Top 10 Issues in Cross-Border Life Sciences Transactions

Cross-border transactions have become a key feature of the life sciences industry, particularly as companies seek to combine innovation, capital, and development capabilities across jurisdictions. These transactions have become more complex due to regulatory scrutiny, geopolitical developments, and evolving industry practices. This article outlines 10 core issues that routinely arise in cross-border life sciences deals, with a specific focus on cross-border life sciences licensing and collaboration transactions involving China.

1. Determining Deal Structure

The choice between a licensing transaction and an M&A transaction is often the most fundamental decision in a cross-border deal.

Licensing structures are generally favored due to their flexibility, lower up-front capital commitment, and reduced regulatory burden, with many structured as territory-split deals in which licensors typically retain rights in its territory and sometimes adjacent territories while out-licensing rights elsewhere. However, licensing transactions present complex challenges including global coordination, governance and control issues, cross-border data sharing restrictions, intellectual property (IP) ownership and management, and counterparty bankruptcy risk.

M&A transactions may be preferred by larger strategic players, such as multinational pharmaceutical companies, under certain circumstances, as acquisitions can simplify IP ownership and control and may reduce complexities related to data sharing, ongoing governance, and licensor insolvency risks. However, M&A transactions typically require greater up-front capital commitments and are more likely to trigger foreign investment review regimes and sector-specific regulatory approvals.

2. NewCo Deals — Combining Licenses With VC-Backed Company Formation

The new company (NewCo) deal structure, which involves the licensing of an asset to a newly formed company set up by an experienced management team or a venture capital (VC)/private equity fund, with the NewCo pursuing institutional financing to raise necessary capital to develop and commercialize the asset, has become popular in recent years, particularly for assets originating from China. The licensor typically receives equity in the NewCo as consideration, allowing it to share in value appreciation through equity interest in subsequent sales, sublicenses, or initial public offerings. The license in NewCo deals often involves a territory-split, which presents complex challenges around governance, decision-making, and compliance with cross-border regulatory and data transfer requirements.

NewCo deals are complicated to execute because of the need to coordinate separate negotiations on license and equity terms between the NewCo and the licensor and the NewCo’s financing with investors. Managing these complexities includes working with experienced advisers, using the negotiated license term sheet to generate investor interest early on, and structuring the license with financing obligations or closing conditions to ensure that execution and closing occur simultaneously or close in time.

3. Platform Deals Versus Product Deals

Platform deals typically involve early-stage technologies or discovery platforms, such as antibody drug discovery or artificial intelligence–driven drug discovery, in which licensees leverage licensors’ capabilities to conduct drug discovery and development, usually receiving rights or options to further develop and commercialize downstream product rights. These structures require careful drafting of target selection and gatekeeping, diligence obligations, option exercise mechanics, exclusivity/non-compete obligations, milestone triggers, and allocation of IP rights.

Product deals increasingly center on Investigational New Drug application–ready or clinical-stage assets, with many strategic licensees focusing on products validated by proof-of-concept trials, reflecting market demand for de-risked programs. Product-specific transactions, particularly territory-split licenses, often involve more complex allocation of development obligations, regulatory strategy alignment, governance and decision-making rights, manufacturing and supply commitments, commercialization economics, and product reversion rights upon termination.

4. Global Versus Regional Deal Scope

In a global deal, the licensee typically receives worldwide exclusive rights or acquires the asset outright, with governance and decision-making arrangements simplified, but it often requires higher up-front consideration.

Regional deals divide rights by territory. For deals involving China, Chinese licensors commonly retain rights in mainland China (and sometimes Hong Kong, Macao, and Taiwan) while exclusively licensing rights for other territories. In territory-split deals, parties must pay particular attention to cross-border data sharing compliance, cross-licenses, and rights of reference for each party’s territories, different regulatory regimes, the cross-territory impact of territorial activities, rights to conduct global trials, potential differences in indication focus, and associated safety issues, pricing alignment, governance, and decision-making.

5. Governance and Decision-Making

In worldwide exclusive product deals, governance and decision-making are generally straightforward, as the licensee typically has sole authority to make development and commercialization decisions, with any joint steering committee serving solely for coordination and information sharing without decision-making authority.

In split-territory, platform, or collaboration deals, governance and decision-making are critical to successful collaboration, providing an established governance structure to help parties navigate the unpredictable nature of product discovery, development, regulatory approval, and commercialization. The scope of topics for discussion and decision-making at the joint steering committee level must be well-structured to balance each party’s interests and risks, with subcommittees and working groups useful for facilitating operational coordination for specific functions and escalation mechanisms employed to elevate matters to senior business leaders when operational teams cannot reach consensus.

6. Cross-Border Data Sharing

Almost all cross-border life sciences transactions involve the cross-border transfer of data during due diligence and at deal completion, as well as ongoing transfers in cases of continued collaboration or transition services. Many countries now regulate the cross-border transfer of personal data — genetic, biometric, or multiomic data — and data that may be state secrets or have national security implications, with legal requirements potentially including obtaining informed and privacy consent from data subjects, putting in place data transfer agreements, registering agreements with regulators, conducting data security assessments, undergoing government reviews, obtaining approvals or licenses, and ensuring reasonable data security measures.

