Too often in merger & acquisition or carve-outs, pharmaceutical executives overlook the complexities of disentangling operations and the effort required for regulatory re-registration and labeling changes. This article covers key areas for the successful re-registration, while presenting strategies to avoid common pitfalls and technical issues.

Mergers and Acquisitions

Mergers and acquisitions have been prevalent in the pharmaceutical industry as companies seek to grow and bolster their pipeline of products. In our business as compliance and quality advisors to the industry, we are seeing an upswing in carve-outs, where a parent company spins off a subsidiary or drug.

Risk Management

More carve-outs reflect investors’ desire for proven products with less regulatory risk and investment needs than developing new drugs. For sellers, carveouts offer the opportunity to realize cash from nonstrategic assets. Whether it’s merger & acquisition activity or a carve-out, there are a number of regulatory and technical business issues which we routinely see back-burnered until the deal is closed and the transition begins.

Pharmaceutical Industry

A common scenario involves the new buyer acquiring an established international drug product with expectations of on-going revenue streams, oftentimes without conducting a thorough regulatory and technical due diligence. After the deal closes, the buyer’s regulatory team learns that they need to re-register the facility, conduct drug listing activities and make mandatory product labeling changes.

Regulatory Agencies

Some countries can require a complete re-approval process with the local notified body or regulatory agency. These activities take time and money, and often the buyer’s regulatory team lacks the bandwidth to handle these simultaneous tasks. As a result, revenues are delayed, budgets are exceeded, and the deal loses its luster.

Regulatory Solution

We argue a better path is to fully quantify the post-deal regulatory/technical activities and their associated costs as part of the due diligence process. This requires deep involvement from subject matter experts or experienced technical consultants in the early stages of the deal.

Transition Service Agreement

When both buyer and seller have a full understanding of the scope and costs, these aspects can be factored into the deal price or negotiated into the transition services agreements (TSA’s). Additionally, proactively understanding this subject may provide capitalization, escrow or other financial advantages.

Regulatory Re-Registrations

In the merger & acquisition, the deal makers typically do not fully appreciate the re-registration workload or timeframe. This task often falls upon technical executives after the deal is signed. All too often, the acquiring firm has limited staff, minimal budget and a narrow bandwidth to take on such extensive research let alone the implementation in every country.

Regulation Examples

Some regulatory considerations are listed below that will be considered in this paper. Any of these can vary from a simple email notification to a year of re-registration, product testing and new government approvals.:

• State licenses for drug manufacturer/distributor
• Certificates of: Authority, Free sale and Origin
• FDA notification required such as:
  • New Drug Establishment License
  • Change of Ownership of an Application
  • Transfer of IND Ownership
  • Transfer of Drug Master File (DMF) Ownership
  • Change of Drug Listing Information with Labeling
• International regulatory requirements in each country of business

Product Registration

One remedy to avoid potential revenue delays is to outsource the product re-registration process. Compliance consultants know the county-by-country requirements and can help to minimize the delays. Ideally the compliance consultants would be brought into the acquisition process during the due diligence stage. This helps the acquiring firm anticipate potential revenue delays, quantify the costs, and identify any gaps in testing or technical data.

Transition Services Agreement

This information can be factored into the deal price and/or the post-transition agreements. For example, the TSA may require the seller to manufacture product and/or maintain the registration for sufficient periods of time that varies by country. The buyer would then aggressively manage the re-registration process to compete the approvals prior to the expiration of the agreements.

 

Quality & Regulatory Systems for the Newco

Another common mistake, especially in carve-outs, is for the new company, “Newco,” to blindly adopt the legacy company’s quality and regulatory systems without regard to their smaller size or scale.

Standard Operating Procedures

While the legacy company has established quality and regulatory departments with employees to implement the procedures, the Newco finds itself with few, if any, quality/regulatory personnel and a full plate of standard operating procedures. They are suddenly “not following their own procedures,” a risky situation during an FDA inspection (which is often triggered by a change of ownership).

