Zinc IT case

Summary

In this negotiation, two parties discuss a deal involving upfront payments and bonuses based on approval. One party argues that the proposed $12 million upfront is unfair given the 10% success rate for approval, proposing a middle ground of $20 million upfront with a $50 million bonus. The other side emphasizes the risks and stakes, highlighting the importance of fairness. After some back-and-forth, they agree on a modified deal with $17 million upfront and an $18 million bonus upon approval, balancing risks and ensuring both sides benefit.

Takeaways

• 😀 The initial proposal offers $12 million upfront with an additional $20 million upon approval, but the approval rate is only 10%, which the speaker considers unfair.
• 😀 The speaker suggests a more balanced approach, proposing $20 million upfront with a $50 million bonus after approval, arguing it better aligns with the potential earnings of the drug.
• 😀 The speaker stresses that the risk on the company's side is low, but the risk is much higher for them if they only receive $12 million upfront and rely on a low success rate for the bonus.
• 😀 The speaker emphasizes the importance of fairness and risk mitigation in the deal, highlighting the need for both sides to benefit.
• 😀 The company is committed to earning trust and not gambling with human health, which is why they are not comfortable with the proposed terms of $20 million upfront.
• 😀 A middle ground needs to be found between the two parties, as neither side can proceed alone in developing the drug.
• 😀 One option presented involves $25 million, which is seen as a loss for the other party but is offered as a strategic maneuver to explore new market opportunities.
• 😀 Both parties need to collaborate to make the deal work, as neither can develop the compound independently.
• 😀 The speaker proposes a compromise where $3 million is deducted from the upfront payment, and added to the bonus, resulting in $17 million upfront and an $18 million bonus if approved.
• 😀 The final agreement would guarantee the other party a minimum of $3 million from the dietary supplement, and both sides would share the bonus upon FDA approval, resulting in a more favorable deal for all involved.

Q & A

What is the proposed upfront payment in the initial deal discussed in the transcript?

The proposed upfront payment is $12 million, with an additional potential $20 million after approval, making the total possible payment $32 million.

Why does the speaker find the initial deal unfair?

The speaker believes the deal is unfair because it involves paying $12 million upfront with the possibility of an additional $20 million, despite the low 10% success rate for approval. The speaker feels the risk is higher for them than the other party.

What is the speaker's proposed middle ground solution?

The speaker proposes a middle ground of $20 million upfront with a $50 million bonus after approval. This is seen as a more balanced approach given the risks involved.

What risk does the speaker highlight about the other party's position in the deal?

The speaker points out that the risk on the other party's side is low because of the low approval rate, while the risk on their side is much higher if they only receive $12 million upfront.

How does the speaker suggest calculating profits in a fair way?

The speaker suggests that the calculation of profits should be done fairly for both parties, considering not just their own profits but also the potential profits of the other party.

Why does the speaker reject the idea of $20 million upfront as a deal breaker?

The speaker rejects $20 million upfront because it contradicts the corporation's mission of not gambling with human health, and they feel that such a payment is too risky given the uncertainty of approval.

What alternative payment structure is discussed as a potential option?

An alternative payment structure discussed is offering $25 million, though the speaker questions why the other party would propose a $5 million loss in this scenario.

What does the speaker identify as a critical factor for the deal to happen?

The speaker emphasizes that for the deal to succeed, both parties must be involved, as neither party can develop the compound alone.

How does the speaker suggest handling the $3 million difference between two options?

The speaker suggests deducting the $3 million difference from the upfront payment in one option, reducing it from $20 million to $17 million, and adding it to the bonus, making the total $33 million.

What is the final outcome of the negotiation in the transcript?

The final outcome of the negotiation is that both parties reach an agreement with the adjusted terms: $17 million upfront and an $18 million bonus after approval, for a total of $33 million.