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After JPM, What Are the Legal Dealmaking Trends to Watch?


    The 41st Annual J. P. Morgan Healthcare Conference came and went this year in its usual flurry of activity, as healthcare and life sciences industry leaders converged on San Francisco to present on the most pressing issues and trends facing investors in the year to come. It was also the first time the annual conference was conducted in-person since the Covid-19 pandemic began.

    The health care and life sciences industries experienced a difficult 2022, due to halted IPOs and plummeting valuations. Many companies found themselves at the ends of their cash runways and were left with the difficult choice of either cutting back operations or seeking financing at a lower valuation to keep the lights on.

    However, 2023 has a brighter outlook. Big Pharma is now on the hunt for innovation to replenish IP portfolios, and investors are seeing the promise of M&A and other strategic collaborations on the horizon.

    After another insightful conference this year, these are some of the key legal deal trends to expect from the health care and life sciences industries in 2023.

    Loss of exclusivity will drive dealmaking

    Many large pharmaceutical companies are facing loss of regulatory exclusivity or patent protection for their most lucrative products and will lose significant market share to generic and biosimilar competitors. Pharma companies are pursuing a variety of strategies to fill their impeding revenue gaps, whether it’s rebalancing their IP portfolios or moving new blockbuster products down the research and development (R&D) pipelines.

    But pharma companies are also turning to business development. With biotech companies sitting on innovative products and potentially in need of a cash infusion, M&A or other strategic collaborations are also on the table. However, deal terms will likely be dictated by how far along a product is in the R&D process. As early-stage product acquisitions pick up steam, risk-allocation will be key. Meaning we’ll see more contingent fee structures and deal terms addressing potential regulatory and approval roadblocks.

    FDA accelerated approval program enforcement

    The Federal Drug Administration (FDA) has been criticized for its administration of its Accelerated Approval Program, which allows for drugmakers to obtain expedited approvals for drugs that satisfy an unmet medical need. Though confirmatory trials are required to establish the drug’s benefit after the initial approval, the FDA hasn’t historically enforced obligations to complete definitive trials, nor has the FDA always required drugmakers to remove a product from the market after a trial failure.

    But the winds of change are here. Expect a revamp of the FDA’s accelerated approval process in 2023, with greater emphasis on timely confirmatory trials of a drug’s indications following accelerated approval. And though a failed or inconclusive trial might not automatically warrant pulling a product from the market, the FDA may also be pushing for product withdrawals if drugmakers fail to conduct timely trials.

    Focus on health equity and value-based care

    If there is one thing the pandemic has brought to the top of everyone’s mind, it’s how disparities in access to care and other social determinants of health can impact patient outcomes and health care costs. The market is also shifting to value-based models, with organizations moving toward a holistic, integrated approach to patient care. Investors are seeing the benefits of pursuing health equity and quality, which can ultimately reduce costs, mitigate risk, and improve patient outcomes.

    Life sciences companies are also shifting to a diversity mindset for R&D. For example, recent developments in mental health treatments, such as those targeting post-pardum depression and schizophrenia, are filling gaps in care for previously marginalized groups.

    Going into 2023, M&A may begin to shift to those organizations championing quality and equity strategies that align with investor objectives. Strategic collaborations may be another viable option for organizations pursuing innovative new models and care integration. Health sciences companies and acquirers will also need to consider how value-based care models might impact financial risk and marketability of a product or service as they evaluate deal potential.

    Photo: zimmytws, Getty Images


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