The National Venture Capital Association (NVCA) provides model legal forms for venture capital investors and entrepreneurs seeking venture capital. The NVCA model forms are the starting point for many venture capital transactions. In a nod to the growing important of the life sciences industry, the NVCA model forms have recently been updated to become more life-sciences friendly.
As the NVCA's press release from February noted: "For the first time, the documents now incorporate drafting options that are specific to the unique nature of life science transactions."
Examples of new life science focused terms and footnotes in the NVCA Model Legal Forms include the following additions to the NVCA's model Stock Purchase Agreement:
- Noted that life sciences transactions often include "Milestone Closings" with tranched investments in which investors are expected to make additional contributions to the company (such as upon FDA approval).
- Added potential penalty provisions applicable to investors who fail to fund Milestone Closings.
- Noted that the "Use of Proceeds" section may be more specific for life sciences companies and "may include 'discovery, research and pre-clinical development' of a particular therapeutic."
- Noted that for life science transactions, it is common to define "Company Intellectual Property" in greater detail with respect to patent rights, including “patent disclosures and all related continuation, continuation-in-part, divisional, reissue, reexamination, utility model, renewals, extensions, certificate of invention and design patents, patent applications, registrations and applications for registrations.”
- Proposed more detailed representations and warranties regarding:
- Intellectual property held or funded by the government or academic or medical institutions;
- Compliance with HIPPA;
- Pre-clinical development;
- Clinical trials; and
- FDA approvals.