Key documentation for funding life sciences companies

It is very common in investments for life sciences companies for a heads of terms (or term sheet, as it is commonly known) to be put in place between the investors and the founders that sets out the key terms of the investment and reflects a non-binding indicative offer from the investors. Putting in place a detailed term sheet that addresses many of the major issues associated with investing in life sciences companies early on in the investment process can often help to not only establish whether the parties believe that they can work together but also to speed up the process generally and, in particular, the drafting and negotiation of the relevant legal documentation.

As part of negotiating a term sheet, an investor may also require that it has exclusivity for a limited period of time to both carry out and complete its due diligence and to then complete the investment. The entry into confidentiality agreements at the term sheet stage is also commonplace in life sciences investments, considering the potential value of any intellectual property (IP) of the investee company. Due diligence of a life sciences company will often include making detailed financial, commercial and legal investigations, in particularly around the IP, business plan and financial budget…

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