Worldwide: Highlights From McDermott's 2016 Pharmaceutical/Medtech Dealmaking Symposium


On October 25, 2016, McDermott Will & Emery held its fifth annual Pharmaceutical/Medtech Dealmaking Symposium in Cambridge, Massachusetts. The day consisted of a series of thought-provoking panels with leading dealmakers in the biotechnology, pharmaceutical, medical device and digital health sectors who spoke to the current dynamics, challenges and emerging opportunities in the life sciences industry. This piece describes the key takeaways from the event.

In Depth

On October 25, 2016, McDermott Will & Emery held its fifth annual Pharmaceutical/Medtech Dealmaking Symposium in Cambridge, Massachusetts. The day consisted of a series of thought-provoking panels with leading dealmakers in the biotechnology, pharmaceutical, medical device and digital health sectors who spoke to the current dynamics, challenges and emerging opportunities in the life sciences industry. Here are the key takeaways from the event:

Convergence is driving innovation through cross-industry collaboration.

Innovators have turned to "convergence"—the confluence of pharmaceuticals, devices, information technology, big data, materials science and other industries to develop innovative health care solutions—in search of new ways to approach medical treatment, engage patients, improve outcomes, change behavior and deliver a higher value to patients, health care providers and insurers. Emerging as a main theme at the symposium, experienced professionals across industries spoke at length about the trend of convergent solutions, and all agreed convergence is a game-changer for health care. Harry Greenspun, MD, chief medical officer and managing director of KF Health Solutions, shared his thoughts on convergence in a keynote address, observing that shifts in today's health care market toward sharing and analyzing information, coordinating care and engaging consumers, combined with the transition to value-based care, are key drivers for convergence. Consumers—who have traditionally been charged with coordinating their own care—are now demanding increased access to information for themselves and their providers, both to inform the quality of care they are receiving across all of their health care providers and to personally make lifestyle choices that improve health.

The industry is racing to adapt to these demands, however, Dr. Greenspun argued that many changes are needed to develop solutions that will dramatically transform health care. A shift to a value-based payment structures rises to the top of the list as critical to increasing innovation in the care delivery space because it will align incentives for the development of tools that inform and deliver quality outcomes. Further, the industry will need to be smarter in collecting data and analyzing it in a meaningful way in order to extract the right data for digital health solutions to thrive.

Cross-industry panelists speaking on convergence in health care agreed that patient-centric care and increased access to data and information are crucial elements to improving health outcomes, and elaborated on the unique challenges that companies developing convergent solutions will need to overcome. As one example, while the US Food and Drug Administration (FDA) has issued some helpful guidance, it can be challenging to companies—particularly technology companies with limited exposure to the FDA—to understand what is required to market digital health tools. More guidance and increased transparency will decrease the regulatory barriers to entry. Another challenge is the lack of standards for interoperability, which is necessary to provide broad access to data; access that is key for data-driven health care solutions such as population health management. While some companies are offering technology solutions to increase interoperability, the panelists welcome policy changes to bridge current interoperability gaps.

The panelists expressed excitement about the potential for life-altering solutions emerging from partnerships across industry sectors. There are cultural challenges to overcome when working across industries, but those challenges are small in light of the potential rewards. Working with a cross-industry partner—and coming out of a distinct technology vertical—offers invaluable perspective and allows focus on clinical outcomes as a common goal. The result: shrinking time for bringing therapeutics to market, going "beyond the pill" to deliver effective solutions into the market, empowering consumers, and endless possibilities for improving treatment outcomes and delivering high-quality care to patients.

Consolidation and fundraising continues, but has slowed significantly when compared to 2015.

M&A activity has continued in 2016 where there is strategic fit to balance out a company's strengths and weaknesses, but business development professionals and C-suite executives agreed that the pace is significantly slower than 2015. Likewise, some initial public offerings (IPOs) are moving forward, but are much less active than 2015. The panelists opined that the slowdown was due to several factors. First, external forces such as Brexit and the impact of the US elections have injected uncertainty into the environment. With the Affordable Care Act and drug pricing at the center of the debate during the US election season, it is difficult to value assets that depend on reimbursement for revenue. As a result, companies on both the buy and sell side, as well as the public markets, are reluctant to take on the added risk of such uncertainty. Second, pharma companies continue to look to biotech to fill in gaps in their product pipelines will not purchase any type of asset, but are not sensitive to price when encountering the right assets. Consequentially, assets in sought-after therapeutics areas are very competitive and make for expensive acquisitions, while assets in less attractive therapeutic categories are left to partner their early stage assets or seek help from venture capital or debt markets. Finally, access to capital from the debt markets and cross-over investors are changing the game. Companies – including later-stage and even public companies – now have access to other sources of capital to get products to market, which changes the calculation when considering an acquisition.

