Turbulent Times for Biotech Sector: $300bn Patent Cliff, Cyber, Legal and Investor Risks
Biotech companies face substantial exposure to regulatory, financial, operational, ethical, cybersecurity, and competitive risks. Firms must contend with complex regulatory frameworks that frequently change and often lag behind innovations, increasing uncertainty and risk — especially when seeking global market access.
Financial pressures are intense, driven by high R&D costs (often over $2 billion per drug), long development timelines, and increasing competition from generics and biosimilars. In fact, 37% of industry executives have cited generic and biosimilar competition as a top concern.
The looming patent cliff — where patents on high-revenue biotech products are set to expire, putting over $300 billion in sales at risk through 2030 — is driving an increase in M&A activity.
Cybersecurity threats are escalating, as firms store valuable IP and sensitive patient data, making them attractive targets for sophisticated attacks. In recent years, the healthcare sector has faced more than 1,600 attacks per week, the average cost of a breach exceeding $10.93 million. Given the extent of the damage, this figure is no surprise. Consider the ransomware attack against Enzo Biochem in 2023 — the clinical test data of around 2.5 million people were exposed.
Ethical dilemmas, particularly in the areas of genetic editing, AI, and data privacy, pose reputational and operational risks. Extended development periods and clinical trial complexities add further exposure to delays, failures, or regulatory rejection.
Implications for brokers and their clients:
- Ensure cyber cover addresses breaches, ransomware, social engineering, and business interruption.
- Review D&O cover for governance failures, ethical lapses, and shareholder litigation, especially during M&As.
- Stress-test R&W and IP protection coverage to prepare for patent cliff exposures and disclosure-related claims.
Source: DrugPatentWatch. (August 28, 2025). Top 6 issues facing the biotechnology industry.
AI Agents Arrive: Could Full Autonomy Trigger High-Stakes Failures?
True AI agents and the agentic workflows we use today aren’t the same. An agentic workflow is semi-automated because it requires human oversight at important decision points. An AI agent is fully autonomous, able to make decisions and carry out complex processes without human involvement.
Developments like GPT-5 suggest that genuine AI agents may be on the horizon. Tom Martin, and AI law professor and CEO and founder of LawDroid proposes that, when we reach that horizon, several principles will need to guide their development:
- Transparency: Clear logging — of its reasoning, not just actions.
- Appropriate levels of autonomy: Autonomy needs to match the risk profile of the work involved.
- Reliability: Consistent, accurate performance based on robust testing frameworks with clear reliability metrics, that monitor changes in performance over time, and that test within adversarial environments.
- Visibility: The scope of information the AI can access. Humans can cast a wider net when researching, while AIs function within defined parameters.
Martin notes that all four bases must be covered for the tech to be a true AI agent. Transparency without visibility means we can see what an agent did but not what it missed. Autonomous systems that lack reliability and transparency lead to unpredictable outcomes, presenting many risks in high-stakes fields such as satellite operations.
Implications for brokers and their clients:
- Require AI companies to demonstrate appropriate levels of autonomy in their operational context.
- Confirm Tech E&O and liability cover address risks from autonomous system failures.
- Anticipate stricter regulator/insurer demands for reliability testing and transparency mechanisms.
Source: Thomson Reuters. (August 25, 2025). The AI Law Professor: When AI agents act without understanding.
Africa’s Cannabis Revolution as Ghana Adopts Morocco’s Model
Ghana’s Narcotics Control Commission is partnering with Morocco to learn from its pioneering cannabis regulatory framework as Ghana develops its own medical and industrial cannabis industry.
Moroccan officials shared expertise on licensing, traceability, and cooperative models, with a Ghanaian delegation set to visit Morocco in September for field studies.
Ghana, which legalized low-THC cannabis for medical and industrial use in 2023, aims to build strict controls, quality standards, and safeguards against diversion. Morocco, a regional leader since adopting Law 13-21 in 2021, has already issued licenses and overseen legal cultivation. The cooperation offers Ghana practical regulatory tools and may serve as a model for other African nations exploring medical cannabis legalization.
