Magazine Article | May 1, 2020

Dealmakers In Life Sciences: More Active, More Creative

Source: Life Science Leader

By Randall Sunberg

The life sciences market has run very hot the last few years as M&A deals have outpaced activity in almost all other industries in both volume and frequency. But not even the life sciences sector is immune to the economic and geopolitical headwinds that we anticipate affecting all industries in 2020.

Baker McKenzie’s annual Global Transactions Forecast, produced in collaboration with Oxford Economics, anticipates a leveling off activity in the immediate term as a cyclical economic downturn looms. However, it is important to remember that it will be macro forces that drive any potential slowdown, not anything sector-specific.

Regardless of the degree of deceleration, our belief is that the underlying strength of the life sciences sector will continue to promote dealmaking activity going forward, continuing its outperformance of other sectors.

And when we speak of dealmaking, we take a more expansive view of transactions, looking not only at mergers and acquisitions but also collaborations and licensing deals. Though these types of innovative structures can be more complex at the outset than traditional M&A, they do offer companies an opportunity to work together in a product-focused development program that may have a higher potential to bring products to market more quickly. Collaborations, which themselves have a range of complexity — from straightforward in-licensing at one end of the spectrum to complex profit-split co-development and co-commercialization forms on the other end — can be a strategy of choice on the basis of their own merits or when financial, operational, and regulatory barriers slow more traditional dealmaking structures.


High costs and disruptive business models have brought about an era of consolidation of core pharmaceutical products and a divestment of noncore offerings. We see companies looking to boost their pipelines — in oncology, and immuno-oncology, in particular — and there is substantial liquidity available among private equity investors. Given the increase in successful development of new technologies and products by biotechs, and the money available to fund smaller players’ development and commercialization activities, we see deals driven by the need to acquire critical and ever-evolving technologies and products (e.g., manufacturing and R&D technologies for cell and gene therapy products).

One interesting trend will be the growth of venture lending as an alternative to equity purchases. Low interest rates are expected to encourage venture lending to cross over from digital health and biotech into pharma and medical devices and potentially be used to help smaller firms through approval processes.

We believe digital health is likely to be a very active sector. Major players are all making significant investments in a broad range of technologies. This is not limited to just digital propositions such as aggregated data, AI, and telemedicine, but also medical devices, pathology, radiology, and medical imaging. Pharma companies and medical device manufacturers are acquiring data-led technology propositions — and vice versa. However, increasing data protection regulation around the world may be a barrier to some of these deals.


In the life sciences industry, licensing is a mainstay of businesses’ efforts to supplement their R&D and extend the reach of their technologies. We believe this trend will become an increasingly popular method for pharma companies to acquire cell and gene assets, for example, particularly in the biotech space.

"Our belief is that the underlying strength of the life sciences sector will continue to promote dealmaking activity going forward, continuing its outperformance of other sectors."

We are observing investors in many privately held and VC-backed biotech firms that are looking for their exit moment. As M&A and IPO markets are poised to soften in 2020, that exit may not be so readily available. Licensing has proven an effective way to move a company closer to its next growth phase by making it a more attractive acquisition, or a more compelling IPO proposition.

A further driver of licensing deals will be new and emerging technologies, such as gene therapy, gene editing, and CRISPR. Innovation in this area is so fast, and so powerful, and pharma companies want and need to be at the forefront.

Licensing is an effective way for them to stay at the cutting edge. Another hot area is predictive medicine and companion diagnostics. This will lead to IP licensing and collaboration opportunities in areas such as biomarkers with companies looking to develop more targeted products and needing to leverage licensing and collaboration arrangements to do so.

Reducing cost (and risk) in R&D has long been a catalyst for companies to seek a licensing path. Of note, split territory agreements between multiple licensees are becoming an increasingly popular method of bringing the same product to different regions of the world. With the cost of bringing a new drug to market reportedly exceeding $2 billion, with timelines that can span over a decade, it’s no wonder that collaboration between multiple partners is so attractive.

A recent example of this is Gilead’s $5 billion R&D pact with Galapagos, which allows them to gain access to a portfolio of compounds, including six molecules currently in clinical trials, more than 20 preclinical programs, and a drug discovery platform.

So it is because of these drivers we expect licensing and collaboration deals to remain a central component to the healthcare and life sciences transactions landscape in the coming years.

RANDALL SUNBERG is a partner in the Global Life Sciences Transactions Group at Baker McKenzie. He also is a member of the Global Healthcare & Life Sciences Steering Committee at the firm.