Quality Management System (QMS) 

Some solutions include engaging experts to rightsize the new quality and regulatory systems to fit the Newco size or negotiate with the legacy company to develop the right-sized quality/regulatory system on behalf of Newco prior to the split. In all cases, Newco needs to quickly establish, and show progress towards a plan demonstrating their compliance intentions.

 

 

Cross Functional Complexities

Merger & acquisition activity is often fraught with cross functional complexity. While the acquiring regulatory team is re-registering the product and introducing new labeling into multiple manufacturing plants, they are also responsible for assuring compliance with a myriad of spin-out tasks. This could include transferring production and managing inventory across multiple international distributors.

Manufacturing Label

Introduction of newly labeled drugs and obsolescence of the old product requires coordination across manufacturing and distribution sites for each country. The central issue is whether to make more of the new label or old label product for each country.

Product Registration

For countries with a long re-registration process, this means that old product needs to be reserved, or for the legacy company to make the drug for Newco during the transition period. Another possibility is to negotiate the transition periods with the international agencies to support the change. All of these additional complexities take place while the technical executives must remain focused on their primary job which is getting product out the door for sale to customers.

Conclusion

Mergers, Acquisitions and Carve-outs are complex projects that require insightful technical planning and execution to realize the deal revenue and strategic goals.

Re-Registration

Ownership changes mandate modifications to the labeling and re-registration of the drug in every country of manufacture and distribution. A proactive, well-researched project plan that addresses the requirements of each country and coordinates cross-functional activities will save time, money and assure revenues. Given the complexity of designing and implementing the plan, experts recommend that companies determine the costs and potential revenue delays before embarking upon a M&A or carve-out.

Regulatory Due Diligence

Including technical executives as a part of regulatory due diligence can help factor these costs/revenue delays into the deal price or post-deal agreements. When the technical executives are stretched thin between doing their day jobs and handling the re-registrations, expert consultants can help quantify these costs and delays, and are available to help implement the plan after the deal closes.

 

About RCA’s Pharmaceutical Consulting Services 

 

Regulatory Compliance Associates (RCA) has helped thousands of pharmaceutical companies meet regulatory, compliance, quality assurance, and remediation challenges. With more than 20 years of experience with FDA, Health Canada, EU and global regulatory agencies worldwide, Regulatory Compliance Associates^® offers leading pharmaceutical consultants. We’re one of the few pharma consulting companies that can help you navigate the challenges associated with industry regulations.

 

Our pharmaceutical consulting firm includes over 500 seasoned FDA, Health Canada & EU compliance consultants and regulatory affairs experts who understand industry complexities. It’s a pharma consultancy founded by regulatory compliance executives from the pharmaceutical industry. Every pharmaceutical industry consultant on the Regulatory Compliance Associates team knows the unique inner workings of the regulatory process. 

 

Client Solutions

 

Whether you’re in the product planning, development or pharmaceutical lifecycle management stage or need a remediation strategy for a compliance crisis, Regulatory Compliance Associates will guide you through every pharmaceutical consulting step of the regulatory process and create a customized approach depending on your product and your pharma company’s individual needs. Our regulatory compliance clients include:

 

• Companies new to FDA, Health Canada or EU regulations and regulatory compliance
• Start-up organizations with novel submissions to 510(k) submissions from multi-national corporations
• Investment firms seeking private equity due diligence for pre-acquisition and post-deal research
• Law firms seeking pharmaceutical consulting firm expertise in the remediation of warning letters, consent decrees, 483’s or import bans

 

Regulatory Affairs

 

Regulatory affairs is Regulatory Compliance Associates backbone. We exceed other pharma consulting companies with industry experts experienced in complexities of the pharmaceutical and biopharmaceutical industries. Our pharma consulting expertise spans all facets and levels of Regulatory Affairs, from Regulatory Support for New Products to Life Cycle Management, to other services like Outsourced Regulatory Affairs, Submissions, Training, and more.

