After a relatively slow 2016 for life sciences deals, Fenwick & West’s corporate group is gearing up for a busy one. And it’s not just the firm’s corporate team that’s preparing for a more active period.
One of the top deal firms in the latest update to the Life Sciences Law Firm Index from Lake Whillans, Above the Law and MedCity News, Fenwick’s Michael Shuster—the co-chair of its life sciences practice and an intellectual property partner—and Matthew Rossiter, a partner in its corporate practice, credit the firm’s collaborative efforts for its success as a dealmaking firm and as a major player in the life sciences legal space generally.
Shuster and Rossiter spoke about the current environment, the pipeline for deals and some key recent transactions.
What does the market for life sciences companies look like right now?
Matthew Rossiter: I think people are optimistic this year. The IPO market is likely to be good this year; in my view, it’s gotten off to a decent start. We were operating under a bit more uncertainty last year; I think we can all attest that it felt like a very choppy election cycle, so that added to the drag in the market. For better or worse—whichever side of the election you were on—that’s behind us.
Michael Shuster: We’re seeing informatics components in a lot of our clients. PACT Pharma is a new client of ours. They are working on T-cell receptors; large informatics component there. We’re seeing heavy application of informatics (including machine learning) technologies by companies that are in the diagnostic space, as well. We’re creating teams that pair members from the life sciences and high-tech sides of our patent practice to bring deep and sophisticated expertise to support these efforts.
Rossiter: As a group and as a firm, by culture and how we designed and organized ourselves internally, we do a very good job of collaborating. I work with and talk to Michael regularly. He’s a patent lawyer and I’m a corporate lawyer, and we talk with each other and coordinate. For deals, particularly in a complex space like life sciences, that ability to collaborate is critical.
Denali Therapeutics is a company with a growing profile in the Alzheimer’s and CNS drug development space. Last year, we worked with them on a partnership with a company in the U.K. called F-Star, which has a technology that Denali believes will help them get drugs across the blood-brain barrier. We had to understand the IP issues associated with the technology that Denali wanted to license, and that was IP analysis by Michael and his colleagues. We had to negotiate a collaboration agreement, which my partner Jake Handy worked closely on. And the collaboration agreement had a corporate aspect: F-Star structures its collaborations by putting assets into separate companies and giving the partner the opportunity to buy those companies. So there was a corporate acquisition element to the transaction. And, last but not least, there was a tax element, because this is a U.K.-based company and we had to make sure that the tax impact was understood and optimized. So, we had four groups in Fenwick involved in aspects of the transaction. Our ability to work together effectively was critical to make what the folks at Denali described as one of the more complicated transactions they’ve worked on in their careers come off successfully.
What has been driving some of the recent deals in the space, and what do you expect to see going forward?
Rossiter: My client AnaptysBio, which completed an IPO earlier this year, really waited for their opportunity and had a very successful IPO, because they were willing and able to be patient. I believe our first public filing was in 2015, and at that point it was shortly before a downdraft in the market. AnaptysBio chose not to go out because the market was not favorable; instead, they kept their heads down, did the science and moved products that were preclinical into the clinic. By the time they chose to complete the public offering, they had gone from being a preclinical company to one that was ready to start trials. I think that profile is replicated across a lot of companies doing good, interesting science, trying to solve problems and develop new drugs. There’s a crop of companies that have had time while the markets been less accessible to move products along to proof points that are important.
Shuster: I would point to the large amount of money being raised in venture rounds, which provides an economic buffer against relatively short-term transitions that could result from the new administration. The Trump administration has telegraphed, through actual and proposed appointment of outsiders to regulatory agencies, that it will reduce regulatory hurdles as part of its strategy to increase American competitiveness. I point out, without comment on the merits of this strategy, that there could be a shift in the FDA more toward efficacy with less specific concerns toward safety. Who knows how that will actually play out, but to the extent that’s what happens you might expect it to be favorable for the industry.
Rossiter: If we take the Affordable Care Act as a model, it shook up the landscape of the healthcare system in general, and that shakeup created a lot of opportunities for companies. There will be a shakeup of some sort in the landscape again that will create some dislocation. There will be winners and losers, but there will be opportunities to come in and figure out how to best navigate that new landscap