Hey, guys. Welcome to the podcast. My guest today is Steve Saint An. He's senior director of business development and corporate communications at Paratek. And we talk about what to expect after your company has been acquired. So it's a very timely conversation. I learned a lot. I think you guys are gonna love this.
Don't forget to follow me on LinkedIn and look at the announcements because we do MSL talk live once a month, which is on LinkedIn live, and it's a panel discussion very similar to this platform, but check that out as well. And thank you guys for listening. Welcome to MSL talk with Tom Caravella, a podcast specifically designed for MSL's and all things field medical. Hey, Steve. Welcome back to the podcast, buddy. How you making out? I'm doing well, Tom. Thanks for having me back.
I wasn't sure I was gonna be invited after, a little performance last time around, but thank you. Totally not true. Totally not true. First of all, you're always welcome back. And, guys, you're in for a treat because Steve did an amazing job last time he was on this show, came back with this idea, which is incredibly timely. And what we're gonna talk about is, you know, there's obviously, there's it's an interesting time right now because there's a lot of, layoffs.
There's people that are getting downsized. There's a lot of acquisitions. And while we've talked about that recently on this podcast, we haven't really talked about it from the perspective of, like, the company perspective and why things happen, how they happen, and all of the things that surround this topic and what expectations, what your expectations might be moving forward. So before we get into that, Steve, why don't you do a quick intro?
Tell everybody who you are, where you're from, and all that good stuff. Yeah. So great to be back. Steve St. Anj. I head of corporate development and corporate communications at Paratek Pharmaceuticals. We actually recently were part of a transaction in a take private, so Paratek is no longer a a publicly traded company, but I've been with the company since 2017. Actually joined in a medical affairs role and then, over the course of time migrated into this this corporate development role.
So it it's been a fun ride, and, you know, career growth and kinda getting a a little bit deeper dive into, you know, corporate life and not just, field medical life. Awesome. Well, I wanna jump into that piece. Before we get into the actual topic, I wanna jump into that piece and have everybody just explain so you came from the medical affairs side, but then you wound up in corporate development. Could you just explain a little bit about what you do?
Yeah. So it you know, corporate development in small biotech and large pharma is a little bit different, Tom, in just terms of roles and responsibilities. So I'm gonna speak mostly from the small midsize biotech perspective. So, you know, my remit for the organization and, you know, roles similar to mine and small to midsized companies really kind of fall into 3 or 4 buckets. 1, how can you continue to grow the company portfolio?
Now whether that's finding commercial stage assets, development stage assets, whatever the strategic priority of of the company is, you know, going out and sourcing those, making cold calls, talking to a lot of investment bankers, understanding, you know, what might be for sale or, you know, what companies might be interested in divesting part of their portfolio. So that broadening the corporate portfolio and growing the company is one, you know, major remit.
Another, depending on the stage of a product that you have, could be bringing the product outside the US. So looking for partners in other major markets. So whether that be Japan, Europe, Latin America, or otherwise.
So out licensing that technology, recognizing the value, you know, of it to the organization, you know, bringing back in non dilutive cash from those deals to the company, really important to, you know, a corporate p and l. So that's another another role that you may play based on where you are, in the life cycle of the product. And then, you know, the third one is, you know, and I found myself in this situation in the last 2 years.
Someone shows interest in buying your company, you know, in reacting to that in a reactive fashion, working with your financial advisors, your legal advisors, you know, very closely with the management team and the board to go through that exercise of, you know, of, hey. You know, someone has come to the table and and, you know, has expressed interest in in taking over the company. What is the appropriate valuation for that deal?
How can we, you know, as a public company, maximize shareholder value? How are you gonna negotiate the deal? Are there other parties that you're gonna reach out to once that inbound interest comes in to understand? It's kind of like we call it doing a market check. Right? It's like selling a house. You know, if if you have a single buyer, well, that that's great, but did, you know, do you really understand if that's the the market and the most value that you're able to extract from the asset?
So no different in the sale of a public company. So those are the, you know, 3 main buckets that somebody in a corporate development role, you know, that a smaller company, a midsized company like Paratek would, would do on a day to day. Awesome. Well, I'm glad you you went through that exercise because I want everybody to kinda know what perspective this is coming from as we get into this topic.