 

As your partner, we can negotiate the potential assessment minefield of regulatory compliance services with insight, hindsight, and the clear advantage of our breadth and depth of knowledge and regulatory compliance consulting. We offer the following pharma consulting regulatory affairs services for pharmaceutical companies.

 

• New Product Support
• Product Lifecycle
• Other Regulatory Services
• Combination Products

 

Compliance Assurance

 

The regulations process surrounding pharmaceutical companies can be tricky for even the most experienced industry veteran to understand. Just one misstep could mean significant and lasting consequences for your business. At Regulatory Compliance Associates, we offer the pharma consulting experience and pharma consultants necessary to guide you through the quality compliance process.

 

• Assessments
• Audits
• Regulatory Agency Response
• Preparation and Training
• Inspection Readiness
• Data Integrity

 

Quality Assurance

 

Regulatory Compliance Associates Quality consulting includes assessments, strategy, implementations, staff augmentations, and identification of quality metrics to ensure continuous improvement. Our pharma consultants understand the strategic thinking needed to align your business needs and goals. Regulatory Compliance Associates quality assurance services include quality experts with experience spanning major corporations and start-ups. Our pharmaceutical consulting firm knows firsthand how to achieve, maintain, and improve quality, and we excel in transferring pharma consulting knowledge to your organization.

 

• 21 CFR Part 11
• Data Integrity
• Manufacturing Support
• Facility Support
• Quality Metrics

 

Remediation Services 

 

Regulatory Compliance Associates has a proven remediation services approach to managing FDA Warning Letters, Consent Decrees, Remediation and other serious regulatory situations. Our pharma consultants know how to partner with executive, legal, and communication teams. Each RCA pharma consulting Expert will develop a response that will be accepted by the regulatory agency and be realistic to execute.

 

Regulatory Compliance Associates pharma regulatory consultants will develop a comprehensive proof book of documented evidence demonstrating the corrective action taken to remediate non-compliant issues. In addition, each Regulatory Compliance Associates pharma consulting Expert understands compliance enforcement. We’ll prepare a comprehensive pharma consulting strategy to assist in your remediation efforts, drive continuous improvement, and maintain regulatory compliance with the regulations.

 

• Regulatory Action
• Regulatory Compliance
• Regulatory Enforcement
• Warning Letter
• 483 Observation
• Oversight Services
• Risk Management Plan

 

About Regulatory Compliance Associates

 

Regulatory Compliance Associates^® (RCA) provides pharmaceutical consulting to the following industries for resolution of life science challenges:

 

• Life Sciences
• Pharmaceutical
• Biologic & Biotechnology
• Sterile compounding
• Medical device
• Lab Testing

 

We understand the complexities of running a life science business and possess areas of expertise that include every facet of R&D, operations, regulatory affairs, quality, and manufacturing. We are used to working on the front lines and thriving in the scrutiny of FDA, Health Canada, MHRA and globally-regulated companies.

 

As your partners, we can negotiate the potential minefield of regulatory compliance and regulatory due diligence with insight, hindsight, and the clear advantage of our unique expertise and experience.

 

• Founded in 2000
• Headquartered in Wisconsin (USA)
• Expertise backed by over 500 industry subject matter experts
• Acquired by Sotera Health in 2021

 

About Sotera Health

 

The name Sotera Health was inspired by Soteria, the Greek goddess of safety, and reflects the Company’s unwavering commitment to its mission, Safeguarding Global Health^®.

 

Sotera Health Company, along with its three best-in-class businesses – Sterigenics^®, Nordion^® and Nelson Labs^®, is a leading global provider of mission-critical end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry. With a combined tenure across our businesses of nearly 200 years and our industry-recognized scientific and technological expertise, we help to ensure the safety of over 190 million patients and healthcare practitioners around the world every year.

 

We are a trusted partner to 5,800+ customers in over 50 countries, including 40 of the top 50 medical device companies and 9 of the top 10 pharmaceutical companies.

 

Commitment to Quality

 

Our Certificate of Registration demonstrates that our Quality Management System meets the requirements of ISO 9001:2015, an internationally recognized standard of quality.

 

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