A Year in Review: Insights from the Life Sciences Sector and Planning Ahead for 2025

As we close the chapter on 2024, it’s clear that this year has been transformative for the Life Sciences sector. With significant regulatory changes and new growth opportunities, the industry continues to evolve rapidly. Amidst this, strategic planning - whether for business setup or preparing for an exit - has never been more crucial.

At Freeths, we’ve engaged with industry leaders through events like the Annual Life Science Roundtable with MEPC and the Exit Right event with The Oxford Trust and Oxford Innovation. These discussions reinforced a key truth: success in life sciences often stems from decisions made at the outset.

As the year ends, it mirrors a business exit—both marking the culmination of a journey. Just as careful planning ensures a successful year-end, selling your business is the final chapter of a journey that began when the business was first established. This highlights the importance of setting a strong foundation, as a good start often leads to a successful conclusion.

So, in this article we will look at some of the legal aspects you should consider when you are setting up a Life Sciences business. The legal planning should go hand in hand with tax, financial accounting considerations and obviously the wider business strategy adopted for the business.

Laying the Foundations for Success

Like many businesses a Life Sciences business typically starts with an idea such as a discovery, an invention or the particular application of know how in a field. This may be protected by intellectual property rights such as patents, design rights, copyright or know how, which you – the inventor/creator - would own. Intellectual property rights often make up the biggest and most valuable asset of a Life Sciences business, and in many company sales the intellectual property rights will determine the price you get for your business. In addition, Intellectual Property rights can also be used to generate revenue while you run the business before an exit.

Another practical point about intellectual property rights is to identify, what type of intellectual property rights you have generated, for example can the invention be patented or not and if not, how can your idea be protected. Also, it is important that the rights are not just owned by the inventor, but by the company you wish to run.

At the beginning of a business you should also think about what kind of entity you want to use to run your business through. Usually, the “private limited company” is used. As a business owner you will only be liable with your shares. Another benefit is, when if you wish to sell later, buyers are generally comfortable with buying the shares in a private limited company.

If you are the only shareholder in the company, then you will be the decisionmaker, and you normally do not have to take into consideration what other people might think. However, if you are more than one shareholder you need to make sure that you agree on the way the company operates. To assist this process, it would be prudent to set up a shareholders’ agreement, which will set out the running of the company, ie. who is on the board of directors, how can you sell your shares, in which situations do all the shareholders need to agree.

Navigating Regulation and Compliance

One feature of the Life Sciences sector is, that it is heavily regulated. Therefore, when starting a Life Sciences business, you must ensure that your product has permission to be sold either by  an authorisation or registration. The starting point is that no product can be brought into circulation in the UK without permission.

A specific element of the regulatory environment in the UK are the data protection rules. These rules are relevant, because most Life Sciences businesses at some point will need to deal with personal information as part of its business, for example through clinical trials or when selling to end consumers. It is therefore important, that you identify what kind of personal data you receive, what you will use it for and how to deal with it.  A breach of the Data Protection rules can be both very costly in terms of fines but also in relation to the loss of reputation.

At some point on your journey, you will be in a position, where you can consider selling to customers. At that point you should a have template contract, which you can use for this. Such contracts should set out the rights and obligations of the parties, including for example what is expected from you, when you are supposed to deliver, if IP is being licensed, your payment and what happens if you do not receive payment and how the contract can be terminated. It is important that the contract reflects precisely the business, you are running and that it is not too generic. 

Scaling and Preparing for Growth

Most businesses when they grow will need to employ staff. Therefore, when your business is at a point, where you begin hiring employees, you should have template employment contracts. These contracts should set out precisely the rights and obligations of the employer and the employee, such as area of responsibility, pay, confidentiality, IP, restrictive covenants and termination.

In the sections above I have set out a few thoughts above setting up a business. Businesses are different, so different considerations may apply to different businesses, but one thing that they often have in common, is that they all at some point need to take advice from a lawyer, accountant, a financial advisor or similar advisors about the steps they need to take. Unfortunately, in many cases, advice is sought too late, which limits what an advisor can do. For example, if unclear provisions are already embedded in contracts between the company and its customers, it can be challenging to make corrections or avoid potential issues down the line.

It is often beneficial to speak to an advisor right from the outset, so that you along with advisor can shape your business in the best possible way. A good advisor will save you money and time and could set you on the journey to a great exit.

Looking Ahead to 2025

As we prepare for the opportunities and challenges of 2025, the following priorities stand out for life sciences companies:

1. Invest in IP: Regular IP audits and strategies for commercialization will help businesses stay competitive.
2. Strengthen Regulatory Compliance: Staying ahead of evolving regulations, particularly in areas like AI integration, is essential.
3. Focus on Talent: Address workforce shortages with attractive employment packages and training opportunities.
4. Embrace ESG Goals: Investors and regulators are placing increasing importance on sustainability and ethical practices.
5. Plan for Growth: Be ready for M&A activity and market expansion by refining contracts and governance frameworks.

2024 has demonstrated the importance of early and thoughtful planning in achieving success in the life sciences sector. By focusing on robust foundations, proactive compliance, and strategic scaling, companies can position themselves for sustainable growth and valuable exits.

At Freeths, we are proud to support the life sciences community at every stage of the journey. Whether you’re setting up, scaling, or planning for an exit, our team is here to guide you toward success. Let’s work together to make 2025 a year of innovation, growth, and achievement.