The IP market is traditionally less volatile than the corporate and finance markets, where fortunes rise and fall with the world’s stock exchanges.
But a wave of M&A activity has hit the life sciences sector, sparking more demand for lawyers with sector-relevant experience. There is a higher demand for IP specialists as well as corporate lawyers, evidenced by a number of notable moves in recent months.
At the start of the year Herbert Smith hired life sciences star David Wilson from Bird & Bird. Wilson handles contentious patent work for a raft of clients, including Baxter, Pfizer and Sanofi-Aventis.
At the time Herbert Smith head of IP Nick Gardner told The Lawyer: “I’m confident this will lead to further growth in our IP practice.”
Last week Bristows waved goodbye to a five-partner life sciences team that had left to set up boutique firm Powell Gilbert.
This increased activity shows that life sciences has ceased to be simply a branch of IP and is maturing into a practice area of its own.
Field Fisher Waterhouse (FFW), a firm traditionally strong in IP, hired partner Neil Foster from the London office of San Francisco-based Morrison & Foerster last year to build the firm’s life sciences practice. Foster is a corporate lawyer who specialises in the sector, which is a particular focus for his former firm.
Foster explains: “Generally lawyers are valuable where their sectors are rising or where their skills are in short supply. At the moment biotechnology is very active and there are a lot of US, UK, German and Swiss transactions.”
Although lucrative patent litigation can occur in any sector, life sciences also offers roles on juicy M&A and licensing deals. It is this increase in the transactional side of the work that has sparked the interest of law firms.
Large pharmaceutical companies are finding that their drug pipelines are beginning to dry up, forcing them to look elsewhere for innovation. They have cash reserves worth billions and are willing to invest in other companies to preserve the future of their business.
As a result large companies are buying and licensing patents for new products from smaller life sciences companies. This often means acquiring part, or all, of the company itself.
Both large and small pharmaceutical companies need patent specialists to assess the strength of the relevant IP rights, as well as transactional lawyers focused on the sector to complete the deal. The work is highly specialised, labour intensive and offers high margins.
Nicola Dagg, head of IP at Allen & Overy, has hired a handful of life sciences associates from Bristows.
She says: “There’s a lot of non-contentious work around. A lot of companies are out to buy products.
“People who operate in this area need to do both M&A and patent licensing. That’s what we’re increasingly hearing from clients.”
Deals can come in all sizes. In November last year, life sciences company Vectura bought out pulmonary drug company Innovata for £130m. Pharmaceutical company Astra-Zeneca has been leading the way on numerous deals, buying Cambridge Antibody Technologies last year for £700m as part of a multibillion-pound acquisition strategy.
AstraZeneca group secretary and solicitor Graeme Musker is adapting his own in-house team to cope with the growing demand for legal advice on these transactions.
Musker says: “Hitherto one has relied on internal R&D for new products, but we’re increasingly looking outside to bolster the drug pipeline.”
Musker is working with his panel of law firms to ensure they understand the changing nature of the work. AstraZeneca’s relationship firms include Freshfields Bruckhaus Deringer, Herbert Smith, Linklaters and Mayer Brown Rowe & Maw.
“I think in a way you’re always actively managing it to make sure [the law firms] are fully aware of what we’re up to,” he says. “We’ve been doing an exercise on this for the last six to nine months.”
Herbert Smith could be one step ahead of its fellow panel firms with the appointment of Wilson. AstraZeneca’s legal spend is likely to rise along with its workflow, making Wilson a good investment.
AstraZeneca’s top-level management is committed to the strategy and is willing to support the in-house legal team as a result.
“One of the key challenges for us is to gear up for a much greater amount of licensing and acquisition work. We’ve diverted more resources to that,” says Musker. “We have to control costs and budgets but the management is aware we have to step up to this challenge.”
An increase in transactional work has also widened the geographical scope for the sector, with Europe and the US the main players.
FFW’s Foster says: “The typical clusters in the EU are Scandinavia, Switzerland, Germany and the UK. Then you’ve got clusters such as San Diego, Silicon Valley and Northern Virginia in the US. International work means decent margins for lawyers.”
Cambridge and London are the main centres in the UK. Some firms, such as Simmons & Simmons and Taylor Wessing, have life sciences specialists posted in both locations, whereas FFW’s strategy is to service the two regions from a London base.
Foster says: “It’s a small market; you need people with local reputations, but that’s not the same as opening an office in every cluster.
“Our firm’s strategy is to have individuals with clients in these areas. Offices aren’t the most important thing, clients are.”
The sector’s recruitment market has been boosted by the relative scarcity of lawyers with top qualifications. Life sciences clients demand that their firms have specialist knowledge about their products and industry. The specialist nature of the work has led to a rush on lawyers with high-level science backgrounds.
Foster says: “In the IP litigation and licensing teams there are a lot of people with postgraduate qualifications in science subjects, including people with PhDs. That’s the way the market’s going.
“We’re looking to hire at partner level and assistants as well.”
Firms with strong life sciences groups get two high-margin revenue streams for the price of one: IP and M&A.
There are few people in the world with the right qualifications in this area, making any firm that can lay their hands on them very lucky indeed.