And let's let's jump into it from the perspective of let's just say you're going about your normal day job. Everything's kinda normal. And then all of a sudden you find out that your company is being acquired. So now what should you expect, and what should your thought process be at that point? Yeah. If you're someone like me that's not an early riser, you should probably expect to wake up to a bunch of text messages, missed calls, emails.
You know, historically, these announcements are put out in the early morning premarket trading hours if you're especially for a public company. So, you know, there's gonna be a lot of a lot of traffic, people, you know, wanting to know what what's going on. You'll you'll get emails from leadership, you know, usually company wide email from the CEO, and then there's going to be immediately following that announcement, either a company wide type town hall or maybe other smaller, team meetings.
You know, I think when the announcement is initially made, there's not gonna be a lot that, you know, leadership is going to be able to say other than really what's put out publicly in terms of these are the terms of the deal. This is who's planning to acquire us, and this is potentially when the transaction can close.
You know, a lot of the a lot of the decisions about who's gonna go forward in the company, what's the organizational structure gonna look like, How does the acquirer plan to maybe prioritize the pipeline? Those decisions, you know, a lot of times haven't been made when the transaction has been announced. Those decisions are gonna be made over the next couple months.
And even part of and we'll talk I think we'll talk about this coming up, you know, post integration after the transaction closes, a lot of those decisions are made. So it's kind of an uneasy time, honestly, for the majority of employees because there's a lot of questions that you wanna ask and you want answers to. But the truth is, you know, management, the board, the corporate development guy, we just we don't have those answers yet. Those are still decisions that there are gonna be made.
And I think a lot of people wonder about that. They're like, okay. How does this work? And maybe if you could walk us through what happens behind the scenes as, you know, before the announcement. And then, is it the type of thing where this is all being baked, and then all of a sudden the announcement happens, and it's like, okay, we're done.
Like, you know, the company sold, and the new people took over, and you just walked into, you you know, a brand new company without any warning, or is it more of a slow roll? Walk us through that. Yeah. That that's really a question. So, you know, before these announcements are made, it's typically months months on end of, you know, talking with potential acquirers, those potential acquirers doing their due diligence.
So, you know, depending on the no. For your listeners, depending on the roles that you've had, in your organizations in the past, you may have been part of these types of diligence activities, especially if your company has been on what we call the buy side and has been, you know, proactively looking to to target other companies for for an acquisition.
So there are, you know, months of discussions between management, corporate developments, from, you know, one board member on one side to a board member on the other side. You know, months of those negotiations and, you know, deeper dives into really every aspect of the business. It's not just commercial. It's not just medical. Manufacturing, IP, you know, legal, you name it.
There's you know, when somebody typically puts forward an offer to buy a public company, you know, that comes a couple months before the diligent really, really ramps up. And then, you know, there's negotiations on price and economics and all of those things, and then, you know, that that work ends with this announcement being made that, you know, company a intends to acquire. Company b, they've entered into a definitive agreement to, you know, for a transaction.
But that's not where the work stops. So that's that's simply, you know, announcing the intentions to take on a transaction. From that point, a a 1000000 different things can happen, Tom. So depending on how the agreement is structured, you know, there may be once the deal becomes public, there may be other bidders that were involved in the process, that could come in and say, alright. You you know, you gotta offer $10 a share. You've made the transaction public now.
We'll come in and offer you 15 just because that's how much we love the product and we love the company. Now there are, you know, within the merger agreements, there are breakup fees. So if, you know, a company like that is gonna come in with a topping bid, we'll call it a topping bid, they're gonna have to pay a breakup fee. It's usually a percentage of whatever the equity value of the company is.
So if you're trading at a $1,000,000,000, it might be a $50,000,000 breakup fee that the, you know, topping big company has to has to pay. I mean, that's one scenario. You know, there's other things. You're gonna have to go out and get shareholder approval if you're a publicly traded company. Right? We don't just, you know, sign the paper, the ink is dry, and and the transaction is done.
So, you know, shareholders have to approve that they feel that the transaction is in the best interest of of themselves, but also, you know, all other shareholders. You know, there's antitrust that you have to go through. Many of you may have seen recently there's, you know, the FTC is really, really ramped up their, perspective of what especially large large mergers between big pharmas look like. And so there's an antitrust process that you have to go through.
