The Diligence Checklist for a Life-Sciences Growth Round
The firm's working due diligence checklist for a life-sciences growth round, eight sections in order, with the clinical, regulatory and reimbursement items tied to their governing rules.
By Peleg Chevion, Managing Partner
8 min read · Life Sciences and Healthcare
In this note07 · 8 min
A due diligence checklist for a life-sciences growth round earns its keep in three sections: clinical, regulatory and reimbursement. Those three test whether the evidence, the authorization and the payment path form one unbroken chain. The list below is LeverVenture's own working checklist, one line per item, with the governing authority in force on September 30, 2025.
01The Order of the Checklist
The sections run in a fixed order: corporate, financial, clinical, regulatory, reimbursement, data and privacy, commercial, people. Corporate and financial items come first because their answers are binary and a failure ends the review: the company either owns its core intellectual property or it does not.
The next three sections are read as one sequence. Clinical evidence is generated under a federal authorization and supports a regulatory status, which must in turn support coverage and a billing code before any revenue in the model is real. A break anywhere in that sequence is a valuation question, not a legal footnote, and the review spends most of its time there.
02The Checklist
This is the firm's own working list, separate from the ILPA due diligence questionnaire that a general partner completes for its limited partners. The right-hand column names the record or authority each item is tested against.
| No. | Section | Item | Tested against |
|---|---|---|---|
| 1.1 | Corporate | Charter and financing documents reconciled to the capitalization table and stock ledger. | Company records |
| 1.2 | Corporate | Liquidation preferences and protective provisions modeled through an exit waterfall. | Charter; investor agreements |
| 1.3 | Corporate | Invention assignments from every founder, employee and contractor on the core technology. | Assignment agreements |
| 1.4 | Corporate | Inbound licenses read for field, royalties, milestones, sublicensing and change of control. | License agreements |
| 2.1 | Financial | Revenue by payer and product line, tied to cash received. | Financial statements; bank records |
| 2.2 | Financial | Cash runway against the clinical, regulatory and commercial milestone plan. | Operating model |
| 2.3 | Financial | Grant, debt and royalty agreements, with covenants and change-of-control triggers. | Financing agreements |
| 3.1 | Clinical | Each drug or biologic study mapped to an IND in effect, or to a documented exemption. | 21 CFR 312.2, 312.40 |
| 3.2 | Clinical | Each device study mapped to an approved IDE, the abbreviated requirements, or an exemption. | 21 CFR 812.2, 812.30 |
| 3.3 | Clinical | Any non-significant-risk position tested against the four limbs of the definition. | 21 CFR 812.3(m) |
| 3.4 | Clinical | IRB approvals and informed consent records for every site. | 21 CFR Parts 50 and 56 |
| 3.5 | Clinical | Clinical hold orders, FDA correspondence and meeting minutes, read in full. | 21 CFR 312.42 |
| 3.6 | Clinical | Monitoring reports and the sponsor's handling of noncompliant investigators. | 21 CFR 812.46 |
| 3.7 | Clinical | Primary endpoint read against the claim the label or the payer will need. | Protocol; analysis plan |
| 4.1 | Regulatory | Classification and premarket pathway confirmed from FDA correspondence. | FDA records |
| 4.2 | Regulatory | Each software function tested against the statutory exclusions from the device definition. | 21 U.S.C. §360j(o)(1) |
| 4.3 | Regulatory | Design controls, corrective and preventive action, and complaint files. | 21 CFR 820.30, 820.100, 820.198 |
| 4.4 | Regulatory | CLIA certificate type matched to the complexity of the tests performed. | 42 CFR 493.3, 493.5 |
| 4.5 | Regulatory | Performance specifications established for every in-house or modified test. | 42 CFR 493.1253(b)(2) |
| 4.6 | Regulatory | Inspection observations, warning letters and recalls, with their closeout. | FDA records |
| 5.1 | Reimbursement | Coverage position for each product under the reasonable-and-necessary standard. | 42 U.S.C. §1395y(a)(1)(A) |
| 5.2 | Reimbursement | Billing code in hand, or the route to one, with the payment amount attached. | Payer and code records |
| 5.3 | Reimbursement | Medicare coverage approval for any Category A or Category B IDE study. | 42 CFR 405.211, 405.212 |
| 5.4 | Reimbursement | Commercial payer contracts and medical policies, with the revenue share of each. | Payer contracts |
