M&A In The Life Sciences Sector: Challenges And Opportunities

By Peter Trösser, Gary Copelovitz, and Frederick Tay

Conducting an M&A transaction in the life sciences sector is a complex process. The industry includes many subsectors, products, and services, and faces major regulatory and legal hurdles. To illustrate the unique challenges and opportunities, which vary by jurisdiction, here are snapshots of the latest trends in three distinct regions.

European Union: The EU Pharma Package Reforms The Landscape

The most common transaction structures in the life sciences space in the EU include strategic M&A and private equity deals. We are also seeing a few asset deals, where a pharmaceutical company acquires certain product lines or market authorizations.

Marketers of pharmaceuticals and medical devices operate in particularly complex regulatory frameworks, but several reforms are underway. First, the EU Pharma Package is landmark legislation — the most far-reaching overhaul in 20 years. Introduced in 2025, the new directives and regulations are expected to be formally adopted in late 2026, after which the national legislatures will start the process of integrating them into local laws.

The key objectives of the package are to simplify the authorization process, strengthen the supply chain, and promote patient access, supporting the EU’s aim to become a life sciences innovation hub by 2030.

How Will the Pharma Package Impact M&A?

From an M&A perspective, some of the key changes include:

• The simplification of the marketing authorization procedure. Currently, the European Medicines Agency (EMA) grants authorization, with the approval process taking up to 210 days. The reforms will allow entrepreneurs to submit approval forms digitally and reduce the timeframe to 180 days.
• The extension of the marketing authorization timeline. The current five-year timeline, requiring a new application to extend at the end of each period, will transition to an unlimited marketing authorization.
• New obligations for manufacturers of critical medicines. Entrepreneurs will be required to monitor product shortages and mitigate them by increasing production, with the EU implementing mechanisms to identify and sanction pharmaceutical company–caused shortages.
• A revision of marketing exclusivity rules. The clinical data protection period will remain eight years, but the sales and marketing exclusivity will be reduced from two years to one year, with an option to extend. The period can be prolonged for products that fill unmet medical needs.
• The introduction of a transferable exclusivity voucher (TEV) for antibiotics, allowing exclusivity rights to be assigned to a related company or third party.

We expect these simplifications to increase M&A transaction activity. The package will require new approaches to earn-out clauses, reflecting both the unlimited marketing authorization and the shorter marketing exclusivity period, and the critical medicine obligations will need to be taken into account during due diligence.

The Proposed EU Medical Device Regulation

The EU Commission also has proposed a comprehensive reform of the Medical Device Regulation (MDR), with a goal of adoption by 2027. Like the Pharma Package, these changes are meant to reduce bureaucratic hurdles. The proposed reforms would reclassify certain products according to risk, with the result that fewer products will need to complete conformity tests or access certification and marketing rights from a notified body, a process that requires significant effort, cost, and time.

The reforms would also align the MDR with the AI Act. Currently, software that is classified as risky requires two conformity tests, one under the MDR and one under the AI Act, but the alignment would remove the need for a second test. In addition, the deadline for reporting serious incidents under the MDR’s vigilance obligations would be extended from 15 to 30 days in most cases.

For M&A, the implementation of these proposed changes would likely lead to an increase in transactions and, potentially, higher target valuations. Earn-out mechanisms and timelines, which are increasingly tied to MDR certification, would need to change to ensure that earn-outs are triggered at the right time. The reforms would reduce the scope of due diligence, but lawyers would need to ensure that new product classifications and other changes are reflected. Covenants could prevent material adverse effects from the changes.

Israel: Bioconvergence Drives Innovation

Since October 7, 2023, Israel’s business and investment environment has shifted materially. In life sciences and healthcare, one immediate M&A consequence has been a slowdown in the number of completed and publicly reported transactions. At the same time, licensing activity has become even more important, both as a near-term commercialization strategy and as a pipeline for future strategic acquisitions.

Life sciences and healthcare remain among Israel’s most significant innovation sectors, supported by approximately 1,800 active companies, strong deep-tech capabilities, and a centralized, digitized healthcare system that provides broad population-level data and clinical insight. Investment activity has remained comparatively resilient, and many companies continue to view licensing, strategic partnerships, IPOs, and M&A as the principal paths to value realization.

One particularly active area is bioconvergence — the integration of biology, engineering, data science, electronics, and artificial intelligence — which is reshaping drug discovery, diagnostics, personalized medicine, and digital health. This field has become a national priority because it builds on Israel’s comparative advantages in both life sciences and advanced technologies.

In parallel, needs arising from the war have accelerated innovation in areas such as rehabilitation, medical devices, emergency medicine, trauma care, mental health technologies, and prosthetics, creating additional demand for investment and commercialization opportunities.