And then there's a ton of other work behind the scenes that has to happen between when that initial announcement is made and when the transaction actually closes. And that could be anywhere from 4 weeks to 4 months between that announcement and the actual transaction closing. And, look, there's been a number of transactions that have been announced that haven't closed or taken longer than 4 months to close.
Yep. So, yeah, just because that announcement has been made, you know, people should you have to continue to operate, you know, your normal day to day. You're gonna continue to operate as independent companies, until the transaction ultimately closes. And that's the toughest part, I think, for a lot of people because it's like, yeah, nothing to see here. Business as usual, but it's you know, we already know the genie's out of the bottle. We already know you already made the announcement.
So and I know that it's that this is kind of a these are loaded questions because I know it's not a one size fits all, and there's all these different scenarios, and there's all these different deals that can happen. But when a company is sold and after the announcement, like, what are the normal what's the normal course of events that happens next? And I I want I know that there are people listening to this. That's like, okay. Well, then what typically happens?
Yeah. So typically, you know, after the announcement but before the close of the transaction, you'll there'll be a bunch of FAQ type documents that are issued by by HR. But, you know, again, as I said previously, there's a lot of decisions that have really yet to be made in that period between announcement and closing. You know, leadership's gonna have a lot of questions. They're I promise they're not trying to dodge you.
It's just that they don't have the information yet to, yeah, to give you a fully flushed out and and well informed response. Now once the transaction closes, you know, you can expect to start to have some discussions around how are we gonna integrate these 2 companies together, how is it gonna impact various teams, you know, are there is there gonna be upsizing of teams? Is there gonna be downsizing? You know, what types of synergies do we see?
Are there gonna be, you know, incentives for retention? You know, I've seen a lot of transactions where the acquiring company is deficient in a skill set. It could be field medical affairs. It could be market access. Could be something else, but they're really deficient in that skill set.
And the reason that they targeted your company for an acquisition is because they want that skill set and they wanna be able to unlock the value that, you know, that individual or group of individuals could bring. So I've seen a lot of instances where people have been given huge incentive, you know, bonuses to stick around for whether it be 6 months, 12 months, 2 years. So that's kind of what you can expect.
A lot of the, you know, the bigger how does it affect me decisions don't come until after the transaction closes. You know, and and that's that's I think it's good to mention that piece because if there is some type of retention bonus or incentives, that actually could work out in your favor because that's not something you would normally get and normally be able you know, that's that could be good money in your pocket.
Yeah. Maybe at some point, there might be a separation at the end of it, but, it's it may not all be bad news is what I'm saying. And I guess that's the next question is, like, at this stage in the process, what can you tell people to help them as it relates to, like, their emotions and how they react to this sort of thing? Yeah. So, you know, I think the first thing is just take a deep breath. Right? We say this in corporate development all the time.
If you've seen 10,000 transactions or 10,000 deals, you've seen 1. Right? They're not all created equal. You know, like I said, just because the transaction has been announced doesn't mean it's gonna close, doesn't mean it's gonna close soon. You know? And not every transaction means that everyone on your team or you are gonna be out of a job immediately. And in fact, as you know, as I alluded to previous comments, it's actually kinda quite the opposite.
I think from a personal and professional growth perspective, you know, there's a lot of these transactions that offer that type of development. You may be going into a company that has, you know, more resources to dedicate, has, you know, additional pipelines or therapeutic areas that you might be interested in. So, you know or like I said, it's a scenario where the acquirer is new to therapeutic area and they're really buying the company for their knowledge and expertise in that space.
You know, their current teams maybe don't have the bandwidth to take on additional work or support additional programs or ongoing clinical studies, and they're really banking on the key talent that they saw during their assessment of the company to, you know, come in house, stick around, and and do a great job. And I think the other important thing to consider, Tom, especially in today's larger macro environment, is in a lot of instances I won't say a lot.
Some instances, the acquisition is actually the best thing, not just for shareholders, but it's the best thing for employees too. Right? We've seen a lot of large layoffs, reductions in force recently, and sometimes a transaction in a deal is a way for a company to get, you know, get around having to do a large cost cutting measure.
So, you know, I think the deal may very well you know, as a public company, we always think about shareholders shareholders shareholders because, you know, our board has fiduciary obligations. But a lot of times, these transactions might be saving you from a larger, more detrimental event. That's a really good point. And I think people don't always realize that. They always think the worst and expect the worst when actually it could be quite the opposite.
