• In the Americas, 62% of respondents are pursuing growth by acquisitions. Over the next 1 to 2 years, 56% intend to pursue carve-outs and specific subsector divestitures (56%) and public offerings (50%)
  • In the Asia-Pacific, within the next 1 to 2 years, the emphasis in the region is set to shift towards VC lending (62%) public offerings (58%) and PE funding (58%)
  • In Europe, 59% of respondents are currently pursuing public offerings to fund inorganic growth plans and 54% are seeking growth via acquisition

Traditionally, the life sciences industry has grown through innovation, acquisition and geographical expansion. In the second instalment of a three-part look into the evolution of life sciences business models, Baker McKenzie explores the trajectory of transactions that companies seek to fuel growth in response to the competitive landscape, shifting demand, increased R&D and cost pressures and the need to alter go-to-market strategies.

The survey of over 250 business leaders from the pharmaceutical, biotech, medical device and medtech sectors in Asia Pacific, The Americas and Europe, uncovers how the life sciences industry aims to reduce risk and gain value even as they seek funding to expand, alter and renew their business models.

The research indicates 56% of respondents are currently pursuing growth via acquisition as the most popular funding route and that traditional modes of inorganic growth, including M&A, will continue to be fundamental to life sciences companies’ business evolution strategy. 54% are pursuing green financing and 53% seeking venture capital funding. In one to two years, 52% will pursue venture capital lending and 51% will seek private equity funding.

M&A, Carve-outs and Divestitures

Growth via acquisition will continue to be fundamental to life sciences' companies' business evolution strategy and remains the most popular route currently to fuel inorganic growth. Looking ahead to the next one to two years, more than half of our respondents indicate that they intend to pursue carve-outs and specific sub-sector divestitures (53%). Such disposals will allow life sciences companies to accomplish a number of strategic business model goals such as divesting manufacturing sites to gain greater control of their supply chain operations and divesting non-core assets to channel funds into improving patient outcomes through increased local market responsiveness.

Olivia Tyrrell, a Corporate/M&A Partner in Chicago who specializes in these types of deals said, "Carve-out transactions are more complex than entire company divestitures. Upfront planning is key to success — to get to closing as quickly as possible with minimal business disruption or integration delays. For life sciences carve-outs, one key element is the regulatory overlay and the related interdependencies for supply chain continuity."

Partnerships, Licensing and Collaboration Agreements

In the last 12 months, more than half (58%) of respondents expect to seek legal advice on collaboration and licensing deals. The importance of licensing and collaborations in the life sciences industry is undeniable. With more complex therapies and product areas coming to market including biosimilars, cell and gene therapies, vaccines, hybrid medical devices, gamification therapeutics and other mobile health (mHealth) solutions, collaboration and licensing agreements are becoming more complex.

In this increasingly fluid deal-making environment, considerations for licensing and collaboration structures extend beyond the development of the therapeutic product into other considerations such as IP, tax, regulatory and more.

Randall Sunberg, North America Head of Healthcare and Life Sciences at Baker McKenzie said, “Licensing and collaboration deals have become increasingly complex as life sciences companies explore creative ways to develop and commercialize products utilizing new technologies. For example, cell and gene therapies require thoughtful attention to the actual product composition and manufacturing arrangements, and cost sharing and profit split structures require correspondingly creative approaches to governance, decision-making, and intellectual property ownership. The exciting challenge is to adapt these deal structures and agreements to reflect the evolving science and achieve the parties’ goals.”

Sustainable Growth

While traditional methods of growth are acutely relevant, rising interest in sustainability-focused goals, see up and coming areas such as green financing and corporate power purchase agreements (PPAs) diversifying the transactional landscape. The research shows that over half of respondents are pursuing green financing and corporate PPAs as part of their funding and ESG, Sustainability or Net Zero strategy.

In one to two years, 46% expect to pursue green financing as an avenue for growth. Increased emphasis on sustainable businesses and alignment to the UN SDGs make this an area to watch. Furthermore, 29% of companies consider the availability of renewable energy sources when deciding on new manufacturing and supply chain operation destinations.

Graham Richmond, a Senior Associate in Baker McKenzie's Global Energy, Mining and Infrastructure Industry Group said, “Decarbonizing requires businesses to assess and measure their environmental impact and establish decarbonization strategies and targets that satisfy both legal requirements and various stakeholders, while also remaining achievable. Board level engagement and sponsorship are critical. Our life sciences clients have become increasingly active in driving efficiencies in energy and water use; reducing direct emissions and electrifying operations; installing renewable generation on-site and behind-the-meter; executing significant corporate (including virtual) power purchase agreements; and investing in carbon removal or reduction projects and offsetting mechanisms.”

