biotechs, this step is indispensable. It highlights potential red flags, such as. insufficiently developed analytical methods or inconsistent impurity profiles between GLP and clinical batches, allowing companies to address issues proactively.
Although mock due diligence does not guarantee a term sheet or investment, it significantly enhances the probability of a favorable outcome. It also provides founders with insights into how their assets will be perceived by external stakeholders. Demonstrating transparency, technical competence, and strategic foresight during this process builds trust with potential investors.
Expertise in Drug Development Due Diligence
Venn Life Sciences (“Venn”), a part of hVIVO Group, offers specialised consultancy services in drug development due diligence, with a focus on CMC, non-clinical and early clinical development, regulatory strategy, quality assurance, as well as health technology assessment via an external partner.
Over the years, Venn has conducted more than 100 due diligence and gap analysis projects across a wide spectrum of therapeutic modalities, including small molecules, biologics, antibody-drug conjugates (ADCs), advanced therapy medicinal products (ATMPs), drug-device combination products, and gene therapies. These projects have supported decision-making for investors (including several renowned life-science investors), pharmaceutical companies, and biotech startups.
Experts in Action
Our consultants supported a biotech developing a combination product (ATMP + medical device) by conducting a gap analysis involving all necessary disciplines. This review uncovered a large hiccup in regulatory roadmap, which is considered critical for coming a meeting with investors. Therefore, we advised and helped set a regulatory strategy and associated actions to proactively address the foreseeable issues. This proactive approach enabled the biotech company to secure a term sheet, illustrating how the gap analysis prior to the due diligence can directly influence investment and partnership success.
In Summary
In drug development ‘s high-stakes environment, due diligence is more than a procedural requirement: it is a strategic imperative. Venn exemplifies the value of integrated due diligence support, combining deep domain expertise with a holistic understanding of the drug development lifecycle. Their track record across diverse modalities and development stages underscores the importance of early, informed, and strategic planning in the pursuit of therapeutic innovation.
Webinar
Want to learn more? Join our upcoming webinar, featuring three experts: Erik Gout (left, Head of CMC), Arthur Noach (middle: Senior Consultant Non-Clinical Expert) and Katsuhiro Mihara (right, Head of Clinical Development).