The Legal Playbook for Building a Biotech Company, From Formation to Financing

When you start a biotech company, you’re often pursuing groundbreaking science that keeps you extremely busy in the lab. But to protect your intellectual property, you need the right legal support from the start. These lawyers can help you protect your ideas, secure your patents, and ensure you comply with regulatory guidelines. They also help you enter licensing agreements, establish relationships with investors and partners, and guide you through clinical trials and commercialization.

Unlike other technology sectors, you’re doing business in one of the most heavily regulated environments in the world. Not only do you need specialized legal guidance to navigate strict approval pathways, but you also need lawyers to help you with data protection requirements. A single misstep, such as failing to properly secure patent rights or mishandling research collaborations, can be costly and affect your company’s valuation. It can also impact how investors view your company and undermine its long-term viability.

“Biotech is the one industry where a legal mistake can make years of valid science completely unusable,” said David Ghozland, MD, a board-certified OB-GYN and physician entrepreneur who pioneered the fractional CO2 laser procedure for Bartholin cysts. “For example, if your intellectual property has not been filed correctly, then someone else could patent around you. Your data may still be valid, and your research may still be accurate, but the commercial rights will be gone.”

Another example would be if your regulatory pathway wasn’t properly created from the beginning, said Dr. Ghozland. Then, the Food and Drug Administration (FDA) could make you begin the clinical documentation process again. “The science gets you to the table, your legal foundation decides if you leave with a deal.”

Consequently, the challenge lies not only in understanding the legal landscape but also in identifying the right legal partners. Choosing a lawyer unfamiliar with the nuances of biotech innovation may cause your company to miss critical issues that specialized attorneys would catch early. In this article, Cure explores what your legal needs may be as an early startup, how these needs change as your company grows, and how to identify the right legal counsel.

How Legal Needs Evolve From Formation Through Financing and Partnering

A biotech startup’s legal needs are constantly evolving, said Richard Lowenthal, MS, MSEL, President, CEO, and co-founder of ARS Pharmaceuticals, which makes Neffy, an epinephrine nasal spray. You’ll start out with basic company formation and early intellectual property protection, but as the business grows, raises capital, and enters strategic collaborations, your legal needs will change. Here’s what you should be planning for from the start.

Starting Out

“At formation, your legal need is to find somebody who is experienced with forming a company, working with venture capitalists to invest in the company, issuing the founders their initial stock, doing a stock option plan, and getting your HR policy together, basically getting to the point where you’ve got your entity set up, you can open bank accounts, and you can get funded,” said Brett Pletcher, life sciences and public companies advisor for the Gunderson Dettmer law firm.

Then, when you start doing business, you will have a lease for the space and possibly for lab equipment and assays, all of which is usually contract-based, where you will need an attorney, said Pletcher. You’ll also have licensing and collaborations to consider, so you need a lawyer who understands how to handle those transactions for a life sciences company, he added.

Protecting Intellectual Property

Early on, you're going to need an intellectual property (IP) specialist, said Pletcher. “You've either got IP that you're putting into the business to start it, or you're licensing it in, and then you're going to start improving it and developing it and creating new technology.”

Your IP lawyer should be skilled at helping you patent your ideas, added Pletcher. “If you don't have patents in the biotech space, you don't have a business. You don't have the ability to be exclusive, and so to me, that's the key group that you need very early.”

Preparing for Regulation, Commercialization, Pricing, and More

Over time, you're going to have additional legal needs, but according to Lowenthal and Pletcher, you need to be lining up your legal team ahead of time. This means finding lawyers who have regulatory experience, understand drug pricing, and can protect your patents and broader IP strategy.

For example, you need a lawyer who understands how to work with the FDA and other regulators to get their approval, as well as offer insight on how you're going to develop the drug or therapeutic and which steps you're going to take, said Pletcher. They need to advise you through phase one and phase two and filing. You’re also going to have obligations to do additional studies, he added. People are going to come in and review your manufacturing process and make sure you're doing all of that correctly, as well as ensure you're running clinical trials properly, an attorney can help keep all of that in order.

You will also need lawyers early on who understand compliance and drug pricing, including how to price the drug in the United States and globally, he added. Find someone who understands drug pricing so that when you're conducting your clinical trial, they know what data you'll need when you reach that stage.

“You want to find somebody who has done work in the regulatory space and understands the type of science that you're doing, and that may not be the firm that you're working with in the beginning,” he said. “The same is true with IP. I'll see companies have a different IP law firm or lawyer than they have for their governance because that lawyer may not have a degree in organic chemistry or have the biology background to fully understand the biologic drug that's being developed.”

Planning for the Future

Over time, the further along you get, the more legal work you're going to find yourself involved in, added Lowenthal. From structuring the company and protecting patent rights to negotiating investor terms, research agreements, and commercial partnerships, understanding how these needs evolve will help you avoid costly mistakes and ensure your company is legally prepared for growth, funding, and industry partnerships.

