What to Know About Life Sciences M&A Transactions

Though M&A activity across the life sciences industry experienced a slight slowdown toward the end of 2019, there is still substantial opportunity.

While factors including unease about market uncertainty, potential trade conflicts, and ongoing recession concerns resulted in many acquirers on the sidelines trying to evaluate what the future may hold, we are seeing opportunities in 2020. Large pharmaceutical companies are increasingly focused on cell and gene therapies; more products are receiving designations, such as fast-track and breakthrough therapy designations, to expedite product development; and the biopharmaceutical artificial intelligence (AI) market is also predicted to increase to $3.88 billion by 2025.

While the effects from the coronavirus (COVID-19) pandemic have slowed M&A transactions across all sectors in the first quarter of 2020, companies are still pursuing strategic deals, and there are expectations that the market will bounce back.

Regardless of the state of the overall M&A market, it is important to note that deals in the life sciences space are different from those in other industries. When engaging in M&A transactions in the life sciences industry, there are some key considerations participants should keep in mind:

• The specialized and highly regulated nature of life sciences businesses requires specialized diligence around areas such as intellectual property; US Food and Drug Administration (FDA), state, and foreign regulation; licensing and collaboration relationships; manufacturing and product quality; and healthcare reimbursement and pricing.
• Extensive use of contingent consideration can raise complex structuring, tax, and legal issues.
• Acquisition agreements should properly reflect the agreed-upon economic terms, as well as specialized representations and warranties, covenants, conditions to closing, and termination provisions.
• FDA regulatory compliance will impact future returns and liabilities. As such, a product’s approval prospects, lifecycle, and regulatory compliance should be assessed to understand current and potential product/company value and risks.

What was patentable 5 years ago may no longer be patentable now, and, accordingly, all patents need reevaluation of validity under current law.

This presentation was part of the Morgan Lewis M&A Academy webinar series.