What M&A deals are getting done in 2016? It is all about de-risking the deal (more on that topic below). Later stage deals in biotech/pharma acquisitions – where the future is more certain – are still active. And, of course, some deals just make strategic sense in that they lower risk generally, such as where the product portfolios balance out each other's strengths and weaknesses, or where the target's assets replace a lost revenue source or grow an existing product pipeline. Companies are overall more willing to pay a higher price to get to a de-risking point, but this makes deals more selective and slower to close.

Speakers throughout the day were optimistic for 2017. Regardless of the outcome of US elections, they expected to see increased M&A activity moving into 2017. They caution, however, that there may be some scars from a volatile political climate that will take time to stabilize before activity will pick up considerably. Further, companies with previously active M&A portfolios looking for alternatives may seek to take more of a corporate venture capital role, recognizing that some opportunities may not quite be ripe for acquisition but there is value in being at the table where such opportunities may be a long-term strategic fit. Taking a corporate venture capital role is a particularly attractive opportunity for medtech companies where traditional venture capital funding is not as abundant. Finally, convergence may be an alluring investment opportunity in 2017 as the trend to value-based payment drives treatment that goes beyond a particular drug or device.

Corporate venture capital is the new big man on campus.

The investment arms of certain pharmaceutical companies—so-called corporate venture capital funds (CVCs)—have become increasingly prevalent in recent years. This growth is likely attributable to companies incentivized by slow recovery from the economic downturn seeking alternatives to internal research and development to access new technology and fill in product pipelines. CVCs vary widely in their investment approaches: while certain CVCs take a more traditional venture capital approach and make investments in companies primarily for financial gain, others take a more strategic approach and make investments in companies that align with the corporate parents' product strategy with the hope of access to new products and technologies. However, regardless of the financing approach and rationale, it was a consistent theme during the symposium that CVC funding is becoming more important as a funding vehicle for early-stage companies in need of capital and strategic relationships.

Some commentators have voiced some concern that CVC investment in an early-stage company may have a chilling effect on a company's ability to attract external (i.e., other than the CVC parent) collaboration partners and acquirers. However, experienced CVC investors and companies funded with CVC capital agreed that they are not seeing this concern play out in practice. In fact, the consensus among the panelists is that the opposite is true—that CVC investment actually helps drive downstream deals—in part because the CVC investment serves as a validation of the company's promise as well as assurance that the company will have access to high-level industry resources and advice. Further, the CVCs are well aware of the potential deterrent effect the CVC having a seat on the board or corporate control can have on attracting outside partners and take active steps to counter this effect, including strictly preserving confidentiality by implementing firewalls between the CVC and its corporate parent, excluding themselves from board discussions relating to potential transactions and not taking large or controlling interests in the companies. It is important to note, however, that there remains an element of concern among early-stage companies that CVCs are spreading capital across the field and may leave a company high and dry if investment in a competitor is showing more promise.

What is the attraction to corporate venture capital? CVCs are viewed by early-stage companies as adding more value than traditional VCs, with access to lab space, scientific expertise and services that will allow the company to get a product through the clinical phase more quickly. Second, CVCs generally take a less active role in managing the company than traditional VCs, opting only for a board observer seat to understand direction of the company and monitor its investment. Finally, panelists on the company side of a CVC investment expressed that they view CVCs as partners, and were concerned that traditional venture capitalists are solely concerned with their return on investment. This discussion provided interesting alignment with panelist observations on physician entrepreneurship: noting that physician innovators, both in academic institutions and in early-stage companies, often initially lack the hard business and operational expertise necessary to bring products to market. CVC funding may provide a means for physician entrepreneurs to access the personnel and expertise they need to harness the economic potential of a technology.

It's all about de-risking.

As mentioned above, the M&A deals that are getting done in 2016 involve de-risking components. A common theme across panels was what companies are doing to de-risk investments in M&A and other strategic deals.

Many of the trends discussed above contribute to the complexity in how risk in an M&A transaction is assessed, including increased globalization, shifting to value-based payment structures and convergence. In addition, many life sciences companies have a complex array of in-licenses and supplier arrangements that make diligence particularly challenging. How should companies doing acquisitions contend with these challenges? Panelists suggested doing a diligence deep dive, but bracing for the reality that issues will arise, and being prepared to focus on remedying these issues in a manner that will enable successful integration of the target with minimized risk following acquisition. While rare, diligence can and sometimes does uncover some deal-killer issues. The top deal-killers noted by the panelists include supply chain gaps or irregularities, discovery that a large percentage of revenue is coming from off-label uses and issues relating to patient safety or criminal activity.

