UK introduces compulsory merger notification for biotech sectors as the NSI Act comes into force

On 4 January 2022, the National Security and Investment Act (NSI Act) entered into force. It introduces, for the first time in UK law, a mandatory pre-notification regime for acquisitions of qualifying entities in 17 ‘sensitive’ sectors – including synthetic biology, artificial intelligence and advanced robotics. Completion of such a transaction prior to Government approval may lead to fines of up to 5% global turnover, imprisonment, director disqualification and the transaction being void.

In addition, the NSI Act gives the Government powers to call-in non-notifiable transactions in the 17 relevant sectors for review. The broad definition of relevant transactions means that this call-in power will, among others, extend to the licensing of intellectual property and other collaborations.

These developments potentially have significant consequences for life sciences and other tech sectors, because the 17 sensitive sectors are defined broadly. For example, 'synthetic biology' is defined to include among others:

• gene editing and gene therapy;
• redesigning existing natural biological systems; and
• the design and engineering of biological-based parts of enzymes, genetic circuits and cells.

While the NSI Act gives the Government new powers to block and potentially unwind transactions following notification (or call in), the Government has indicated that it will do so only as a last resort and only where there is a significant national security concern.

As part of the entry into force process, the CMA has issued updated merger control guidance to take account of the impact of the NSI Act.

Stephen Smith and Isobel Thomas will be taking a deeper look into the provisions of the NSI Act and its implications for the biotech sector in the next edition of the Bristows Biotech Review that will be available soon.