The numbers for royalty financing transactions in the first half of 2025 look promising, with one commentator going so far to state, “Faced with a bleak equity market and tightening credit, drug developers from Boston to Basel turned to royalty monetization as a lifeline.” (see, https://www.p05.org/royalty-financing-rescues-biopharma-a-h1-2025-global-analysis/)
Expanded QSBS Benefits: What Biotech Founders Need to Know After the “One Big Beautiful Bill” Act
Why this matters for biotech start-ups
Raising capital for drug discovery often pushes early-stage biotech companies above the gross asset limit for qualifying for the U.S. federal income tax benefits associated with qualified small business stock (“QSBS”). The law commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”), signed into law on July 4, 2025, lets founders and other investors greater access these tax savings—potentially reducing their tax bill by millions when the company is sold.
Getting Ready for Your Q2 Quarterly Reports: Trends in Biopharmaceutical Disclosures from Q1 Quarterly Reports
Earlier this year, the new Presidential Administration introduced a series of policies, legislative proposals and regulatory actions that have impacted the business and regulatory environment and contributed to a climate of uncertainty—particularly in the biopharmaceutical sector. These developments gave companies much to address in their first quarter 10-Q filings. To shed light on how biopharmaceutical companies addressed these developments, we conducted a survey of the Q1 Quarterly Reports of the top 100 biopharmaceutical companies. Our analysis revealed that most companies are actively assessing the potential impact of these changes, with more than two-thirds (68%) of companies updating their risk factors and more than half (53%) updating their Management’s Discussion & Analysis (MD&A) accordingly. Below is a summary of the key disclosure changes, with a focus on topics of heightened relevance to the industry—including tariffs, changes in laws related to Medicaid or Medicare, federal workforce disruptions and other issues such as the Section 232 investigation and the Section 340B Drug Pricing Program.
Q2 2025: Life Sciences Capital Markets Recap
Despite positive momentum in the life sciences capital markets throughout 2024 and expectations for increased favorability in both public and private investment avenues in 2025, the second quarter of 2025 continued a trend of subdued activity for the sector. As of mid-2025, life sciences companies continue to navigate a challenging financing environment, as evidenced by the statistics below and against a backdrop of the XBI and BBC both suffering moderate declines while the broader market is up 8% for the year. In the public markets, public equity capital remains scarce and issuers are heavily favoring confidential offerings to mitigate market and execution risk following key clinical read-outs. In the private markets, venture capital investors remain selective and are favoring de-risked, later-stage assets, while smaller, early-stage companies are continuing to weather an extended “biotech winter”.
Is There a Duty to Disclose FDA Feedback?
The Trustees of Welfare & Pension Funds of Local 464A – Pension Fund v. Medtronic PLC, 726 F. Supp. 3d 938 (D. Minn. 2024).
Case Highlights
On March 28, 2024, a federal district court held that positive statements about the prospect of U.S. Food and Drug Administration (FDA) approval of a company’s latest product were not sufficiently alleged to be false or misleading even though the company did not disclose that it had received a Form 483—a form issued by the FDA following an inspection that lists objectionable conditions an investigator believes violate the Food, Drug, and Cosmetic Act and other related acts. The plaintiffs in The Trustees of Welfare & Pension Funds of Local 464A – Pension Fund v. Medtronic PLC (“Medtronic”), 726 F. Supp. 3d 938 (D. Minn. 2024), filed a lawsuit alleging that Medtronic misled investors when it disclosed that the application process for FDA approval for its next generation insulin pump designed to manage type 1 diabetes—the MiniMed 780G (780G)—was “on track.” The plaintiffs alleged that this statement led investors to believe that FDA approval was likely when, in fact, Medtronic had received a Form 483 following the FDA’s inspection of a Medtronic facility, which ultimately led to an FDA warning letter and a decision to delay approval. Medtronic’s stock price dropped when it announced that it could no longer include FDA approval of 780G in its guidance for fiscal year 2023. The plaintiffs claimed that the defendants had a duty to disclose Medtronic’s receipt of Form 483—which it had received approximately six months before the warning letter was disclosed—given Medtronic’s disclosures that its submission for FDA approval of 780G was “on track.” While the court acknowledged that this was a “close[ ] question,” it found that the complaint did not allege that the “on track” statement was false or misleading. The court distinguished Public Pension Fund Group v. KV Pharmaceutical Company (“KV Pharmaceutical”), 679 F. 3d 972 (8th Cir. 2012), where the Eighth Circuit held that defendants in that case had a duty to disclose the receipt of Form 483 when they told shareholders that the company was compliant with FDA regulations given “numerous, severe, and pervasive objectionable conditions” covering “the entire range of the defendants’ operations and products.” Here, unlike KV Pharmaceutical, the Medtronic complaint did not allege how the issues raised in Form 483 would necessarily doom or impact the timeline for FDA approval and the defendants never represented that Medtronic was in compliance with all FDA regulations.
