Life Sciences Highlights and 2024 Outlook

The life sciences industry has been subject to significant shifts, from a changing transactional market to landmark legal rulings and regulatory changes. Read more to learn about key developments and their implications for the future of life sciences.

Market Trends

The life sciences industry has seen substantial developments across the various touchpoints through which clients in this sector interact.

The once vibrant financing market, characterized by frequent IPOs, slowed considerably in 2023, with reverse mergers and private placements becoming a popular alternative for private companies seeking financing. Amid this slowdown, Dechert has moved to focus on merger and acquisition activity, successfully closing deals such as the US$1.48 billion acquisition of Amryt by Chiesi Farmaceutici, the sale of Cerus Endovascular to Stryker and the reverse merger of Diffusion Pharmaceuticals.

In the intellectual property segment, the U.S. Supreme Court’s ruling in Amgen v. Sanofi was an important development in the patent enablement requirement – a case in which Dechert acted on the side that obtained unanimous affirmance. This ruling, coupled with a growing focus on manufacturing patents for biologics, has led to an increase in patent-related supply chain litigation, particularly for therapeutic biologics.

Antitrust victories and regulatory decisions have reshaped the market in Europe, setting precedents that reinstate trust in market growth without market dominance. Notable among them is Dechert’s major antitrust win for Roche, a defendant alongside Novartis, against the French Competition Authority’s sanction for alleged abuse of collective dominance in the market for the treatment of an ophthalmic condition primarily affecting the elderly. The Paris Court of Appeal completely overturned the Financial Conduct Authority’s decision, ruling that the discourse of Roche and Novartis was not abusive within the meaning of Article 102 of the Treaty on the functioning of the European Union.

Meanwhile, the European Commission's prohibition of the Illumina/Grail merger, citing stifling of innovation and reduced choice, has also been an important development and sets a precedent for future life sciences transactions.

Legislative and Regulatory Developments

Across the U.S. and Europe, one of the key challenges in life sciences is navigating a complex environment of evolving regulation and legislative changes.

In the U.S., the Securities and Exchange Commission introduced new rules in 2023 that affect public life sciences companies, including changes to 10b5-1 insider trading plans, cybersecurity disclosure and Section 13 reporting rules.

Legislative initiatives in patent law, such as the PREVAIL Act, are also underway, though still in the early stages of IP subcommittee hearings. For private company clients, the Corporate Transparency Act is set to increase complexity in terms of reporting and recordkeeping. Pharmaceutical clients are also keeping an eye on the Food and Drug Administration’s “Orange Book” of approved drugs, with potential challenges to certain patent listings.

Meanwhile, the European regulatory and legislative framework has undergone a series of changes. A key example is the renewal of the regulation of medical devices, which is undergoing substantial changes to incentivize innovation within the sector, while balancing this with requirements for the fulfilment of public health needs. These developments provide scope for companies to strategize their market access in Europe.

More broadly, there have been significant developments to EU legislation, such as the Artificial Intelligence Act and the Representative Actions Directive, which entered into force in mid-2023.

Outlook

Life sciences market participants can expect further changes in the year ahead. In the U.S., the transactional market is expected to shift, returning to an increase in financing activity and cross-border transactions as companies and investors adjust their valuation expectations, and investors seek to re-deploy funds after significant M&A exits. We expect to see non-U.S. companies seek access to U.S. capital markets, as well as an increase in M&A and partnership deals.

There is a growing emphasis on licensing and collaboration to advance innovative medicines. The effect of generative AI and machine learning on protein-based therapeutic development is an increasingly dominant area of work. We expect an accelerated pace of discovery and development in the year ahead. More broadly, young companies are working innovatively to apply AI and machine learning to product candidate identification and development.

The outlook in Europe is impacted by the expectation of legislative developments as enforcement in the sector remains a priority, particularly for competition authorities. In the year ahead, the market awaits rulings by the European Commission in landmark cases involving pharmaceutical companies Servier and Teva, setting precedents that may more broadly affect communication strategies relating to products. Meanwhile, medical devices and animal health segments are also expected to come under regulatory and legislative scrutiny.

On the transactional side, companies involved in life sciences deals relating to innovative targets with no, or limited, revenue should carefully consider the risk of a potential referral under Article 22 of the EU Merger Regulation, or a potential challenge under Article 102 TFEU.

Sector Matter Highlights

• Dechert successfully represented the Roche group before the Paris Court of Appeal in its appeal of the French Competition Authority’s decision that led to record fine totaling €444 million. The French Competition Authority had imposed fines on several entities of the Roche and Novartis groups for alleged abuse of a collective dominant position in the French market for the treatment of wet AMD, an eye disease. The verdict fully exonerated Roche and is rare in its decisive rejection of the French Competition Authority’s judgment.
• Dechert advised Chiesi Farmaceutici on its acquisition of global, commercial-stage biopharmaceutical company Amryt Pharma. Dechert advised on the all-cash transaction valued at US$1.48 billion, demonstrating the firm’s ability to close complex cross-border mandates. The deal required expert knowledge of the heavily regulated life sciences sector involving IP, corporate and antitrust aspects.
• Dechert achieved unanimous affirmance from the D.C. Circuit of the dismissal of an antitrust case filed by the Federal Trade Commission against pharmaceutical manufacturer Endo Pharmaceuticals. The D.C. Circuit’s ruling is particularly significant in an antitrust enforcement environment that has become increasingly hostile to, and suspicious of, the exercise of patent rights. In affirming dismissal of the FTC’s case, the appellate panel confirmed the boundary between antitrust enforcement and the legitimate exercise of patent rights.