Regulatory developments relating to new approach methodologies are increasing investor interest. We examine the key issues prospective investors should consider.

New Approach Methodologies (NAMs) offer innovative ways to generate human-relevant evidence for drug development while moving away from animal testing. NAMs, including advanced in vitro models, organoids, organ-on-chip systems and computational methods, are being developed rapidly. As regulators in Europe, the US, Japan and elsewhere are focussing on providing regulatory clarity on their use, interest among investors and strategic acquirers is increasing.

In this two-part series, we examine the M&A implications of this transition and the particular considerations that apply when investing in NAM businesses. We consider why NAM businesses are emerging as acquisition targets, how their assets can be classified from a regulatory perspective, and why conventional transaction documents need tailored risk allocation and contractual protection. In Part 2, we will examine specific transactional issues and how investors can address them.

2026 is a year of regulatory momentum

Animal studies have long been central to preclinical drug development, but NAMs are changing the landscape, and regulators are assessing how existing frameworks should adapt.

Regulators are not currently proposing an outright ban on animal testing. Much of their work will instead concern the development and validation of NAMs and their integration into regulatory frameworks. This process will influence where M&A activity is likely to increase, since a methodology may be validated without being accepted by a regulator for the specific endpoint the target intends to rely on. Due diligence should therefore distinguish whether the methodology is under development, has been validated, included in a recognised testing framework, or has been accepted for a defined regulatory context of use.

Over time, greater convergence in validation principles, technical standards and contexts of use will improve the portability of NAM-generated evidence across jurisdictions. For NAM platforms that meet those standards, this should reduce duplication, increase regulatory predictability and strengthen commercial scalability.

Developments in the European Union and Japan illustrate this trend, alongside important initiatives in the US, UK and other jurisdictions.

European Union

The European Union has pursued the reduction and replacement of animal testing for many years. Directive 2010/63/EU refers to the three core principles of replacement, reduction and refinement, and provides for the replacement of animal procedures where a scientifically satisfactory alternative is available.

On 1 June 2026, the European Commission announced a roadmap towards phasing out animal testing for chemical safety assessments. The roadmap sets out 22 actions across three pillars and covers 15 regulatory domains including pharmaceuticals, food and feed additives, pesticides and biocides, and industrial and consumer chemicals. The first pillar contains more than 30 recommendations addressing the development, validation and regulatory acceptance of alternative methods.

The Commission has also identified the need to create mechanisms for companies to engage with regulators on the potential use of alternative methods. One recent example is the European Medicines Agency's voluntary data submission pilot, launched on 1 September 2026, which enables companies to submit NAM data outside marketing authorisation applications. 

Japan

Japan is developing its regulatory approach to NAMs on a less formalised basis than the European Union. The Pharmaceuticals and Medical Devices Agency has published a series of non-binding "Early Consideration" papers covering pharmaceuticals, quasi-drugs, medical devices and regenerative medicine products. Its most recent paper in this area, published in May 2026, addresses the general toxicity evaluation of monoclonal antibodies.

The agency's work spans in vitro, in chemico and in silico methods, weight-of-evidence approaches, and the possible reduction of specific animal studies, including non-human primate studies for biologics. However, the agency has indicated it will assess weight-of-evidence approaches and NAM data on a case-by-case basis, rather than through binding rules of general application. Japan also places significant emphasis on international cooperation and regulatory harmonisation through organisations and frameworks including the International Council for Harmonisation, the International Cooperation on Cosmetics Regulation and the International Organization for Standardization.

Developments in other jurisdictions and internationally

The developments in the European Union and Japan form part of a broader regulatory trend. In the United States, the Food and Drug Administration ("FDA") published a roadmap for reducing animal testing in preclinical safety studies in April 2025. The roadmap prioritised monoclonal antibodies as a first step, followed by draft guidance in March 2026 on the general use of NAMs in drug development. In April 2026, the FDA released a "Year One" progress report on the roadmap, describing initiatives launched to facilitate the use of NAMs in appropriate contexts.

In March 2026, the United Kingdom's Medicines and Healthcare products Regulatory Agency introduced five regulatory principles for human medicines marketing authorisation applications governing when animal testing is required, optional or may be omitted. Other jurisdictions, including Brazil, China and India, have also been taking steps in 2026 to facilitate the use of alternative methods in specific regulatory sectors.

At the international level, the OECD is developing Integrated Approaches to Testing and Assessment, which provide frameworks for combining different sources of evidence, including in vitro and in silico data, for defined regulatory purposes.

What this means for transactions involving NAMs

Regulatory expectations are becoming clearer, but treatment remains jurisdiction and use dependent. Investors should assess a NAM platform's scientific maturity, validation status and regulatory acceptance.

In Part 2, we will consider how these regulatory developments affect due diligence, risk allocation and contractual protections in transactions involving NAM businesses.