Choosing the right distributor is one of the most critical decisions for life sciences companies entering or expanding in a new market. Whether in pharmaceuticals, biopharmaceuticals, medical devices, or med-tech, the wrong partner can slow growth, damage your brand, or block market access entirely.
This guide offers practical tips for carrying out thorough due diligence when selecting a new distributor, as well as strategies for correcting course in existing partnerships when the initial diligence didn’t reveal key issues.
Part 1: Operational & Commercial Due Diligence for New Distributors
Effective due diligence goes far beyond reviewing financial statements. Assessing whether a distributor can actually sell your product requires a deep dive into operational, commercial, and strategic capabilities.
1. Sales Force Structure and Coverage
- Number of reps covering your product category.
- Geographic reach and account segmentation.
- Experience with similar products or therapeutic areas.
2. Track Record of Product Launches
- Historical success launching similar products.
- Time-to-market performance for previous launches.
- Ability to meet sales targets consistently.
3. Customer Access and Relationships
- Depth and quality of relationships with hospitals, clinics, labs, or pharmacies.
- Access to KOLs and decision-makers.
- Ability to navigate procurement or hospital approval processes.
4. Sales Processes and Metrics
- Pipeline management and CRM usage.
- Lead follow-up speed and frequency.
- Reporting cadence, accuracy, and transparency.
5. Marketing and Promotion Capabilities
- Preparedness to run product demos, webinars, or scientific events.
- Existing marketing collateral and ability to adapt it for your product.
- Budget allocation for promotional campaigns.
6. Team Expertise and Commitment
- Knowledge of your product’s therapeutic area.
- Training programs for sales reps.
- Incentive structures aligned with your growth objectives.
7. Operational Risk Assessment
- Ability to handle regulatory reporting, cold chain logistics (if applicable), and customer service.
- Past incidents of compliance failures, stock-outs, or logistical delays.
Tip: Conduct site visits and ride-alongs if possible. Observing the team in action often reveals insights that documents or interviews cannot.
Part 2: Fixing Existing Partnerships When Due Diligence Was Missed or Misleading
Even the most thorough diligence cannot guarantee perfect results. When actual performance falls short, companies can take several steps:
1. Audit and Assess Current Performance
- Conduct a competency audit: sales, marketing, reporting, regulatory compliance.
- Compare actual results with initial expectations and contractual KPIs.
2. Improve Visibility and Transparency
- Require more frequent and structured reporting.
- Request access to customer or sales data (where possible).
- Introduce dashboard tracking of key metrics.
3. Reset Expectations and Roles
- Define clear KPIs and responsibilities moving forward.
- Conduct workshops or training to align the distributor with your product strategy.
4. Provide Support
- Offer marketing, sales, or clinical support to help them succeed.
- Facilitate introductions to KOLs or hospital networks.
5. Plan for Exit or Transition if Needed
- Maintain the ability to replace or supplement the distributor if performance doesn’t improve.
- Include contingency clauses in agreements for future transitions.
Key Insight: It is much easier and cheaper to prevent issues upfront than to correct them later, but structured audits and incremental intervention can salvage underperforming relationships.
Key Takeaways
- Due diligence is multi-dimensional: Commercial, regulatory, financial, strategic, and operational aspects all matter.
- Standardized scoring systems help compare potential distributors objectively.
- Missed diligence isn’t a lost cause: Audit, support, reset expectations, and maintain exit options.
- Long-term foresight is critical: Changing distributors later is expensive and disruptive — plan and structure your agreements accordingly.
At Invision Japan, we help life sciences companies thoroughly vet new distributors and rescue underperforming partnerships in Japan. Whether you’re entering the market or correcting course, structured assessment and proactive management are the keys to sustained success.