Though M&A deal value and volume both declined in biopharma in 2024 compared to the year prior, PwC analysts still believe 2025 will be an active year for the sector.
A look at 2024
The volume of M&A activity in the pharma and the life sciences industry in 2024 was healthy compared to historical levels, according to a yearly PwC report published Dec. 12. The analysts used data as of Nov. 15.
That being said, deals have trended toward the smaller side, driving down overall deal value.
M&A across pharma and life sciences declined 8% over the last 12 months when compared to the year before, while deal value slipped by 2%, the report finds.
While the sector underperformed the S&P 500 this year, individual stock performance was driven by therapeutic area, with companies in the GLP-1 space—for example—overperforming.
The highest-value deal in pharma for the year was Novo Holdings' $16.7 billion acquisition of CDMO giant Catalent, which is set to close by the end of 2024. The massive deal has faced major scrutiny from lawmakers and the Federal Trade Commission (FTC), though the proposed buyout received a vote of confidence earlier this month when the European Commission granted “unconditional approval” for the pending transaction.
Meanwhile, 2024’s top biotech deal was Vertex Pharmaceuticals’ $4.9 billion purchase of Alpine Immune Sciences, a move that gives Vertex control of a dual B cell cytokine agonist that Alpine says has best-in-class potential as a treatment for IgA nephropathy.
What to expect for 2025
PwC expects to see sustained activity for transactions between $5 billion and $15 billion in 2025, while acknowledging the uncertainty tied to several geopolitical factors.
New leadership across the Department of Justice and FTC may resolve some concerns that prevented bigger deals from occurring over the last few years, the analysts write.
Meanwhile, questions about FDA regulations, new tariffs and other regulatory policy actions hang in the balance.
The broader economic uncertainty that has plagued the market over the last several years has also prompted private equity investors to hold onto portfolio companies longer than they normally do. The backlog should start to resolve next year as investors seek exits.
“In a world where volatility has become the norm,” the companies best positioned for long-term success are those able to identify core strengths and continuously reevaluate portfolios, according to PwC.
Businesses with an infrastructure that allows for the speedy integration of acquired assets will be the most successful in creating value via M&A, the report continues. Many companies only start to think of these activities once the need has been realized, but those that have proactively built holistic capabilities will have a significant advantage.
For biotech specifically, the analysts highlight the presence of many early- to midstage biotechs that are attractive buyout targets for larger players. Signals of a thawing IPO market also bode well for the sector, according to PwC.
Biotechs in radiopharmaceuticals and immunology are expected to see healthy activity, the analysts write.
In the pharma realm, the possible changes in antitrust regulator perspective may give companies more confidence to close larger deals that will be needed to fill gaps tied exclusivity loss.
“The ability to quickly access and deploy capital will be critical as we expect competition to be fierce for the highest potential therapeutic classes and areas,” the analysts conclude. “Companies with the resources and playbooks needed to efficiently evaluate targets will be at a significant advantage.”