What happens to gene therapy insurance in an acquisition or licensing deal?

The long tail becomes acute at a transaction. Because a gene-therapy program can generate claims for up to 15 years of long-term follow-up, a buyer or licensing partner will scrutinize whether that delayed-injury liability is funded before closing. An unfunded tail is a real diligence problem and can affect deal terms.

Several mechanisms come into play. If a program is wound down or a subsidiary is divested, run-off or tail coverage is purchased to keep the claims-made window open for the long-term-follow-up period. In an acquisition, the parties negotiate who carries the historical liability and how the retroactive dates are preserved so the acquired program's prior work stays covered. Representations-and-warranties and other transactional insurance may also feature.

The practical point is that planning the retroactive-date continuity and the tail budget from the start makes a gene-therapy company cleaner to transact. A company that has treated the tail as a budgeted cost, rather than discovering it at the deal table, protects both its valuation and its founders and controls the terms of how the long-tail liability transfers.