Even with the Federal Trade Commission keeping a watchful eye on the biopharma industry and the economic landscape giving some players pause, mergers and acquisitions are back on the rise. And it is with cautious optimism that industry watchers see the trend continuing in 2024.
Wielding plenty of firepower, drugmakers are more likely to make higher-value deals in the new year as they address growth challenges that loom later in the decade because of patent cliffs and the effects of the Inflation Reduction Act.
“Executives will continue to deploy cash balances and seek out areas of innovation and clinical differentiation,” PricewaterhouseCoopers wrote in its Pharmaceutical and Life Sciences: U.S. Deals 2024 Outlook. “As regulators’ perspectives on key deal factors become better understood, there may be a return of larger deals, along with continued interest in the $5 billion to $15 billion deals to fill targeted strategic gaps.”
Look no further than Pfizer’s recently completed $43 billion acquisition of cancer specialist Seagen—the largest transaction in biopharma since 2019—for a deal that checks all the boxes: pharma giant, in need of assets, flush with cash, investing in a modality with enormous growth potential.
Not only did Pfizer gain one of the world’s most prized biotechs, it snatched up a pioneer and market leader in antibody-drug conjugate technology. Pfizer values its new toy so much that it has reorganized around it so as not to disrupt its trajectory.
And just as this piece went live, we got news that Bristol Myers Squibb has snapped up neurological disease-focused biotech Karuna for $14 billion, getting its experimental schizophrenia drug KarTX in the deal, as we finish off the year with an M&A bang.
In its study, which compared M&A activity from mid-November of 2022 to mid-November of 2023 to the previous 12-month period, PwC found an 8% drop in the number of deals, while also noting a 37% increase in their value. Go back another year further and the value increase is even more pronounced, noted Cody Powers, a pharma and healthcare consultant with ZS Associates, citing the effects of the pandemic.
“A lot of people stayed on the sidelines for so long,” Powers said in an interview. “There was roughly a year and a half period when you couldn’t meet management teams on the other side, you couldn’t walk the manufacturing floor. All these things added up, making it hard to do any major transaction.”
Now that companies are freed to conduct business as usual, those that stayed on the sidelines have more urgency to make deals. And many of those transactions figure to be of higher value. With patent expirations on the horizon, drugmakers are more interested in pursuing de-risked assets than those that are boom and bust.
“Even if the total deal count is slightly down, the fact that people are willing to spend more money on the M&A side of the equation is broadly encouraging, even if it’s basically the rich get richer and not everybody else benefits,” Powers said.
Another factor favoring a bumper crop of M&A in 2024 is the dry power on hand. Companies in the industry have nearly $1.34 trillion at their disposal to invest, which is close to an all-time high, according to Arda Ural, EY Americas Industry Markets Leader, Health Sciences and Wellness.
Pair that up with the state of biotechs—half of which do not have the cash needed to sustain operations for more than 18 months—and you have a “playing field tilted toward the buyers,” Ural said in an interview.
“It’s still a buyers’ market, but with an asterisk,” Ural added, pointing out that the number of companies “swirling” around later-stage assets are likely to bump up premiums and could transform the market into one that is more advantageous for sellers.
“There are mixed market conditions,” Ural said. “It’s not as simple as it might have been in prior years.”
Another trend seen driving more deals in 2023 and expected to continue in 2024 is therapy areas where incremental innovation is taking place. Targeted oncology and autoimmune treatments are drawing much attention, along with advancements in cardiology and obesity drugs.
For example, with the enormous success Novo Nordisk and Eli Lilly have seen with their blood sugar managing diabetes/weight loss drugs, the rush is on to uncover and develop the next generation of treatments.
In December, Roche ponied up $2.7 billion-plus for Carmot Therapeutics, which has three promising injectable and oral candidates with the same mechanisms of action as Novo’s semaglutide and Lilly’s tirzepatide but designed to have better tolerability and allow users to maintain their muscle mass.
In November, AstraZeneca made a similar $2 billion bet on a candidate from China’s Eccogene. Novo and Lilly also made investments in 2023 to try to stay ahead of potential competitors.
“Non-peptide-based treatments of development, virtually all of them are going for a muscle preserving type of data,” Powers said. “That would be a step change, for sure.”
Jennifer O’Brien, partner, mergers & acquisitions at West Monroe, believes companies will be focused on enhancing their core areas while divesting assets that don’t fit.
“I still think there’s going to be some space around acquiring these smaller biotech businesses that have these very niche areas and allow the big pharmas to focus on these specific types of innovation, really expand their pipeline in a cost-effective and efficient way,” O’Brien said.
A study from EY of 7,000 transactions over the last 11 years shows that companies that were more active in divesting and acquiring assets had a 67% greater return on capital employed (ROCE). EY competed its initial study in this area in 2018, then updated it this year, showing an even more pronounced advantage.
“The world has materially changed since 2018,” Ural wrote in his analysis from October of this year. “The new analysis confirms that portfolio optimization is even more compelling to the C-suite for higher returns on capital.”
Firms that engaged in both buy- and sell-side transactions saw an 8.8% ROE, compared to 7.9% for those who only performed acquisitions. For companies that only divested, the ROE came to 7.2%.
The advantages of divesting are already apparent with the recent moves made by companies like Johnson & Johnson and GSK.
“When I think about 2024, the J&Js and GSKs, my question is are they done?” O’Brien said. “Do they feel like they’ve shed enough? Have they really gotten to their core focus business and have they freed up enough capital to be able to be able to invest in that?”
Under the direction of the Biden administration, the FTC has ratcheted up its scrutiny of biopharma M&A. Since President Biden took office in 2021 and through to the first half of 2023, the FTC has sought additional information—termed a “second request”—on 24% of the deals made in the industry compared to 15% from 2015-2020, according to a study by Mergermarket, which examined SEC filings of biopharma transactions of $200 million or more.
Aside from a lawsuit settlement between Amgen and the FTC after the company acquired Horizon, not much has come from the FTC’s increased probing, though an argument could be made that the added attention has forced companies to address potential antitrust concerns before making deals.
“I think it created this pause where pharma companies more carefully considered the value of the deal versus the risk,” O’Brien said. “We might see more partnerships to kind of avoid that scrutiny of the FTC.”
As we move into 2024, FTC scrutiny doesn’t appear to be as great a hindrance for companies looking to execute M&A. The watchdog’s recent challenge to “improper” patents listed by drugmakers in the FDA Orange Book is an indicator that it is looking for other ways to impact drug pricing.
“If you look at the FTC’s broader mandate, they’re trying to hit every possible lever,” Powers said. “The industry looks at it like, M&A is the sacred cow, don’t go after that.”

https://www.fiercepharma.com/pharma/2024-forecast-ma-saw-uptick-2023-expect-trend-continue