Pharma mergers and acquisitions are on the upswing

It’s comeback time for pharmaceutical mergers and acquisitions (M&A).

Following a 2022 slowdown in deal-making activity due to rising valuations and high interest rates, pharma M&A activity began to speed up at the end of 2023—and experts say they expect the momentum to continue in 2024 and beyond.

Analysts at consulting firm PwC expect global deals to total between $225–$275 billion in 2024. In comparison, deals totaled $135.5 billion in 2023 and $98.5 billion in 2022, according to data from the London Stock Exchange Group, as cited by Axios.

“There’s a lot of pent-up demand,” Jennifer O’Brien, an M&A partner at management consulting firm West Monroe, told Healthcare Brew. “There’s a lot of capital out there.”

What kind of deals are we seeing?

At least nine pharma M&A have been announced so far in 2024, according to BioPharma Dive’s M&A tracker tool, and most are on the smaller side (which, in the pharma world, just means anything under $1 billion).

Roel Van den Akker, a deals partner at PwC, told Healthcare Brew he expects most deals that close this year to be either in the $1–$5 billion range or the $5–$15 billion range.

Both O’Brien and Van den Akker projected that there won’t be any mega-deals made in the near future—like Pfizer’s $43 billion Seagen takeover in December 2023—due to a rise in antitrust concerns from the Federal Trade Commission.

“Regulators appear to have taken a more proactive stance to review larger combinations, with more novel theories of competitive and antitrust law than we’ve seen before. So I think there’s just generally a bit of a reluctance,” Van den Akker said.

Pharma companies may instead form partnerships—like the one between Pfizer and BioNTech to create the Covid-19 vaccine or Merck and Moderna’s partnership to create a cancer vaccine—to skirt antitrust concerns, O’Brien said.

“We’re starting to see some more partnerships around clinical and commercial collaboration, partnerships around leveraging innovative tech—things like [artificial intelligence], automation, those types of platforms,” O’Brien said. “I think we might see some interesting partnerships there to help drive these pharmas forward from an innovation and technology perspective.”

The companies ripe for deals

Big pharma companies are primarily looking to scoop up or merge with smaller biotechs focused on addressing unmet medical needs, Van den Akker said, such as oncology and rare disease treatments.

Rare disease drugs in particular are a hot target for acquisitions, as the drugs can be “very lucrative,” O’Brien said. Drugmakers can charge millions for a single dose of a rare disease treatment, like Novartis’s spinal muscular atrophy drug Zolgensma that comes with a $2.1 million price tag for the one-time treatment.

“Finding those smaller biotech businesses that built that kind of expertise or that drug treatment or therapy in that specific area is a quicker way to enable a big pharma to enter that market and address unmet medical needs,” O’Brien said. 

Other areas where there’s a lot of M&A interest include GLP-1s, O’Brien added. Novo Nordisk’s parent company, Novo Holdings, announced on February 5 that it plans to acquire the biotech firm Catalent for $16.5 billion as the pharma giant looks to ramp up its supply of the Wegovy GLP-1 and compete with Eli Lilly’s Mounjaro.

Looking to the future

Pharma M&A activity is only going to continue gaining momentum, experts project. One reason is because many big pharma companies have drugs with patents expiring in the next few years, so they’re looking to scoop up smaller biotech businesses to replace the anticipated losses in revenue, according to O’Brien.

“There’s anywhere between $170 to $190 billion of currently patent-protected revenue that will go through a loss of exclusivity before the end of the decade,” Van den Akker said. “That’s obviously an enormous shift to the sector. Companies are leaning in to proactively address those frontline headwinds that they’re going to have in the next couple of years.” 

Deal activity may slow this fall during the presidential election, O’Brien said, as there tends to be more hesitancy to deploy capital in uncertain environments. But she projected the slowdown won’t last long.

“We’re pretty optimistic,” Van den Akker added. “There could always be something that throws us for a bit of a tailspin […] but the macro trends are there, and we continue to believe in strong activity levels for the remainder of 2024.”