Introduction: The "Race Against Time" in Vaccine R&D

In the late autumn of 2024, a local biotech enterprise stood at a critical juncture in its fate. Its independently developed new pneumonia vaccine had successfully completed Phase I clinical trials and was about to enter the more crucial Phase II trials. Once successful, it is expected to fill the gap in relevant vaccines in China. However, Phase II clinical trials require a huge sum of 30 million yuan, and the company's cash on hand is only enough to sustain it for two months.

The financing window is very short, but investors are highly vigilant about the "patent risks" and "equity flaws" unique to biotech enterprises, clearly stating that the due diligence must be free of major issues, otherwise the investment agreement will not be signed. A legal due diligence race against time has thus begun.

I. Patent "Hidden Mine": Who Owns Inventions Made During Employment at a University

Luheng Law Firm quickly assembled an interdisciplinary due diligence team consisting of M&A lawyers and patent agents. When verifying 17 core patents, a potential risk emerged —

The inventors of three key technologies all completed the inventions while the founder was employed at a university. Although the company signed a "Service Invention Transfer Agreement" with the university after its establishment, the transfer consideration agreed in the agreement has never been paid, and the patentee has not been changed to the company's name.

This means that once the financing is successful, the university may claim rights at any time, and the entire vaccine project will be caught in ownership disputes.

Risk Mitigation Steps:

1. Valuation Assessment: The team entrusted a professional appraisal institution to evaluate the fair value of the 3 patents and determined the transfer consideration to be 2.8 million yuan.
2. Payment Completion: Assisted the enterprise in raising funds, signed a supplementary agreement with the university, and paid the transfer consideration.
3. Registration Change: Completed the change registration of the patentee and filed it with the National Intellectual Property Administration.

4. Founder's Guarantee: Required the founder to issue a "Letter of Commitment on No Ownership Disputes", promising to bear all losses personally if disputes arise in the future.

II. Equity "Blind Spot": The Forgotten Nominee Shareholder

After resolving the patent issue, the team continued to trace back the enterprise's 5 rounds of financing history since its establishment. When verifying the documents of the second round of financing, it was found that a natural person shareholder had never signed any "Nominee Holding Agreement" and was not reflected in industrial and commercial registration, but the shareholder had participated in shareholder meetings many times and received dividends.

Tracing the Truth

After multiple interviews, it turned out that the shareholder was an early partner of the founder. Due to sensitive identity at that time, it was agreed that the founder would hold the equity on his behalf, but there was only a verbal agreement between the two parties without any written documents. Once the shareholder claims rights, it may trigger equity disputes.

Remedial Measures

• Immediately sign a supplementary "Equity Nominee Holding Agreement" to clarify the rights and obligations of both parties;
• Notarize the agreement with a notary public to enhance the evidential effect;
• Clearly state this matter in the "Equity Evolution Compliance Report" and attach all supplementary documents.

III. Milestone-Based Disbursement: Aligning Every Cent with Risk Nodes

What investors are most worried about is not the capital, but the possible failure of Phase II clinical trials. Once the trial is terminated due to safety issues, the 30 million yuan may be lost without return.

The Luheng team designed a set of "milestone-based disbursement" clauses to accurately bind investment risks to R&D progress:

At the same time, a "termination clause" was set: if the trial is terminated due to safety issues, the unreleased funds will be automatically cancelled. This design not only ensures the continuity of the enterprise's R&D, but also locks the upper limit of investors' risks, ultimately facilitating the two parties to reach a cooperation.

IV. Achievements and Impact: Valuation of 210 Million Yuan, A Checklist Becomes an Industry Standard

After the signing of the financing agreement, the post-investment valuation of the enterprise reached 210 million yuan, doubling that before financing. More importantly, in this service, Luheng Law Firm systematically sorted out various risk points in the financing of biopharmaceutical enterprises and compiled the "Financing Risk Checklist for Biopharmaceutical Enterprises".

The checklist covers 37 specific risk points in 8 categories including patents, clinical trials, equity, and compliance, accompanied by response measures and legal basis. After its release, it has been adopted by many medical investment institutions as a reference standard for internal due diligence, significantly enhancing its industry influence.

V. Conclusion: Professionalism Means Making "Invisible Risks" Visible

From patent flaws to equity blind spots, from the uncertainty of clinical trials to valuation negotiations, every link may become a "hidden mine" in financing. With professionalism and meticulousness, the Luheng legal team not only helped the enterprise successfully raise the life-saving funds, but also produced knowledge achievements with industry value.

In the future, we will continue to deepen our layout in the biopharmaceutical track, accompany more innovative enterprises through the risk cycle, and move towards the high ground of value.