Beyond diligence, since contingent payments can also be a major source of disputes, negotiation of contingent payments requires particular attention to minimize risk. On the one hand, contingent payments in the form of earn-outs or milestone payments are a common means of bridging the value gap in M&A and collaboration transactions with pre-commercial assets. On the other hand, the data shared by the panelists indicated that contingent payments are frequently not paid because the triggering events are not met, even when parties often have easily agreed to the events and timing of contingent payments. Because the pre-commercial assets' potential for success is often in the hands of the acquirer, sellers commonly question whether the buyer has used the appropriate level of efforts to reach the milestone. Panelists discussed strategies for avoiding disputes and litigation relating to contingent payments, agreeing that setting forth specific expectations of the acquirer/licensee and frequent communication with respect to the progress of those expectations can be the best path to avoiding disputes. Knowing the deal and benchmarking against similar deals can provide valuable perspective in setting the milestones, or it can offer information that may lead the parties to choose a different deal structure and avoid the contingent payment approach altogether.

Lastly, the panelists noted that it is important to remember that in any strategic transaction a comprehensive set of representations and warranties is critical to protect the buyer against the unknown and to fill any gaps in diligence. However, the panelists agreed that when the parties are stuck in negotiation on this point, representation and warranty insurance can be a cost-effective means of preserving deal value and keeping everyone at the bargaining table.

Brexit's impact on the life sciences industry in Europe and beyond remains uncertain.

Without a doubt, the life sciences industry is ever-increasingly global and major events in any country that is an innovation center are likely to have an impact that extends beyond its borders. Discussions at the symposium regarding deals and funding opportunities included cross-border transactions and consideration of the impact of recent events; most notably Brexit and Theresa May's signal of a hard departure of the United Kingdom (UK) from the European Union (EU) and the single common market, including the fact that the UK will not guarantee the perpetuation of residency rights to citizens of other EU countries currently residing in the UK. Panelists from the United States (US), the UK and Germany agreed that it is difficult to exactly predict the ultimate impact of this turn of events, but that it will impact the UK's position in the life sciences industry, including EU funding, life sciences dealmaking in Europe generally, as well as the regulation of medical devices and pharmaceuticals in the UK specifically. Panelists throughout the day discussed several considerations with regard to the current landscape in the EU in these areas in general, and for the UK in particular once it has left the EU. 

Over the last years, the EU continuously formed one of the two (or in terms of purchase power parity, three) largest economies of the world, slightly ahead or behind the US, and in terms of purchase power parity, China. For pharmaceutical products and medical devices, the EU has a uniform market authorization system being managed by the European Medical Agency (EMA), based in London but contemplating where to relocate in Europe. In addition to this uniform market authorization system, all member states also still have their own market authorization system (although under common rules) allowing companies to first only get access to individual European member states markets. These national structures are, however, increasingly losing importance as most companies opt to get access to the entire EU market under EMA proceedings.

Having opted to leave the EU and its common market, the UK will lose access to the uniform market authorization system and EMA will be relocated to a remaining EU member state. Thus, unless the UK wants to accept future market authorizations granted to products under rules and structures then beyond any influence of the UK, the UK will have to establish its own market authorization system. In view of the relatively modest size of the UK health market compared to the US, the remaining EU and Japan, several panelists expressed doubts as to whether a UK market authorization would in future be first priority of globally active producers of pharmaceutical products. However, panelists also argued that a small market like the UK might be attractive for market authorization test runs before ascending to larger markets. The national UK market authorization authority is globally well-regarded for its quality, and this might help the UK entertain test run market authorization structures. Further, reimbursement for pharmaceutical products might be more in appealing in the UK than in some smaller EU member states since reimbursement by public payers is still governed nationally by each member state individually without any EU-harmonization.

Following the Brexit vote, the British pound dropped significantly and panelists broadly agreed that following its vote to leave the EU, the economic outlook of the UK looks humble; however, panelists expressed optimism that this might not apply to the pharmaceutical and medical device market. Rather, the weak British currency has the potential for appealing investment opportunities for foreign investors as products in the industries were mostly marketed globally and only to a tiny extent within the UK itself. In particular, the panelists noted that they were not surprised that stocks of globally active UK pharma companies had developed considerably better after Brexit than most other UK stocks.

The panelists did express concern that much funding for fundamental research by UK companies has traditionally come through funding sources in the EU, and going forward UK companies will need to look for alternative funding sources following departure from the EU; a task made more difficult by many elements, including the UK's uncertain position on trade, licensing regimes and political constraints. Practices such as aligning itself with the regulatory standards of the EU and liberalizing use of the UK's national patient database may assist in keeping the UK an attractive location for researchers. 

In connection with securing funding for research, the panelists noted that, compared to the US, there is a lack of private funding in Europe to get product to the proof of concept phase. Some countries, like France, are offering government funding to fill the gap in capital funding. However, public funding is spread thin over many companies and the strategy behind the funding allocation can be uncertain. Several private investors in the EU investors are also looking to fund US companies because the time to deploy a company in the US is shorter than in Europe (80 percent invested by year four; 100 percent invested by year five or six). The panelists did not foresee that Brexit or any other European policies are likely to change this in the near-term.

Brian M. Bunn, Byron S. Kalogerou, Richard B. Smith and Krist Werling also contributed to this On the Subject. 

Highlights from McDermott's 2016 Pharmaceutical/Medtech Dealmaking Symposium

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions