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/)
Trends and Insights
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”.
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.”
Impact of Current and Proposed Tariffs on Pharmaceutical Products
Pharmaceutical products from China continue to be subject to the fentanyl-related emergency tariffs (20%) and are expected to be subject to national security tariffs to be announced under Section 232 of the Trade Expansion Act of 1962, despite the recently announced “exemption” from the so-called “reciprocal tariffs” announced on April 2, 2025. We expect the Section 232 investigation to move quickly, and we advise companies to take prompt proactive steps to assess the tariff impacts. Our trade team stands ready to assist clients in navigating the fast-developing tariff landscape.
FDA’s Roadmap to Reducing Preclinical Animal Safety Studies: Six Things to Know
On April 10, 2025, the U.S. Food and Drug Administration (FDA) announced a new initiative to explore ways to reduce preclinical animal safety studies for human drugs and biological products, beginning with an approach to allowing the use of “New Approach Methodologies” (NAMs) in lieu of animal testing for eligible investigational monoclonal antibodies.[1] The agency’s plan marks a significant departure from decades of agency practice, in which life sciences companies developing novel therapeutic products typically have conducted a number of safety studies, including pharmacological and toxicological studies, in various species before progressing to the clinical phase. Below are six key points for life sciences companies to know about FDA’s plans to incorporate NAMs into preclinical evaluations for human drugs and biologics.
Royalty Report: Royalty Finance Transactions in the Life Sciences 2020-2024
This Royalty Report provides an analysis of publicly reported royalty finance transactions for the last five years (2020 to 2024) in the life sciences sector, focusing on both traditional and synthetic royalty transactions. Traditional royalty transactions encompass monetizations of royalties under existing license agreements. Synthetic royalty transactions involve the sale of a portion of future product sales, rather than the sale of an existing future royalty entitlement.