A contract is a business document as much as a legal one. As such, capturing the business and technical objectives of a transaction in a contract can be just as important as inserting the correct “legalese”. It follows that a lawyer advising a life sciences company should make a point of understanding a transaction’s business or scientific purposes.
Several factors differentiate the biopharma industry from other industries. For many biopharma companies, their intellectual property (IP) is their most important asset. Research and development plays a central role, and the path from product discovery to commercialization is expensive, lengthy and uncertain. Additionally, biopharma is among the most intensely regulated of all industries. These factors introduce several important considerations into life sciences transactions.
A life sciences transaction might have any number of business purposes. Is it to develop or optimize a new drug product candidate? Or to generate safety or effectiveness information on existing products or product candidates? Is it to evaluate the technology or product of a prospective vendor or business partner? Or is it simply to generate basic scientific information which will guide the company in its future product plans?
Closely associated with the previous paragraph, the attorney should ask what kind of new information or IP might arise from a planned project. Could a proposed collaboration lead to discovery of a new drug candidate? What about a new manufacturing process, or an unanticipated pharmacologic effect? Perhaps a clinical trial will identify an unforeseen new use of a product or provide unexpected information about methods of administering a drug. A biopharma company will probably want to own all rights to optimized versions of a drug candidate, or new applications of an existing product. If the company’s assets include a technology platform, it will presumably want to own any improvements or new uses of the platform. Ascertaining in advance the foreseeable outcomes of a project or transaction permits an attorney to focus on drafting transaction documents which maximize the kinds of prospective IP rights that add value to the company.
Conversely, there may be other potential outcomes of a project where obtaining freedom to operate is sufficient, and it is not necessary to seek full IP ownership. For example, if a biopharma company is engaging a contract manufacturer, the biopharma company may not necessarily need to own improvements to the manufacturer’s technology unless they are specific to the biopharma company’s product. Similarly, a biopharma company using an outside laboratory will not necessarily need to own improvements to the laboratory’s testing methods as long as it has ownership and rights to use the results of the safety studies.
Understanding the objectives and anticipated outcomes of a project can also help an attorney envision the type of agreement necessary. For example, for a collaborative research effort which could lead to important new discoveries or products, a comprehensive agreement which carefully specifies the intellectual property and other results each party will own or have rights to may be necessary. However, if the goal is simply to understand whether another party’s product or technology is potentially suitable, then a much simpler contract which allows just an initial evaluation may be sufficient to start the project, with the possibility of negotiating a more detailed collaboration later on if the initial results so justify.
The above are just a handful of examples of why handling a life sciences transaction for a lawyer involves so much more than standard contract drafting skills (although those are also essential). A biopharma company should expect its attorney to focus on the business and technical purposes underlying a prospective transaction. An attorney who understands these purposes, and how they fit into the company’s overall strategy, is in a position to best serve the client and ultimately produce an agreement which most effectively advances the client’s business.