29 Apr The Changing Shape of Life Sciences Deals
The life sciences sector is undergoing a transformation. While overall deal volume may have slowed, the size, structure and sophistication of transactions have all increased. At the same time, scientific innovation—from GLP-1 drugs to AI-enabled discovery—is reshaping where and how companies invest.
Marsden’s Jonathan Bower spoke with Winsome Cheung, a partner in Covington’s life science transactions team, to explore what’s driving these changes and how they are playing out in practice.
Jonathan Bower: The market has seen a drop in deal volume, certainly in IPOs, though those deals that have occurred have been for record values. In addition, many life sciences companies are tending to invest at a later stage in the deal cycle. How does that affect you as a lawyer?
Winsome Cheung: It affects me in multiple ways. One of them is that deals are getting increasingly complex. It’s a very dynamic environment and there is a variety of deal structures, and pharma companies are still very keen to buy.
Because they are facing looming patent cliffs in the next few years, they want to keep the pipeline evergreen to be competitive in the market. But at the same time, pharma companies are still cautious. So if a pharma company wants to acquire an asset that isn’t fully de-risked, for example a clinical-stage asset, it might not be a straight-out M&A or cash deal. Rather, it could be a more milestone-driven structure, with some of the consideration paid upon success, based on milestones being achieved.
Jonathan Bower: GLP-1 is a drug that has recently revolutionised the industry. Eli Lilly’s Mounjaro is one of the factors which has enabled the company to attain a market valuation of over a trillion dollars. Is this a short-term craze? Do you have any insights as to what the next trend will be?
Winsome Cheung: GLP-1 will be here to stay, partly because of how it has transformed the pharma market. The market is now pivoting towards larger drugs that target a big population with chronic diseases. Many pharma companies want a slice of this market, creating a significant opportunity in itself.
By developing drugs with better delivery, better efficacy, or targeting a different indication, a pharma company can gain an edge and secure a share of this market.
There are definitely quite a few other interesting trends emerging. Some years ago, we were mainly seeing oncology deals. We are still seeing them—this is still a significant segment of the market—but there are now many more types of indications and modalities.
One area that has been quite active is immunology. With lots of bispecific antibodies now in development, choosing the right bispecific that is well engineered and effectively delivered still gives it an edge. We are also seeing next-generation products building on these approaches, such as antibody derivatives including T-cell engagers.
Jonathan Bower: Neurology is another area that seems to be picking up – why is that?
Winsome Cheung: It’s perhaps slightly unexpected because there hasn’t been that much activity in neurology for a while, partly due to some high-profile data that didn’t work out, which dampened the appetite for investment in this space. It has traditionally been seen as quite a risky area.
But in the past couple of years, we’ve seen some really significant M&A deals, investments and collaborations in the neuroscience space, whether in ion channel modulators or technologies that can transfer drugs across the blood-brain barrier. So we anticipate that deals will continue to happen in this space.
And of course, we would be remiss not to mention AI and drug discovery.
Jonathan Bower: Absolutely, it’s one of the largest growth areas at the moment. In fact, I heard the concept of an “acqui-hire”, which is the acquisition of a company for its talent rather than the assets it is producing. It’s a big growth area.
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For law firms and hiring partners, these developments have clear implications. These trends point to a clear shift in what life sciences clients need from their lawyers – and therefore what firms are looking for when they hire. As deals become larger, more bespoke and more risk-sensitive, there is growing demand for lawyers who can operate across disciplines, combining strong transactional skills with a deep understanding of IP, science and commercial strategy. There is also an emphasis on adaptability, with lawyers who can move comfortably between traditional M&A, licensing and technology-driven work particularly well placed.