Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Deals in the pharmaceutical industry have sunk to their lowest level in almost a decade, as the world’s biggest drugmakers shy away from big bets on commercially ready medicines in favour of earlier-stage drug developers.
By late November, pharma groups such as Eli Lilly, Novartis and Vertex Pharmaceuticals had completed a total of 558 deals globally, worth a combined value of $67.2bn, the lowest level for that stage of the year since 2016, according to London Stock Exchange data.
The biggest biotech deal of the year — Vertex’s $4.9bn buyout of autoimmune disease biotech Alpine Immune Sciences — pales in comparison to last year’s biggest acquisition: Pfizer’s $43bn takeover of cancer drug developer Seagen. The dollar value of deals by late November stood at half that of last year, according to LSEG data.
The dearth of blockbuster deals this year — driven by pharma groups concentrating on digesting larger deals from last year as well as the frothy valuations of the larger listed biotechs turning off potential acquirers — is the main factor behind the slow mergers and acquisitions activity this year, advisers told the Financial Times.
This is despite an expected $59bn loss in sales across the major pharma groups when 190 drugs lose exclusivity by the end of the decade, according to KPMG.
Andrew Weisenfeld, an investment banker at MTS Health Partners, which advised Seagen, said: “To some degree, [pharma groups] addressed their loss of patent life on existing drugs so they got pickier — and a lot of bigger companies got really expensive, and people just aren’t paying those prices.”
“Big pharma ate through a lot of the available targets in 2023,” said Jamie Leigh, co-chair of Cooley’s mergers and acquisitions group. “[Companies were] more judicious about the remaining pool in 2024.”
Some bigger deals have been completed this year but none were instances in which a pharma group was buying a biotech to get hold of promising drugs. Novo Nordisk this year agreed to pay $11bn to acquire three manufacturing sites from Catalent in a three-way deal involving its parent company, while Sanofi handed control of its consumer drug division to private equity group Clayton Dubilier & Rice in a €16bn deal.
A tough antitrust environment under Lina Khan’s Federal Trade Commission as well as the political uncertainty of an election year has also slowed deal activity. But the election of Donald Trump could usher in the return of bigger healthcare tie-ups.
“Trump coming to power is generating cautious optimism for increased deal flow and investments in the biopharma sector” said Zahid Moneer, a senior managing director of healthcare at BNP Paribas. ‘There’s a cautious buzz around that in January you will see a significant rebound in activity.”
For the time being, pharma companies have prioritised bolt-on deals of below $5bn, favouring private companies over listed groups. Danish pharma group Lundbeck bought neuroscience start-up Longboard for up to $2.6bn in October, while Merck bought privately owned ophthalmology biotech EyeBio for up to $3bn.
Siddhart Nahata, global head of healthcare investment banking at Morgan Stanley, said: “Bolt-ons are business as usual — large-cap [pharma groups] have had to keep doing bolt-ons to supplement their internal R&D efforts. There’s no way around that.”
Despite some of the uncertainty still affecting the biotech sector, in particular what Trump’s pick for health and human services secretary Robert F Kennedy Jr might mean for drugmakers and vaccine makers, most dealmakers expect a more positive outlook next year.
“Healthcare has had a lot of dramatic headline news in the past 10 days,” Nahata said. “We need to digest what that actually means in terms of policy, and that will have implication in terms of what people pursue in terms of M&A . . . but I do certainly expect 2025 to be a more active year.”