National Venture Capital Association Addresses “Shadow Trading” Concerns Summer Updates to Form of CDA and Model PIPE Documents
The National Venture Capital Association (NVCA) has continued its commitment to standardizing venture financing documents by incorporating new language into its form confidential disclosure agreement (CDA) aimed at addressing the emerging “shadow trading” issue in light of the SEC v. Panuwat case. This update should help to standardize shadow trading carveouts in CDAs, which have initially varied in their adoption and have sometimes been met with resistance by counterparties based on a misunderstanding of the Panuwat holding.
Potential Impacts of Most-Favored-Nation Executive Order on Ex-US License Agreements
Introduction
On May 12, 2025, President Donald Trump signed an Executive Order titled “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients”. This order aims to address the perceived imbalance where the United States funds a significant portion of global pharmaceutical profits and pays high prices, while drug manufacturers offer deep discounts to access foreign markets, subsidizing those lower prices through higher prices in the United States. The stated purpose of the Executive Order is to ensure that Americans are not forced to pay almost three times more for the same medicines and have access to the most-favored-nation (MFN) price.
Trump Administration Revives Possibility of MFN Drug Pricing: Key Implications for the Life Sciences Industry
On May 12, 2025, President Trump signed an Executive Order (“EO” or “Order”) “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” aimed at significantly reducing U.S. prescription drug prices by aligning them with the lowest prices paid by other developed nations. According to the EO, drug manufacturers “deeply discount their products to access foreign markets and subsidize that decrease through enormously high prices in the United States.” Seeking to rectify this “egregious imbalance,” the EO announced the following policy: “Americans must therefore have access to the most-favored-nation price for these products… [and] should drug manufacturers fail to offer American consumers the most-favored-nation lowest price, [the] Administration will take additional aggressive action.”
Gibson Dunn and BCLT Host a Webcast Series on Royalty Finance, the UCC, and Issues of Recharacterization
Gibson Dunn has partnered with the UC Berkeley Center for Law & Technology on a three-part webcast series that discusses issues originally raised in a Law 360 article on royalty financing written by partners Todd Trattner and Ryan Murr.
In the series, partners Todd Trattner, Ryan Murr, Jin Hee Kim, and Jeffrey Krause and associates Kali Jelen, Anthony Hajj, and Michael Farag provide an in-depth exploration of royalty finance, the treatment of synthetics under the UCC, and the risks of a sale of a synthetic royalty being recharacterized as a loan in bankruptcy.
The series is designed to educate biotechnology stakeholders (investors, entrepreneurs, companies, and their attorneys) on best practices for monetizing and investing in a synthetic royalty so that they can embark on such transactions with greater certainty.
To access the series, visit:
- Panel 1 – Royalty Finance: Structures, Trends and Synthetics
- Panel 2 – Synthetic Royalty Financings and the UCC
- Panel 3 – Synthetic Royalty Financings: Risks of Recharacterizing a True Sale (available May 20)
You can watch the series for free using the code “BCLT-GD” at checkout.
“Deal Lawyers Download” Podcast: Shell Companies and Reverse Mergers
Listen to Ryan Murr, Branden Berns, and James Moloney discuss reverse mergers and how recent actions by the SEC have influenced the ways that reverse mergers are structured and the implications of those actions for those companies considering a reverse merger on the “Deal Lawyers Download” podcast produced by DealLawyers.com.
Listen here (subscription required).