The Role of PE and VC Funding

The survey indicated that 52% of respondents expect to turn to VC lending and 51% expect to seek PE funding. 2021 has seen a record amount of VC capital being raised, with high attention on the life sciences industry in the US, Mainland China and the UK in particular. In Q4 2021, several large PE firms have made acquisitions or entered partnerships with life sciences companies in order to integrate capabilities related to R&D, manufacturing, digital technologies and more.

Karen Guch, Global Head of Private Equity, Baker McKenzie said, “While VC has been a more classic source of investment into many healthcare assets, particularly life sciences such as pre-revenue biotech, PE sponsors are increasingly competing in this space as well. Early stage healthcare companies are under growing pressure to be ready to quickly manufacture and market a drug aggressively on the heels of a positive phase 2b or phase 3 clinical trial. PE firms, not shying away from complexity and pre-revenue stages, can offer an attractive source of capital and operational experience to meet those needs at the point of a drug being ready for approval by the FDA or EMA.”

Jane Hobson, a Corporate/M&A Partner in London continued, "We will continue to see divestment of non-core assets across the life sciences spectrum, allowing further investment by private equity but where we may see caution is across the biotech sector. Acquisitions are subject to higher scrutiny by antitrust regulators around the world (led by the US, UK, Australia, Germany and to some extent the EU) on the back of recent publications asserting that for sectors characterized by high research intensity. M&A impacts the merged entity's innovation efforts, as well as reducing innovation among non-merging competitors. Combined with a growing number of foreign investment regimes, deal certainty is harder to achieve than ever."

Regional Spotlights


Oren Livne, a Corporate/M&A Partner in New York/Princeton specializing in life sciences transactions said, "We’ve seen some very high profile spinoffs this past year as companies are trying to focus on more targeted business strategies. At the same time, acquisitions of products, whether by license or M&A, have continued. The incredibly diverse efforts at research institutions and biotechs have made acquisitions a necessity to fill product pipelines.”

Asia Pacific

Tracy Wut, Head of M&A for Hong Kong and Mainland China said, "There is a lot of dry powder in the (Asia Pacific) market — from pharmaceutical companies with strong balance sheets to PE and VC funds — their strong interests in the biotech and medtech sectors will continue to drive deals. Growth in the sector is also fuelled by the capital markets, with Hong Kong leading the charge. Since the reform in 2018 allowing pre-revenue biotech companies to be listed on the Hong Kong Stock Exchange (HKEX), Hong Kong is now the largest biotech fundraising hub in Asia, and is competing with Nasdaq to be the largest fundraising hub for biotech companies in the world.”


Roel Meers, EMEA Head of Healthcare and Life Sciences commented that, “Life sciences companies in Europe are tapping into positive market sentiment and extending their cash runway via private placements or initial and follow-on public offerings. This is particularly true for companies who are not generating revenue yet, where equity is often the only viable financing route. We also see life sciences companies in Europe carrying out public offerings or secondary listings in the US, looking for more liquidity and a broader investor base. The recent increase in successful fund raisings and listings by SPACs provide companies with an additional route to seek business combination with a SPAC. While this is an attractive alternative to a classic IPO, companies should be aware of additional structuring complexities and increased scrutiny by regulators.”

About the Survey and Methodology

All findings across three reports in the Life Sciences Business Evolution Series are gleaned from a custom survey conducted by Baker McKenzie in collaboration with Pharma Intelligence in late 2021.

Over 250 life sciences respondents from North America, Latin America, Europe and Asia Pacific were consulted on their thoughts relating to the changing market conditions, challenges and opportunities affecting life sciences business models, growth patterns, funding and shifting operational dynamics.

Respondents include executives in C-suite, EVP/SVP, Head of, Director, Manager, General Counsel and Assistant General Counsel roles in various business functions including clinical operations, business development, IT, clinical research, strategic operations, quality, R&D, regulatory, commercialization, digital transformation, market access, medical affairs, operations, sustainability and legal.

About Baker McKenzie

We are a transactional powerhouse providing commercially-focused, end to end legal advice to maximize deal certainty and secure the intended value of transactions. Our 2,500 transactional lawyers combine money market sophistication with local market excellence. We lead on major transactions and the combination of deep sector expertise and our ability to work seamlessly across each of the countries where we operate, means we add unique value in shaping, negotiating and closing the deal.

As one of the first law firms to advise life sciences companies on their global expansion 60 years ago, our deep industry knowledge is rooted in our corporate DNA. Our impressive group, recognized by various legal rankings including LMG and Chambers, is comprised by over 800 lawyers in 467 countries, including in the top 10 largest markets in the world. Our clients include pharmaceutical, biotech, medical device, medtech, veterinary drug and digital health companies. We provide legal advice for various commercial arrangements related to new technologies, drugs, biologics, biosimilars and devices; in areas such as nanotechnology, cell and gene therapy and editing, vaccines and other drug development, as well as medical foods and other products regulated by the FDA, EMA and other authorities.

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