A challenging area for due diligence is whether privacy consents or informed consent forms signed by clinical study participants enable the sharing or cross-border transfer of clinical data, as it is common for such forms to have defects that do not permit sharing or transfer, and it may be challenging or impossible to reobtain consents with appropriate language. In addition to uncovering data sharing and transfer issues through due diligence, due care must be taken to address risks through thoughtful representations and warranties and obligations to obtain proper consents. The need to put in place data transfer agreements also needs to be factored into deal timing.

7. Granting Equity to Licensors

It is not uncommon for a portion of consideration for a life sciences license transaction to be in the form of equity, which helps align interests between licensor and licensee, allows for lower cash consideration and additional value capture by the licensor, and gives additional flexibility to reach an agreement on fair value exchange. However, for cross-border transactions, granting equity to foreign licensors presents additional risks and challenges, as foreign investment laws may require government approval or licenses, the reporting to regulators, and the subjection to ongoing foreign investment risk, scrutiny, or investigations.

For transactions involving licensors located in China, Chinese companies need to obtain overseas direct investment approval from the Chinese government to lawfully hold equity in a foreign company, and they need to factor the likelihood of getting government approval and the time needed for such approval into deal structure and timing. For US companies, granting equity to foreign licensor partners may subject the transaction to Committee on Foreign Investment in the United States (CFIUS) jurisdiction, requiring careful assessment of CFIUS risk, compliance, and deal structuring. Geopolitical factors potentially affect regulatory risk, speed of approvals, and whether approvals can realistically be obtained. Building in sufficient runway for obtaining overseas or foreign investment review and approval and issuing warrants in lieu of immediate grants of equity are some ways to manage these risks.

8. Third-Party Obligations

Third-party obligations are often a critical diligence item in cross-border life sciences transactions. In many cases, upstream licenses may impose field-of-use restrictions, consent requirements, milestone and royalty payment obligations, or revenue-sharing arrangements, all of which can materially affect deal structures and economics. Licensees typically expect licensors to remain responsible for all third-party payment obligations in existence as of the effective date, on the basis that such obligations should already be reflected in the licensors’ economic returns. One particularly important category in biologics transactions is cell line licenses, which may impose restrictions on downstream sublicensing or the transfer of cell lines as well as milestone payments or royalty obligations.

In territory-split transactions, licensors may have existing regional collaborators or licensees requiring careful diligence, and they may later license out the rights in the retained territory to a third party, which presents risks and introduces complexity to ongoing collaborations. Agreements between licensors and preexisting regional collaborators may lack key provisions relating to data sharing, manufacturing technology transfer, or grant-back licenses, and the absence of appropriate provisions can create challenges for downstream transactions and may necessitate amendments to such preexisting regional agreements.

9. De-Risking for Bankruptcy

The U.S. Bankruptcy Code provides certain protections to the licensee of IP rights in the event of the licensor’s insolvency that enable the licensee to continue to have access to the licensed IP, but bankruptcy laws in other countries may not provide similar protections, creating a risk that the licensee may lose its access or license if the licensor becomes insolvent.

When undertaking a cross-border license transaction, the licensee should assess through due diligence the financial solvency of the licensor, the strength of the licensor’s business, and the licensor’s cash runway and ability to fundraise. Attempting to recreate the protective mechanics of the U.S. Bankruptcy Code by contract is recommended but may not be enforceable, so structural mechanisms may need to be considered, including financial reporting rights, financial covenants, and the assignment of IP rights — to affiliates of the licensor located in countries with bankruptcy laws protective of licensees, or bankruptcy remote vehicles. However, structural mechanisms may be imperfect, require consideration of tax consequences, and can be challenging to negotiate, making exploring an alternative deal structure — asset purchase or M&A — another way to avoid such risk.

10. Leveraging CRO and CMO Capabilities in Overseas Jurisdictions

China’s contract research organization (CRO) and contract manufacturing organization (CMO) ecosystem continues to offer significant advantages in cost, speed, and scale for clinical development and manufacturing, but recent regulatory developments, including the BIOSECURE Act in the US, and heightened scrutiny of cross-border transfers of data and biological samples, have increased regulatory compliance risk. For more information on the BIOSECURE Act, read our latest alert “Final FY 2026 NDAA Includes BIOSECURE Provisions and New Opportunities for Biotech as DoD National Security Priority” (December 2025).

Investigator-initiated trials (IITs) conducted in China have recently attracted increased interest from Western biotech and pharmaceutical companies, driven by efficiency and speed, with Western companies typically needing to partner with China-based collaborators in order to meet local regulatory and compliance requirements. When structuring IIT collaborations in China, companies need to pay particular attention to regulatory requirements, allocation of risks and liabilities, data protection laws, IP ownership, terms of confidentiality, and publication rights.