Big pharma is set to keep signing bigger deals in 2024January 2024 - The global life sciences industry has once again embraced big deal making, with mergers and acquisitions (M&A) investment totaling US$191b to 10 December 2023, compared with US$142b in 2022. Though deal volume fell, with the total M&A spend representing only 118 completed deals, compared with 126 in 2022, the average deal size increased significantly in 2023. According to the 12th edition of the annual EY M&A Firepower report, which tracks global M&A investment in life sciences, the industry’s return to M&A is being driven by topline pressures, key products losing their patent protection in the next five years (“patent cliff”) and the need to do the right deals now to deliver new revenue growth and value into the future. The industry also holds near-record levels of Firepower – defined as a company’s capacity to do M&A based on the strength of its balance sheet.
M&A targets: oncology and rare diseases
The huge growth potential of the oncology market is reflected in companies’ M&A spending over the past five years, with oncology dominating industry acquisitions in both value and volume terms – in 2023, M&A investment in oncology assets reached US$65.2b. The intense competition for these assets has also resulted in companies paying higher multiples than for targets in other therapeutic areas.
As well as oncology, the changing regulatory landscape is leading to other assets becoming attractive acquisition targets. With legislation such as the IRA unlikely to affect the price point for orphan drugs, companies specializing in rare diseases have become significant M&A targets, commanding high multiples and driving some of the biggest deals of the past 12 months.