Turning Insight Into Action: A Life Sciences Playbook For 2026

Clients & Friends,

Looking back on 2025, one word comes to mind: resiliency. The life sciences sector has taken some hits, but it kept moving. Public markets are showing real signs of life again. The private side - frozen at times - is beginning to thaw. Investors are stepping back in, deals are returning and companies that spent two years tightening their belts are coming to market with a clearer sense of purpose. It's a welcome shift that appears to be rewarding those who remained patient.

Our team has been steady through it all, helping clients move through the uncertainty with practical, grounded advice. We're also proud that Polsinelli was recently recognized by Chambers and Partners for excellence in Life Sciences. It reflects the work we do every day as a unified, cross-department life sciences team and reinforces the trust our clients place in us.

With the industry heading to San Francisco soon for the J.P. Morgan Healthcare Conference, we're looking forward to seeing many of you at our networking reception on Tuesday, January 13, now at a new venue.

With high hopes for 2026,

Rick Jordan
Lead, Life Sciences Industry Group
Co-Chair, Venture Capital and Emerging Growth Companies

M&A‑Ready from Day One

Andrew J. Merken
Shareholder
Boston

Cortney E. Mendenhall
Shareholder
Kansas City

Corporate, IP and Regulatory housekeeping should not be an afterthought.

As the calendar turns to a new year and the Life Sciences and BioPharma sectors look forward to gathering in San Francisco for the J.P. Morgan Healthcare Conference, there is a palpable sense of excitement about the direction of Life Sciences and BioPharma dealmaking, particularly in M&A. The last 4-5 years have seen significant choppiness in M&A activity: decreases, then increases, then decreases again in both the number of M&A deals and the total value of M&A deals. Each year just before the JPM Conference, the optimists became vocal, predicting an upmarket in terms of both number and size of deals. In 2024, the optimists were wrong, as a number of factors contributed to a sluggish 2025 for M&A dealmaking, extending the lethargy of the prior few years. As we move into 2026, however, the headwinds that have been negatively impacting the M&A markets, such as a slower economy, increasing inflation, higher interest rates and greater regulatory confusion and decreases in government funding, are expected to be less impactful. They may be outweighed by an improving inflation rate, lower interest rates, significant deployable capital within Big Pharma, upcoming patent expirations and increased interest in the industry by private equity firms.

With an expected increase in M&A activity, you may decide that now is the time to sell. Or an acquirer may approach you with a lucrative offer. Alternatively, you may think that now is the time to start interviewing investment bankers about a possible exit in the next few years. In any case, you will want to be as ready as possible to start the due diligence process when acquirers come knocking. What you don't want is to discover at that stage that structural or historical issues exist that could slow the process, reduce the acquisition price or, in some extreme cases, jeopardize the deal altogether.

Whether you're an earlystage startup with M&A still years down the road or you are a later stage company anticipating an acquisition in the near term, it's important to understand the structural corporate, legal and financial issues that should be avoided or addressed as soon as possible, before they become obstacles.

1. Cap table – keep it clean and simple.

An acquirer wants a clear record of who owns what. That record is your capitalization table. A clean cap table means:

• One official system that matches signed documents for every share of common and preferred stock, option, warrant, convertible note, SAFE or other securities issued by the company.
• An up-to-date valuation that reflects material events such as funding rounds, IND/IDE clearance or the readout of pivotal data, supported by either a recent thirdparty 409A valuation or by a reasoned, informed board determination.
• Grants of stock options and restricted stock approved in writing by the board, with clear and unambiguous vesting schedules, early exercise and company repurchase rights and vesting acceleration triggers (including acceleration upon a change of control) spelled out clearly in the grant documents.
• SAFEs and convertible notes whose conversion terms at a sale are unambiguous and easy to understand and calculate.
• All discussions about equity among founders, including previously undocumented promises, have been documented and ratified by the board.

2. Prove you own and can use the science.

Two of the critical questions that drive value in life sciences M&A are: "Do you own the rights?" and "Can you use those rights without violating someone else's rights?" To help answer these questions in the affirmative, we suggest you prioritize the following:

Assignment of Inventions. Require execution of invention assignment agreements by anyone who has contributed or could possibly contribute to the company's core inventions, including founders, employees, consultants, CRO partners and manufacturing partners, so that the company can demonstrate that it clearly owns all intellectual property created. In cases of employees and consultants, be sure that these agreements are signed by any new employee or consultant who could possibly, however remote, later be deemed to have contributed to the science. Ideally and typically, this would include all employees and consultants.

Ownership. Establish and maintain a comprehensive, easily accessible library of all license and sublicense agreements and any amendments.

Freedom to Operate. Maintain an up-to-date view of relevant third-party patents you may encounter and your strategy for avoiding or licensing them, along with any FTO opinions from counsel.

3. Identify contract provisions that may be triggered upon a change of control or assignment.

Many agreements require consent by the other party to an assignment of the contract or trigger other counterparty rights in the case of a sale or change of control of the company. Be sure to identify these provisions early in the process and consider negotiating to eliminate them, ideally before you are required to disclose a potential deal to the contract counterparty and lose negotiating leverage. You won't always be able to change these clauses, but knowing early that third-party consent may be required, or other third-party rights may be triggered, allows you to inform a buyer upfront that this could be a gating issue.