| 5.5 | Reimbursement | Denial rates, prior authorization burden and the evidence file used on appeal. | Billing records |
| 6.1 | Data and privacy | HIPAA status: covered entity, business associate, or neither. | 45 CFR 160.103 |
| 6.2 | Data and privacy | A business associate agreement for every vendor that handles protected health information. | 45 CFR 164.504(e) |
| 6.3 | Data and privacy | The latest security risk analysis and the risk management that followed it. | 45 CFR 164.308(a)(1)(ii)(A)-(B) |
| 6.4 | Data and privacy | Breach log and notices, tested against the 60-day outer limit. | 45 CFR 164.404(b) |
| 6.5 | Data and privacy | De-identification method and data rights for any data set used to train a model. | 45 CFR 164.514(b) |
| 6.6 | Data and privacy | Consumer health data outside HIPAA. | 16 CFR Part 318 |
| 7.1 | Commercial | Sales compensation and any payment to a referral source. | 42 U.S.C. §1320a-7b(b); 42 CFR 1001.952 |
| 7.2 | Commercial | Physician ownership and compensation ties to any entity furnishing designated health services. | 42 U.S.C. §1395nn; 42 CFR 411.353 |
| 7.3 | Commercial | No promotion or test marketing of an investigational device. | 21 CFR 812.7 |
| 8.1 | People | Who holds the regulatory, clinical and payer relationships, and the cost of losing them. | Interviews |
| 8.2 | People | Laboratory director qualifications for any high-complexity laboratory. | 42 CFR 493.1443 |
| 8.3 | People | Employees, investigators and vendors screened against the federal exclusion list. | 42 U.S.C. §1320a-7a(a)(6) |
03The Clinical and Regulatory Chain
Under 21 CFR 312.40(b), an IND goes into effect 30 days after FDA receives it unless FDA imposes a clinical hold under §312.42, or earlier on FDA notice, and §312.40(a) also requires compliance with Parts 50 and 56 (informed consent and IRBs). For devices, 21 CFR 812.30(a) lets an investigation begin 30 days after FDA receives the IDE application unless FDA objects, or on approval by order. Section 812.2(b) treats a study of a device that is not a significant risk device as having an approved IDE if the sponsor meets abbreviated requirements, including IRB approval after explaining why the device is not a significant risk.
That position is only as good as its analysis. Section 812.3(m) defines a significant risk device in four limbs: an implant, a life-supporting or life-sustaining device, a device of substantial importance in diagnosing or treating disease, or one that otherwise presents a potential for serious risk to a subject; the first three also require that potential. In the firm's view, a weak call here can leave pivotal data outside the authorization it needed.
Part 820 on September 30, 2025 was the Quality System regulation, and §820.30(a) applies design controls to class II and class III devices and to listed class I devices, including those automated with computer software. FDA published a final rule on February 2, 2024, at 89 FR 7496, that amends Part 820 by incorporating an international quality management standard by reference, effective in a later year. Diligence tests the text in force and the company's readiness for the amended one.
For software as a medical device, 21 U.S.C. §360j(o)(1) first excludes certain functions from the device definition, including administrative support functions and functions for maintaining a healthy lifestyle that are unrelated to disease.
04Laboratory Tests Under CLIA
FDA published a final rule on May 6, 2024, at 89 FR 37286, to make explicit that in vitro diagnostic products are devices when a laboratory manufactures them. On March 31, 2025, the Eastern District of Texas, in consolidated cases brought by the American Clinical Laboratory Association and the Association for Molecular Pathology, vacated that rule, holding that laboratory-developed tests are services, not devices. For a laboratory, the operative framework is CLIA.
Under 42 CFR 493.3(a), a laboratory is out of compliance unless it holds a current CLIA certificate applicable to the tests it performs or is CLIA-exempt, and §493.5 sorts tests into waived, moderate complexity and high complexity. For a test developed in-house or modified from a cleared or approved one, §493.1253(b)(2) requires the laboratory, before reporting patient results, to establish accuracy, precision, analytical sensitivity, analytical specificity, reportable range and reference intervals. Those characteristics are analytical; the regulation does not ask whether a result changes patient management. The firm therefore reviews clinical validity and utility evidence in the reimbursement section, where it decides revenue.
