Last week, we partnered with Edison Group and the London Stock Exchange to host the Edison Open House Global Healthcare 2021 virtual conference. During the event, partners Adrian Toutoungi, Alison Dennis and Colin McCall led a workshop panel which covered negotiating partnering deals with Big Pharma.
Over the course of the panel, representatives from among the conference's 35 hand-picked life sciences companies and investors shared their views on a range of partnering issues, including current trends, the impact of COVID-19, and deal-making in a virtual environment.
Top insights from the workshop session
- 2020 was a boom year for biopharma partnering, with over 62 deals valued at $50 million+ (aggregate upfronts and milestones). The average deal size was $1.2 billion, which is the largest we've seen for at least 10 years.
- China regional deals – current PRC practices regarding forced technology transfer (including local clinical trials, local manufacturing and disclosure of manufacturing techniques) can be a deal-breaker for licensors with valuable manufacturing process know-how but are not a problem in many deals.
- The meteoric rise of Chinese biopharma companies continues, with increasing numbers of out-licensing deals in relation to Chinese-developed assets in 2020.
- Given the long-term nature of partnering deals and the dynamic nature of M&A activity in the biotech sector, careful thought is needed when future-proofing deals so that you can handle new parties becoming involved. Assignment and change of control clauses require close attention, as do firewalls.
- Negotiating reversion rights in the event of early termination, and how to value the work done by the licensee during the deal, requires strong consideration and can be a difficult issue in the optimistic early stages of a relationship; the group discussed a variety of approaches to this.
- Withholding tax continues to be a potential pitfall – even for experienced dealmakers. Paying particular attention to the tax treatment of the upfronts, milestones and royalty payments in the drafting (which are definitely not boilerplate clauses) and seeking local tax advice in all relevant jurisdictions on a substantial deal is highly recommended.
Find out more
To discuss any of the issues raised in this article in more detail, please reach to a member of our Life Sciences & Healthcare team.