Disruption Is Strengthening Licensing As A Pathway To Future M&A

Two major factors continue to drive innovation in the life sciences sector. First, the Israel Innovation Authority, an independent public agency, has played a central role in supporting research and commercialization. It provides non-dilutive grants for technology development, typically in exchange for royalty payments from future product sales if the technology reaches the market. This funding support helps de-risk early-stage innovation and makes commercially promising but capital-intensive fields more attractive to private investors that might otherwise be reluctant to participate at an early stage.

Second, universities and hospitals are increasingly collaborating to generate intellectual property that is commercialized through their respective technology transfer offices (TTOs). Universities often contribute foundational research, patentable inventions, and scientific know-how, while hospitals contribute clinical expertise, access to real-world care settings, patient-derived insights, and, in some cases, their own independently developed intellectual property. The market has also seen growing collaboration between these institutions in forming joint ventures and other shared commercialization structures.

As a result, licensing transactions often involve two TTOs, which can make negotiations more complex and time-consuming. Key issues include ownership allocation — particularly where inventions, data, samples, or know-how are jointly developed or involve multiple institutions — required internal and regulatory approvals, permissions for data sharing and downstream exploitation, permitted use of patient samples or other human-derived materials, publication and academic freedom rights, confidentiality protections, and mechanisms to secure ongoing inventor participation and cooperation.

Financial terms can be equally sensitive, including upfront fees, milestone payments, royalty sharing, sublicensing income, expense allocation and enforcement rights, especially because TTOs frequently rely on licensing revenue to fund future research and innovation activities.

Despite these complexities, technology transfer licensing has emerged as a practical and increasingly important tool for sustaining innovation during a period of disruption. It enables institutions and companies to continue developing and commercializing high-value technologies, preserve momentum in the market, and create a stronger foundation for future strategic partnerships, investments, and M&A transactions.

Singapore: Alliance Transactions On The Upswing

There has been increasing attention from investors who are interested in investing in Singapore in areas such as biotech and health tech, primarily because of its role as a gateway to China, a global powerhouse in these sectors.

As a result of geopolitical tensions, a growing number of biotech licensing deals between Chinese entities and companies in the U.S. and other western nations take place in Singapore and are governed by Singapore law. Some companies have established operations in Singapore to globally commercialize products based on Chinese IPs.

When it comes to innovation and commercialization, players in Singapore tend to rely more on licensing than M&A. The market is also seeing more alliance transactions that incorporate licensing, collaborative research, or a hybrid of the two. Often a bigger company will enter into a joint venture, investing cash as well as research contributions and other resources, to develop and commercialize new innovations.

Given the investments provided by the Singapore government in growing this industry and the country’s geopolitical stability, Singapore is considered a good environment for experimentation and exploration that could lead to commercialization.

Public Funding Is Key

Life sciences start-ups in Singapore rely heavily on public funding. The government has stepped in to generate more value around this industry, especially in areas unattractive to private investors because of their long runways to market. This funding has been trending up since the pandemic.

Singapore is a small country and faced supply constraints in trying to procure vaccines, which led the government to think about the country’s resilience from a pharmaceutical perspective. As a result, it decided to build its own industry and grow it organically, supported by grants and subsidies.  

Enterprise Singapore, the arm of the government that manages the research grants, requires that every grant be convertible into an equity stake. This means that private and public ownership comingle, which can lead to complexities when it comes time for a partner to exit or the company to fold.

Deal Structures Can Be Complex

Singapore does not have the complex regulatory framework that the EU has. A key challenge is figuring out how investments should be structured, including the details of earn-out clauses, which are especially important for technologies that are in their early phases. In addition, the heavy focus on alliance transactions means the partners need to be clear about who owns any collaborative IPs that are generated.

Larger investors have become increasingly interested in share swaps, in which they receive shares in the company in return for their investment in IP, technology, or AI data sets. These agreements can be complex, requiring experience and collaboration between lawyers and IP valuators to determine the best structure, define the IP given the specifics of the company, and negotiate fair exit terms.

Finally, smaller biotech companies in Singapore are increasingly using AI — to replace trials or research regulatory compliance, for example — as a way to bridge the resource and talent gaps between themselves and the big boys. This adds new wrinkles, such as data and IP constraints, to the negotiations.

Globally, investing in the life sciences space tends to be more complex than many other industries, due to heavy regulation, the collaborative nature of innovation, the constant development of new intellectual properties, and the sensitive data involved. Retaining legal representation with deep local knowledge is essential for successful cross-border transactions.

About The Authors:

Peter Trösser, co-head of healthcare and life sciences at GvW Graf von Westphalen (Frankfurt, Germany), Gary Copelovitz, co-head of M&A and technology and a healthcare and life sciences expert at LIPA&CO (Tel Aviv, Israel), and Frederick Tay, director of M&A and life sciences at Joyce A. Tan & Partners LLC (Singapore, Singapore) are members of Meritas, a global alliance of more than 170 independent law firms in over 240 markets worldwide. Meritas’ Healthcare and Life Sciences and M&A and Private Equity groups provide quality cross-border legal service to clients investing in life sciences and healthcare.