Implications for brokers and their clients:
- Monitor evolving compliance obligations and potential liability test cases.
- Maintain strong tracking and traceability systems to prevent diversion to unauthorised channels.
- Review product liability and recall coverage to ensure alignment with new packaging/traceability rules.
Source: North Africa Post. (August 24, 2025). Ghana seeks Morocco’s expertise in medical cannabis regulatory framework.
Justice for Blockchain Developers?
In Risk Wrap 016, we mentioned the conviction of Roman Storm of Tornado Cash and how blockchain developers’ liability is implicated by the malicious use of neutral code.
Recently, the US Department of Justice signalled a possible shift towards intent-based enforcement, which would protect developers from being prosecuted for developing tools that could be misused. Instead, evidence of directly facilitating criminal activity would be required.
The Tornado Cash case highlighted gaps in existing regulation, with OFAC’s sanctions overturned for overreaching against immutable smart contracts. This has pushed regulators toward criminal enforcement, making compliance-by-design critical for developers.
Investors are increasingly directing capital toward projects that integrate compliance tools such as zero-knowledge proofs and AI-driven AML systems. Cross-chain collaboration is another strategy that aims to reduce legal exposure. Ecosystems like Ethereum and Solana are bringing their resources together to share compliance costs and protect developers.
Implications for brokers and their clients:
- Track regulatory changes closely and anticipate stricter enforcement approaches.
- Demonstrate intent-based compliance controls and governance frameworks to mitigate underwriter concerns.
- Confirm Tech E&O and legal defence cost coverage extend to novel blockchain exposures.
Source: AInvest. (August 29, 2025). The Legal Risks Facing Blockchain Developers and Their Impact on Crypto Innovation.
$100m Fraud Cases and Costly Settlements Mount for Crypto Providers
Crypto providers face mounting liability from regulators and investors. The SEC continues to target companies for fraud and market manipulation — for example, a judgment was secured against CLS Global for manipulating the NexFundAI token, while Unicoin faced a $100 million securities fraud case.
Compliance and transparency are becoming central to operating in the sector — and legal and advisory firms are increasingly being targeted for facilitating fraud. For example, law firm Fenwick & West faces a class-action lawsuit for designing opaque corporate structures that enabled the siphoning of customer funds.
Investors are also quick to seek recovery when platforms fail, illustrated by BlockFi’s $13 million settlement connected to FTX and Terra. This case highlights the difficulties of recovering losses caused by crypto bankruptcies.
Implications for brokers and their clients:
- Review bankruptcy coverage, as traditional policies may exclude platform collapse or mismanagement.
- Ensure D&O provides protection against fraud, market manipulation, and regulatory action.
- Confirm E&O and transaction liability cover extend to advisors and intermediaries involved in structuring deals.
Source: AInvest. (August 28, 2025). The Hidden Risks of Legal and Advisory Firms in Crypto Collapses: A Investor’s Guide to Liability and Due Diligence.
£100bn Laundering Risk: UK Fintechs Face AML Crackdown
Recent enforcement trends in UK fintech highlight tougher regulatory scrutiny, with authorities increasing their focus on AML controls.
The UK economy loses more than £100 billion per year to money laundering and the risks are growing along with technology and the emergency of crypto. Specifically, the layering phase of laundering is becoming more sophisticated as funds are moved cross-border or through crypto services.
High-profile fines have been imposed on firms with weak internal oversight and compliance teams, showing that insufficient compliance structures will draw swift and costly penalties. The FCA encourages the use of AI tools for detecting laundering activities — but these come with their own risks.
Implications for brokers and their clients:
- Ensure policies cover regulatory investigations, penalties, and remediation tied to AML breaches.
- Review D&O in light of SMCR, where directors may face personal liability.
- Strengthen vendor risk and cyber liability cover given AI-driven AML detection and cross-border threats.
Source: Bird & Bird. (June 10, 2025). Money Laundering in the age of Fintech: Emerging risks and regulatory responses.
