Guest Column | September 25, 2025

Early-Stage Life Sciences Partnerships Raise Later-Stage Considerations

By Adam Welland, Meena Datta, Mathew Eapen, and Torrey Cope

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Early-stage companies thrive on being nimble and running rather than walking. In times when funding is flowing and the IPO market is open, early partnering may be viewed with some skepticism out of fear of limiting future strategic flexibility. But in today’s market, where capital is scarce and timelines to meaningful value inflection are longer, the calculus has changed. Early strategic partnerships, when thoughtfully constructed, can offer an advantage and provide a means not only to survive in less certain environments but also to thrive.

Such partnerships reduce technical and execution risk by bringing experienced development teams, regulatory insight, and operational infrastructure to an emerging company. They also introduce valuable non-dilutive capital through the use of up-front payments or milestone-based funding. Not surprisingly, though, these collaborations may require a new level of discipline for the early-stage partner (e.g., steering committees reporting requirements, etc.), and also involve decisions that could have long-term and far-reaching implications for the direction of the company.

As a result, to assist development-stage companies and their investors, we offer the following list of later-stage legal and regulatory issues that potential partners should consider.

Structural Considerations

Venture investors value the capital efficiency gained through these partnerships, as it allows an emerging company to focus equity financing on long-term value creation rather than short-term survival. Additionally, the presence of a large pharmaceutical partner may increase the likelihood of a strategic exit.

At the same time, sophisticated investors will closely examine the structure of any partnership to ensure it does not constrain the company’s strategic flexibility or unduly limit upside potential. Primary areas of concern include the scope of exclusivity, intellectual property (IP) access, rights of first refusal for future transactions, and control over clinical, regulatory, and commercial decision-making.

Intellectual Property

Ownership and access to newly created IP is often a core value driver, but when the compound at the center of the collaboration is in a very early stage of development, the high-value applications and associated IP may not be as clear. Key questions to consider include:

Should newly generated IP be owned based on inventorship, subject matter, jointly, or by some other allocation? Each would have its own operational and business realities that should be recognized.
Which party should control prosecution and enforcement of patentable inventions arising from the collaboration? Both parties may also have business interests outside of the collaboration that could influence patent strategy.
What happens to exclusive licenses if there is a setback or change in commercial interests? The potential reversion of IP licenses can be just as important as the licenses themselves.

Development And Commercialization

Important decisions will have to be made around development and commercialization contributions, such as:

whether clinical study site results will be shared on a rolling basis
whether the pharma partner will have the right to provide input in investigator recruitment and patient enrollment methods
whether the reimbursement model is sound and durable given the potential for changes in drug pricing policy (e.g., Inflation Reduction Act changes or most-favored-nations pricing)
to what extent the pharma partner can place the early-stage partner’s product on its market access contracts
whether both parties will promote the product
whether any ex-U.S. licenses exist that could have implications for any U.S. most-favored-nations pricing.

Regulatory

A regulatory strategy requires a long-term view, and collaborating at an early clinical stage of an asset can present challenges. Thoughtful consideration of the following can help avoid future issues:

Milestones: Contingency payments based on key clinical trial and approval milestones are often critical for addressing the uncertainty inherent in biotech development. But disputes about whether milestones are met can easily arise. As just one example, regulatory approval for a certain indication is a common milestone, but does that mean any approval in that indication or only one that has significant commercial importance? And what if agency expectations for approval change? It is critical for early-stage companies to map out these types of considerations internally and account for them in clear milestone language.
Setbacks: Steering committee meetings can include discussions of setbacks, such as difficulties obtaining alignment with regulatory authorities, higher-than-anticipated costs, and shifting market dynamics. Early and open dialogue can provide opportunities for the development-stage company to seek guidance and support from the pharma partner, which may have confronted such challenges in its own business or in other partnerships.
Paving the way: The journey for a development-stage company often involves multiple partnerships, and each one has the possibility of putting the company in a better position for future deals. For example, more-experienced partners may provide good insight into what potential future partners would expect to see in terms of regulatory strategy and product development decisions. A well-executed regulatory plan can not only pay dividends in the partnership in hand but can lay the groundwork for more lucrative partnerships and success in future dealmaking.

Partnership Structure Matters

Collaborations can be transformative for a company, and negotiating these agreements to ensure alignment with investor expectations and to protect long-term value is critical. When thoughtfully structured, early partnering transactions can significantly enhance investor confidence and position both partners for success. Careful consideration of the issues described here is a critical step in maximizing the likelihood of realizing all that potential.

About The Authors:

Adam Welland is Counsel with Sidley Austin LLP in San Diego.