Life Sciences 2022

Life Sciences 2022 – Global Overview

The life sciences industry continues to be active. Licensing and collaboration opportunities abound, while traditional M&A activity is slowing down. Existing supply chain challenges worsen as new socio-political developments further complicate business relationships and ESG considerations increase in importance. Cannabis is also a growing area of opportunity to many life sciences players. IP risks caused and exacerbated by the pandemic linger as new ones appear.

Digital transformation once again is one of the overriding themes that permeates all areas of the life sciences industry. The intersection between digital and science has grown so profound that the new mantra within the industry is: "Life sciences companies now have to think like tech companies in order to be successful." Not going digital for life sciences players is no longer an option; it is a means to survival.

The pandemic accelerated the adoption of digital health solutions by hospitals and medical institutions around the world. Companies are innovating at lightning speed to adapt to new needs, including the remote monitoring and treatment of patients through wearables and telehealth apps, which allows virtual consultation with medical professionals. Patient-centric care models (including telehealth, telemedicine and connected care), wearables, software as a medical device (SaMD), digital pills, AI and machine learning in R&D, virtual clinical trials and SMART care (precision medicine, robotics, medical 3D printing) are some of the ways that technology has transformed the life sciences sector. All these bring about huge benefits but also carry significant risks and legal challenges.

Licensing and Collaboration Opportunities Abound

Licensing and collaboration agreements in the life sciences industry continue to increase and expand, spurred by the urgent need for diverse treatment alternatives, with companies forced to negotiate deal terms in record time. In many cases, traditional partnerships between industry players have been replaced by collaborations with tech companies that often have little or no experience in the industry. This in itself poses legal and practical challenges but also triggers opportunities with respect to growth and efficiency. Agreements often include elements directly related to digital transformation, especially with respect to data, such as data generation, data ownership and data monetisation.

Slowdown of M&A Activity

In general, traditional M&A activity is expected to slow down; however, tech giants are actively moving into the life sciences industry, including via M&A deals. As such, these transactions will continue to see unfamiliar faces and unusual partners as industry players look to rely more on their tech partners and in some cases, even integrate them into their corporate structures. Partnerships involving traditional life sciences and tech companies have created new challenges, driven by the tremendous differences in their corporate cultures. Due diligence is also much more challenging and complex when elements of digital transformation are involved in the transaction.

One notable exception to the M&A slowdown involves those industry players whose profits have increased geometrically as a result of the pandemic; they are poised for new investments via M&A. As with all industries, sustainability is a key issue when considering an acquisition. Targets with strong corporate governance and integrity qualities (transparency, accountability and security) will be more attractive.

In any event, the slowdown in M&A and hesitation to deploy capital is also expected to have an impact on fundraising, where biotech companies have particularly felt the crunch in the financial markets. This has been exacerbated by the geopolitical challenges since the start of 2022, and the uncertainties that this brings, particularly for companies in the early stage of development and commercialisation.

Nevertheless, the sector has seen many carve-outs take place, with companies continuing the trend to focalise in their best therapeutic areas.

At the same time, regulatory clearance of deals is becoming more complex. We are seeing increased merger control and unprecedented co-operation between regulators across the Atlantic.

Existing Supply Chain Challenges Worsen as New Ones Appear

The pandemic created supply chain challenges from the onset. The existing challenges have worsened and new issues have arisen over the past year. Trade restrictions, sanctions and political unrest are some of the factors disrupting the global supply chain. Life sciences companies are looking to bring supplies and manufacturing closer to home, regionally as well as locally, and they are integrating hi-tech into their supply chain to increase efficiency.

Governments are also exploring ways of incentivising local production and making their industry more competitive. We are also seeing greater government control over production (eg, management of shortages, and export controls). Some governments are also launching aggressive efforts to localise or near-shore their supply chains, which opens opportunities to deepen regional integration and revitalise regional trade agreements. This includes the USA, with President Biden issuing executive orders to review critical supply chains, including pharmaceuticals.

ESG Considerations Increase in Importance

Shareholders and consumers increasingly demand corporate accountability in the face of the growing demand for ESG transparency. Environmental concerns broaden as the entities involved in the global supply chain – including producers, vendors, distributors, retailers and the like – will be held to the same high standards that the industry players profess at a global level. Energy transition activities such as corporate power purchase agreements are now more common within the life sciences industry. Governments increasingly adopt regulations governing packaging of medical and non-medical products, which includes design and safety, labelling and traceability, collection and sorting, and/or recycling and reuse. Ambitious carbon-zero targets are shared across the globe. Life sciences companies internally promote diversity and often demand diversity figures from their partners, including their legal counsel. From an M&A perspective, ESG standards are expected to continue influencing investment decisions.

Medical Cannabis Takes Off Globally

Medical cannabis has taken off globally in the past year and growth is expected to continue. Regulation from region to region and country to country is inconsistent, but interest on the part of life sciences companies is consistent across the globe. Questions for those interested in the market include marketing feasibility, permissibility in pharmaceuticals, clinical trials, export/import regulations and private sector involvement.

IP Risks Linger

Patent litigation remains rampant and involves every aspect of the life sciences industry where the stakes are exceedingly high. Patent protection is more imperative than ever, be it through efforts to protect public health or as a governmental response to economic sanctions.

Digital Transformation Paving the Roadmap for Life Sciences

Areas positively and directly affected by digital transformation include research and development, clinical trials, manufacturing, supply chains and commercialisation. AI and machine learning speed up drug development up to and including launch, which benefits not only the industry players but society as a whole. Digital transformation has also had a positive influence on regulatory authorities across the globe.

It is no secret, however, that regulations have not caught up with innovations resulting from digital transformation. The massive data generated by the implementation of digital transformation raises questions including data ownership, storage, transfer, use and consent, all of which are accompanied by cybersecurity risks. Cybersecurity challenges have increased geometrically as pharmaceutical and biotech companies suffer more breaches than those of any other industry. Finally, the life sciences industry anticipates disruption arising out of blockchain, cryptocurrencies and increased governmental demand for broader data protection.

Conclusion

As the life sciences industry continues to evolve and become more complex, so do the legal issues facing the industry. In-house counsel are faced with legal issues that are completely out of the scope of their traditional legal education. They must deal with partners and professionals who are not familiar with the life sciences industry and whose corporate culture is completely different from the life sciences corporate culture. More than ever, life sciences companies need not only trusted counsel who are legal experts, but also trusted partners who know their industry and the legal and business idiosyncrasies triggered by digital transformation.