When You Need Specialized Biotech Counsel vs. General Legal Support

As your biotech startup grows, you’ll need to differentiate when general legal support is sufficient and when specialized biotech counsel becomes necessary, said Lowenthal. While routine legal services can handle tasks like basic corporate filings or standard contracts, the life sciences sector presents unique challenges involving intellectual property strategy, regulatory pathways, research collaborations, and licensing arrangements.

“When I opened the Ghozland Institute, one of the biggest things we had to do legally was to get clear ownership of all the assets, appropriately establish the actual legal entity, and ensure proper assignment of intellectual property rights, or who owns what, under what conditions, what happens if someone leaves,” said Dr. Ghozland.

As the company started to look for financing to grow and bring more advanced technologies into its facilities, the focus shifted from establishing ownership to negotiating and preparing legal documents for financing, such as term sheets, shareholder agreements, anti-dilution provisions, and representations and warranties tied to FDA regulatory status and clinical trial agreements, he said.

“The moment your work touches a regulatory agency, a proprietary protocol, or a licensing structure, you are past the point of being able to rely solely on general counsel,” said Dr. Ghozland. “General counsel primarily handle contracts, whereas biotech-specific attorneys work with FDA classifications, intellectual property strategy, and partnership agreements with embedded milestone payment triggers.”

How to Evaluate Law Firms for Biotech Experience and Fit

Selecting the right law firms begins with looking beyond general credentials to assess whether a firm truly understands the scientific, regulatory, and commercial realities of the biotechnology sector, said Lowenthal. The right legal partner should demonstrate familiarity with intellectual property strategy, life sciences financing, regulatory frameworks, and industry partnerships, while also aligning with the startup’s stage, goals, and working style.

Start with determining whether the firm and its lawyers are startup-capable, suggested Pletcher. “Quiz them about their biotech clients or ask about who they are representing. Try to determine if they have an understanding of biotech. Engage them in a conversation that you would expect them to participate in at a biotech level, and if they can't, they might not be the right person.”

You'll also be looking for someone who can handle licensing, joint ventures, and collaborations. When evaluating candidates, get a sense of how deeply they understand the industry and who they’ve worked across from. From there, it comes down to asking the right questions.

Practical Tips for Managing Legal Costs

For many biotech startups, legal expenses can feel daunting, especially during the early stages when resources are limited and funding must be carefully allocated. But at the same time, cutting corners on legal support can lead to costly problems down the road, said Pletcher and Lowenthal. The key is learning how to manage legal costs strategically, prioritizing the most critical issues, working efficiently with the right counsel, and choosing appropriate billing structures.

A practical solution is using flat fees for predictable work, said Dr. Ghozland. “For example, you do not need to bill hourly for routine filings, preparing standard employment contracts, and completing annual compliance reviews. You should establish flat fees for these types of work to accurately budget for contract negotiations that truly warrant hourly billing.”

He said his medical practice conducts a short quarterly legal checkup to identify compliance issues before they compound, and that this approach has been significantly less expensive than correcting issues after the fact. “The objective of your legal expenditures should not be to reduce your legal expenditures, but rather to strategically reduce your legal exposure while you are concentrating on becoming a company that can grow.”

Common Mistakes Early Teams Make and How to Avoid Them

In the early stages of a biotech startup, you’re moving quickly to advance research, secure funding, and build partnerships. But that doesn’t mean legal details should be overlooked or addressed too late. Teams are often juggling multiple priorities at once.

Doing so without structure can lead to unclear intellectual property ownership, poorly structured founder agreements, or informal research collaborations, all of which can create serious and often costly legal issues down the road. The key is to take proactive steps to avoid common early-stage mistakes.

Selecting the wrong IP firm. Teams fail to think through IP strategy, including what to patent, where to file, and how those decisions impact long-term cost and exclusivity.

Signing contracts without review. Many young companies get into trouble by signing agreements without legal review, which can put their IP at risk or lock them into unfavorable terms.

Over-negotiating low-risk contracts. The opposite extreme also occurs, when founders spend too much time negotiating minor details instead of focusing on higher-impact work.

Delaying IP filings until after funding. Protection begins with the filing date, not the funding milestone.

Relying on informal co-founder agreements. This is nearly free to fix at formation but expensive later.

Handling legal needs sequentially instead of in parallel. Many teams address legal work step by step rather than tackling key issues simultaneously, creating gaps.

Using outside counsel inefficiently. Some early-stage companies either over-rely on outside counsel for every decision or fail to use them strategically, leading to unnecessary costs.

Overall, Pletcher said founders should work with a firm that helps them understand: “What are my resources today? Where is the product likely to be sold? What do I need to do?”

“It becomes enormously expensive, like millions and millions of dollars, if you don't pay attention to that from the beginning.”