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Joaquim Cardoso MSc.
Servant Leader, Chief Research & Strategy Officer (CRSO),
Editor in Chief and Senior Advisor
January 19, 2024
This executive summary is based on the article “Deals are back: Surge in life sciences M&A fueled by sector’s capital reserves and quest for new revenue growth”, published by EY and written by Michael Curtis, on January 5, 2024.
What is the message?
The life sciences industry experienced a remarkable resurgence in mergers and acquisitions (M&A) in 2023, with a total investment of US$191 billion, marking a 34% increase from 2022.
This surge in M&A activity is driven by topline pressures, the impending patent cliff, and the urgency to secure new revenue growth and value.
Notably, big pharma’s increased involvement, with major players leading significant deals, propelled the average deal size up by 77%.
What are the key points?
Big Pharma Dominates M&A:
Big pharma companies accounted for 69% of the total M&A investment in 2023, a substantial increase from 38% in 2022.
Despite a decrease in deal volume, the average biopharma acquisition size surged by 77%, reaching US$2.18 billion by December 2023.
Oncology as a Major Target:
Oncology remains the primary focus for dealmaking, with investments totaling US$65.2 billion in 2023.
The competitive nature of the oncology market has driven companies to pay higher multiples for these assets compared to other therapeutic areas.
Future Trends and Predictions:
The EY report anticipates the upward trend in M&A spending to continue into 2024, citing near-record levels of M&A firepower, the industry’s looming revenue challenges, and favorable economic conditions for buyers.
What are the key statistics?
Life sciences M&A spend rose by 34% to US$191 billion in 2023.
Oncology M&A investment reached US$65.2 billion in 2023.
Big pharma’s average deal size increased by 77% in 2023.
What are the key examples?
Pfizer’s acquisition of Seagen for US$43 billion and Merck’s US$10 billion acquisition of immunology specialist Prometheus exemplify big pharma’s substantial investments.
Conclusion
The life sciences industry’s return to robust M&A activity in 2023 underscores its resilience and strategic response to challenges.
With the industry facing revenue pressures and the patent cliff, big pharma’s dominance in M&A signals a proactive approach to secure growth.
As the trend is expected to continue into 2024, companies need to focus on identifying the right deals and executing strategies that deliver lasting value.
The report highlights five key strategies, including building focused business models and embracing disruptive opportunities, for companies to navigate the evolving landscape successfully.
To read the original publication, click here.