05Reimbursement and the Referral Statutes
Medicare pays only for items and services reasonable and necessary for the diagnosis or treatment of illness or injury, under 42 U.S.C. §1395y(a)(1)(A). For device trials, 42 CFR 405.211 covers routine care in a Category A study, and the device plus routine care in a Category B study, only if CMS or its designated entity finds the §405.212 criteria met; for Category B, that finding must precede the first related claim.
The Anti-Kickback Statute, 42 U.S.C. §1320a-7b(b), makes it a felony to knowingly and willfully solicit or receive remuneration in return for referrals, or to offer or pay it to induce them, for items or services payable by a federal health care program, with a fine of up to $100,000, imprisonment of up to 10 years, or both. Under subsection (g), a resulting claim is a false claim under the False Claims Act, and under subsection (h), actual knowledge of the statute or specific intent to violate it is not required. The safe harbors at 42 CFR 1001.952 define payment practices that are not treated as offenses.
The physician self-referral law, known as the Stark law, 42 U.S.C. §1395nn(a)(1), bars a physician with a financial relationship with an entity, directly or through an immediate family member, from referring Medicare patients to it for designated health services, and bars the entity from billing for them, subject to the exceptions in subsections (b) through (e). Clinical laboratory services are designated health services under §1395nn(h)(6)(A). The prohibition contains no intent element, and subsection (g)(1) denies payment for any service furnished in violation. The implementing rule is 42 CFR 411.353.
06Data, Privacy and People
Under 45 CFR 160.103, a business associate creates, receives, maintains or transmits protected health information on behalf of a covered entity. Under 45 CFR Part 164, §164.308(a)(1)(ii)(A) requires an accurate and thorough risk analysis, §164.404(b) requires breach notice to individuals no later than 60 calendar days after discovery, and §164.514(b) recognizes de-identification only by expert determination or by removing the listed identifiers without actual knowledge that the remainder could identify the individual. Outside HIPAA, the FTC's Health Breach Notification Rule reaches vendors of personal health records.
Under 42 U.S.C. §1320a-7a(a)(6), contracting with a person one knows or should know is excluded from federal health care programs, for items or services those programs pay for, exposes the company to civil money penalties. For a high-complexity laboratory, 42 CFR 493.1443 sets the director's qualifications, and a gap in that role is a gap in the laboratory's compliance.
07Frequently asked questions
What belongs on a due diligence checklist for a life-sciences company?
Eight sections in order: corporate, financial, clinical, regulatory, reimbursement, data and privacy, commercial, and people. The clinical, regulatory and reimbursement sections matter most because they test whether the evidence was generated under the right federal authorization and whether it can support coverage and payment.
Does FDA regulate laboratory-developed tests as devices?
FDA's May 6, 2024 final rule sought to treat them as devices, but the Eastern District of Texas vacated that rule on March 31, 2025, holding that laboratory-developed tests are services. Laboratory testing remains governed by CLIA at 42 CFR Part 493, including the performance specification requirements of §493.1253(b)(2).
Why do the Anti-Kickback Statute and the Stark law appear in a growth-round checklist?
Both reach revenue directly. A claim resulting from an Anti-Kickback Statute violation is a false claim under 42 U.S.C. §1320a-7b(g), and the physician self-referral law at 42 U.S.C. §1395nn(g)(1) denies payment for designated health services furnished on a prohibited referral, including clinical laboratory services.
Nothing in this piece is investment, legal, tax or accounting advice, and nothing in it is an offer to sell or a solicitation of an offer to buy any security.
Three decades of operational leadership across agriculture, pharmaceuticals, biotechnology, climate, food and defense. He has spent that career doing the work this seat requires: strategic partnerships, licensing and business development, executed transaction by transaction. He sits with a company as an operating partner and a growth strategist rather than as a name on its board. A corporate finance and intellectual property attorney, an INSEAD MBA, and a former Air Force officer in aerospace. He also brings strong private equity experience.