Look closely at:

• University licenses. Many prohibit assignment and/ or charge an assignment fee if you sell the company.
• Other licenses, joint development and similar agreements. Some may prohibit assignment without consent or may grant a right of first negotiation or right of first refusal to the counterparty with respect to a sale of the company. These types of provisions are critical to identify as early as possible, as they may chill potential buyer interest. These types of agreements also often contain crosslicenses between the parties; consider whether any cross-licenses may be impacted by an M&A transaction. As drafted, a buyer may be obligated to cross-license its own IP to the counterparty following an M&A transaction and may be unwilling to do so.
• Sponsored research and material transfer agreements with universities or hospitals. Look at who owns derivatives or cell lines and whether you need permission to assign the agreement to a buyer.
• Contracts with CDMOs and CROs (manufacturing and research partners). Make sure the company owns the data, methods and improvements, and that the partner must help transfer know‑how to a buyer.
• Hospital pilots, payer and customer contracts. Upon a sale some end automatically, include automatic price increases, or give the other side a right of first refusal or first offer on the company.
• Notes, warrants and SAFEs. Check for cash penalties or required cash payout (rather than conversion) if you sell, as well as rights of first refusal and rights of first offer.

4. Due diligence and reps and warranties: where life sciences deals can break down.

Representations and warranties are critical parts of an M&A purchase agreement. They allocate risk and help protect the buyer from potential issues after a transaction closes. In life sciences transactions, representations and warranties (particularly regarding intellectual property and regulatory matters) are often much more robust than in transactions in tech and other industries. Extensive due diligence will likely be performed by a potential buyer, and such diligence will inform the reps and warranties requested. The following are likely to be key areas of focus in a life sciences M&A transaction:

• IP and FTO. As noted above, a buyer will trace a seller's intellectual property ownership or license rights from the originating institution through every amendment and assignment. They will look for field‑of‑use holes, sublicensing limits and background IP that never truly transferred and may use any issues discovered to lower the purchase price offered, among other things. It is advisable for potential sellers to trace ownership, identify any holes and attempt to fix them before engaging with potential sellers.
• Regulatory correspondence and quality. Buyers want the complete picture of a company's FDA interactions, including minutes of FDA meetings, commitments, inspection history, FDA warning letters, quality manuals and evidence of your quality management system. If the FDA ever raised a question, a prospective buyer will expect to see the FDA's inquiries and the company's documented response.
• Compliance, privacy and healthcare laws. Exposure under anti‑kickback, Stark and similar laws, interactions with healthcare professionals, transfers of value, business associate agreements, data use agreements and security testing history will all surface as part of the due diligence process. Even for pre-revenue companies, the diligence bar is high for anything touching patients, protected health information (PHI) or clinical sites.

5. Setting up a buyer‑friendly virtual data room.

Strong virtual data rooms share three traits:

• Organization and context. Folders are created that correspond to a broad table of contents. Each folder starts with a short overview and a simple index. If there's an exception or a gap, include a brief note explaining it. Examples of typical folders include:
  • Corporate Governance and Cap Table
  • IP and Licenses
  • Regulatory and Quality
  • Clinical and Scientific
  • Manufacturing
  • Commercial and Contracts
  • Privacy/Security/Compliance
  • Finance and Tax
  • People
  • Litigation and Insurance
• Consistency. Items contained within each folder should be labeled with clear, consistent file names and dates (e.g., License Agreement between X and Y dated Z). Avoid duplicate or unlabeled PDFs.
• Speed. Assign an owner for each folder so that you can respond quickly to questions and update the data room as appropriate during diligence.

A sample 90‑day plan.

Life sciences sellers can become significantly more "acquirable" by focusing on the matters identified above well in advance of sitting down at the negotiating table with a potential buyer. Below is an illustrative 90-day plan to implement the foregoing:

Weeks 1–2

Ownership and IP. Tie every security on the company's cap table to a signed document. Paper any missing invention assignments. Get an updated 409A valuation if a big milestone has occurred or consider getting a 409A valuation if you have not previously gotten one.

Weeks 3–4

Build the virtual data room. Create a table of contents and a clear folder structure based on it. In every folder, include a short note to the reader and identify the dates that the documents were uploaded, who at the company is responsible for each document, and notes about documents with multiple versions. Be sure to add new documents to the virtual data room as they are executed by the company.

Weeks 5–6

Audit contracts. Review all contracts for assignment and other critical provisions. Negotiate amendments for the risky ones while you still have leverage (i.e., before there is a deal on the table that requires disclosure to the counterparty).

Weeks 7–8

Gather regulatory information and data. Assemble agency meeting notes and inspection history. Finalize the data integrity archive and document and close out open corrective actions.

Weeks 9–10

Privacy and security. Map what sensitive data you have and where it flows. Make sure data‑sharing agreements with hospitals and partners are in place. Pull the latest security test or assessment and a brief incident history (even "no incidents").

Weeks 11–12

Dry‑run diligence. Do a mock Q&A with your key officers/employees and counsel. Fix weak spots in the process, not just the files.

The Bottom Line

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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.