Yep. So with that, what advice, like, what could you tell people as far as what do they do next? So you find out about this acquisition and you start hearing some things. What what advice do you have? Like, what what should they be doing at that point? I think a lot of it's mindset, Tom, actually. Prepare for the ambiguity, but accept the uncertainty. I think you just have to every day again, it's it's business as usual until the transaction is closed.
Ask the right questions, but understand that, you know, some of the answers are just not gonna be readily available. And I think, you know, during this time, you know, I always tell people, focus on the variables that you can control. Like, what do you ultimately, in your domain, have control over. Right? And that's continuing to knock it out of the park on your day to day. You know, take the time to learn more about the, you know, acquiring company. Use your network.
It's typically frowned upon, you know, I wouldn't suggest that you call up somebody who is in your role at the acquiring company and that's typically frowned upon, but, you know, use your network. Has somebody worked for this organization in the past? Know, do do they have a lot of connections with individuals there? What is the leadership look like? What is the corporate strategy? What's their, you know, the culture or the overall company reputation?
So so do your homework and understand, hey, is this a is this a company that if given the opportunity, I would wanna continue to be part of? And, you know, I I think that that goes into further, you know. We always wanna have an updated CV. Right? I think. Talk about, you know, don't go 5 years or 3 years just because you haven't changed roles without updating your CV. But, get your CV ready. And it's not just gonna be for the purposes of interviewing externally.
You may be interviewing internally. Right? To, 1, maybe keep your role, take on a more senior role, or take on a a different role. So I think getting prepped whether it's gonna be, you know, life with the go forward organization or, you know, life outside the organization is a really good step to take. Well, we talk about that a lot. I know that I say that ad nauseam, that you just you really have to make sure you're updating your CV regularly a couple times a year because you just don't know.
And the thing is you're not gonna remember or really be able to keep track of all of the projects, projects, accomplishments, and achievements and everything that you've been able to do to build up such great experience and and put forth such a great body of work unless you capture it. So it's just that's really good practical advice, especially in situations where there is volatility, because then you'll be prepared.
And but I like the fact that right so far, everything that we've talked about hasn't been this doom and gloom story. Like, oh, you know what? Batten down the hatches, man. Acquisition time, announcement happens, and it's a death sentence. I appreciate that there's a lot of positivity that we're discussing. There's a lot of strategy that we're discussing.
But the other thing that I want to mention, and I think we need to talk about is what warning signs should people look for to prevent them from being caught off guard if it is gonna be bad news? Yeah. So, you know, I think it's it's critical. And and whether some people innately have this knowledge and others don't, but, have an understanding of your company's financial position, you know, both near term, intermediate term, and longer term. You know, what is what is the cash runway look like?
Do the does the company have cash for 6 months? Do they have cash for 4 years? You know, those are plus different scenarios. When do you think the company is gonna turn profitable? And if they're not profitable, you know, in today's market environment, do you think or do the experts think that going out and being able to raise this money is, you know, to continue to fund operations is gonna be reasonable?
I'll tell you, you know, that in today's market and macro environment, that's difficult to do for early stage companies that are years away from generating either revenue via commercialization or becoming profitable. It's not to say that it's impossible, but right now, the markets are favoring companies that have either commercial stage or near commercial stage technology being able to, to to raise effectively raise that money to continue to fund operations.
And, you know, again, I I realize not everybody listening is a numbers person and, you know, wants to get into the nitty gritty of what, you know, what's said in an earnings call and what's filed in in public disclosures. But find someone on your team that, you know, is a little more savvy or, you know, find someone internally that you're close with that that knows how, you know, how to navigate these situations. Usually, somebody has a that you work with has a fundamental understanding of this.
You know, some some acquisitions come as a total surprise. You know, I think a lot of the listeners have maybe been in those shoes before. You know, companies coming along, doing great, has multiple products that are, you know, generating a ton of revenue and profitable and, you know, hey. Somebody else comes up and, you know, and gobbles you up.
But others other acquisitions should be much more expected, and especially for those in in today's environment where, 1, if you wanna go to the capital markets and and raise money, it's very challenging. And 2, the capital markets aren't really open to you going and taking on, you know, straight term debt. It's the same story for biotech, right, as we're seeing in the in the home buying, you know, experience for for homeowners right now.
You know, 7 to 8% interest rates in in the mortgage field, that translates to 13 to 14% interest, to most biotech companies in straight debt. And when you start talking those numbers, it it it's very difficult to make a sound business case for, hey. I need $500,000,000. Let me go raise it at 14% interest. And then I I think just, you know, remember, this is this is part of working in this sector. There's going to be ambiguity. There's gonna be peaks and valleys. It's not 2021 anymore.
We're not riding high with these crazy valuations that we were 2, two and a half years ago in an interest basically, a free interest environment. Anyone could go out and raise money, regardless of whether the technology was good or not. And, you know, we're in a we're in a state right now, and I think we will be for the next 12 to 18 months, you know, where public company boards are thinking long and hard about strategic alternatives for companies.
And, you know, boards, that's their job at the end of the day is to do, you know, what's best for shareholders and be able to maximize and extract that value. And, you know, that may mean selling a company or a product before it reaches its peak potential. And we've seen a lot of cases of that over the last couple of years. Well, and let's get to that. I wanna talk about you mentioned the word macro, and and I I do wanna talk about the big picture. Like, why why are there why is there so much?
There's always volatility to pharmaceutical industry. I've been in the industry for 30 years, and it's a roller coaster. But why is it so crazy right now? And what could you tell people some of the factors that you're seeing as reasons for this crazy market? Yeah. So it it really, you know, directly biotech always, you know, correlates well with the the broader macro and interest rate environment.
And, you know, I think what we're seeing right now in terms of company evaluations suffering, you know, the inability to to raise the necessary funds to continue operations is a is a direct result of that. And, you know, people might wonder, well, jeez, you know, if if that's the case and company evaluations are down, you know, why haven't we seen more mergers and acquisitions in the last 12 to 18 months? There's really a number of reasons for that.
As I mentioned earlier, there's increased scrutiny from the FTC with regard to antitrust. Inflation Reduction Act has had a big impact on how, pharma has viewed m and a as well. We know that there's gonna be, you know, big time government pricing pressures for the top 50 or 100 drugs.
So, you know, the larger pharmas that are out there looking for multi $100,000,000 products or $1,000,000,000 products are thinking longer and harder about, jeez, how is the inflation reduction act going to impact the price potential as well as, you know, future commercial revenue potential of products that we're that we're looking at? So I think that's, you know, that's the big drivers right now.
And, look, it's forcing companies to take, you know, make really tough decisions about how are they gonna prioritize their pipelines, how are they going to prioritize their commercial products. And I think, you know, in field medical, right, we're a very critical cog to the commercial story of commercial stage companies. But at the end of the day, you know, the view from boards and and finance gurus is that affairs, you know, those are not revenue generating positions.
And right now, there's a focus on, you know, is this spend critical? Does this spend directly correlate to revenue generation? And sometimes the answer in MediFairs is very clear. Yes. But other times, it's not, you know, it's not quite as black and white, and it's a little bit gray. So, there's, you know but you you know it much better than I do, the the recent trends that we're seeing.
But I think we're going to be kinda stuck in this I don't wanna call it a rough, but there's, you know, there's peaks and valleys, highs and lows to this business. I think we'll be we'll be stuck here for a little bit, maybe 12 to 18 months until the interest rate environment changes, until it's easier for companies to go out and secure debt or, you know, other types of financing. Yeah. But it's like anything else. You know?
I first of all, I I just to unpack everything that you were saying, I I I think that everything that you just put forth, is, from what I could tell, really accurate inflation reduction act, just the the broader interest rates. There's just so these reasons are so apparent. And so it's not it's it's there's there's very, there's very specific things that we could point to. But because things are always in flux, there's resiliency that always comes through.
And I say that because, you know, if you experienced, for example, 2,008. 2,008, the world literally was coming to an end. That was the big collapse in the financial crisis. And anybody that was around at that point in time, it was literally even 911 going back to 911 in 2001, right after that, it was the end of the world. So, like, 911 in 2001, 2008, and, oh, by the way, COVID, Like, COVID happened, and it was like, oh my god. We're never gonna be the same.
We'll never transact business the same. This is the worst thing that could possibly happen. And I'm saying all this because right now, we're 22 2023 is in this really weird down market. And a lot of people aren't familiar with being involved in the down market, but we're gonna pull out of it. It's going to get better. This is not it's not gonna stay the way it is. People that are unemployed right now, you're not gonna be unemployed forever.
If you're involved in an acquisition, it's not the end of the world. Things are going to turn around. Pain is temporary. You guys have heard me talk about that. I think what what Steve said earlier, I think it's really important to just do a really good job every day. There's no substitute for excellence. It's not a time to settle for mediocrity.
It's not a time to complain and and to air your grievances and to spend a whole lot of time talking to friends and colleagues and peers about how bad everything is. Nothing good comes from that. So I just wanna go on the record to state that even though there have been there's been a lot of uncertainty. There's been a lot of downsizing and layoffs. It's affected all of us. It breaks my heart. I try to help people every day, and with all this acquisition stuff, but it's going to get better.
It's gonna turn around. So, Steve, last minute advice for people. You were great, by the way. This is really awesome information. I learned a lot. But what what, like, final advice do you have for people that either are going through an acquisition now, think they may go through an acquisition, or have recently gone through 1? I think you kinda mentioned it, Tom. There's a a couple things. Really talented people, and that's 99% of people I know in industry.
So, you know, I thought I'd work with a lot of smart people in clinical practice. I work with so many more smart people in industry. Those really talented people, they're not gonna be free agents for long. So sometimes a break is honestly refreshing. You don't you don't realize it until you've been there and you've had a little bit of downtime. It allows you to kinda have a blank slate.
And, you know, for me personally, if my transaction had gone in a different direction where, you know, the Go Forward organization said, hey, Steve. We we don't need you anymore. I I talked to you about this before, Tom. I mean, I told my wife, like, I wanna spend 9 or 12 months at home with our kids and, you know, I think that would have been awesome for our family. I had, you know, a lot of busy days, you know, during the birth of our 2 kids and, you know, time that I'm not gonna get back.
And so I think sometimes just taking a deep breath and saying, hey, you know, this maybe this is the best thing for us personally as a as a family. You know, I've I've known people that have gone through, you know, acquisitions or layoffs, and they've taken their severance and they've gone on to start really successful businesses, you know, kind of take on an entrepreneurial mind mindset and, you know, they look back and, like, man, what an opportunity.
Like, you know, I didn't see it as an opportunity at the time, but it was. And I think, you know, for every door in life and business that shuts, another 5 are gonna open for really talented and successful people. And, you know, somebody once told me I think it rings really true. Like, opportunities are like buses. There's always gonna be another one coming. And, you know but remember that success is not owned. It's rented. Right? And the rent is due every day.
And to, you know, to your point about even in these times of uncertainty, like, let's put our head down, continue to rock our day job, and, you know, if you're really talented, you're gonna find a role. It's not gonna be long. So, look, the need for innovation in this space is not going away anytime soon.
I just read an article the other day that, you know, in the next, I think, 5 years, big pharma is facing a $100,000,000,000, loss in terms of revenue from products that are coming off exclusivity. So, you know, these companies are gonna continue to be looking for really solid innovation, and that's gonna be what continues to drive small biotech.
We just have to ride this, you know, ride the storm out here, because rare disease, hemop, immunology, those are spaces that, you know, like I said, the innovation and need for it is not gonna dry up anytime soon. So, there's lots of money sitting on the sidelines from an from an m and a perspective, from and from an investment perspective as well, you know, during during this larger macro environment. Once that starts to ease, we're gonna see a lot of that money start to come off the sidelines.
No doubt. You know why? Because history repeats itself, and that's always the case. So let's leave it at that, Steve. You're awesome. I appreciate you coming on again and sharing your wisdom. That went really fast, and I hope it gave a lot of hope to people. I know that there we talked about a lot of things, some good stuff, and, some some some other stuff. But I I just think at the end of the day, there there's so much to look forward to. And like you said, there's always opportunity.
So seek out those opportunities, and, thank you guys for for listening to these shows, for supporting this show, and for sharing this show. So we'll see you next time, Steve. Thanks again, buddy. Thank you. Hope we can do it again soon. Take care. Thank you so much for listening to the show. And if you enjoyed it, please subscribe so that you don't miss an episode in the future, and feel free to leave a rating or a review or a comment. Thanks again, and we look forward to seeing you soon.