Biopharma M&A is on an uptick compared to the post-pandemic doldrums of the last two years. Analysts anticipate that the trend will continue in 2023 and into 2024 as companies attempt to beef up their portfolios.During second quarter earnings calls, many heavy-hitters—including Johnson & Johnson, Bristol Myers Squibb and Merck—expressed urgency in their quest for deals. With so many buyers in competition, sellers are finding offers that are more attractive.
For example, Merck’s $10.8 billion proposal to acquire Prometheus in April came at a 75% premium. In July, Biogen’s $7.3 billion deal for Reata represented a 59% markup.
“There’s been such a consistent pick up in momentum in anything above a billion [dollars]," Cody Powers, an M&A expert with ZS Principal, said in an interview. "I think we’re back on the gravy train of where we were a couple of years ago in terms of premiums."
In 2019, the industry delivered record-breaking deal values, with BMS paying $74 billion for Celgene and AbbVie ponying up $63 billion for Allergan. That year, the industry’s top 10 acquisitions exceeded $200 billion. But with the pandemic, the figure plummeted to $53 billion by 2021.
“COVID did have this chilling effect,” Powers said. “You couldn’t walk the shop floor, you couldn’t walk manufacturing facilities. [It was] just very hard to pull off mega-deals in that context.”
The chill remained in 2022 as there was even less high-dollar M&A activity, until December when Amgen proposed its $27.8 billion acquisition of Horizon to bring the annual total up to $65 billion. In the first eight months of this year, however, the top 10 deals have already reached a combined $81 billion in value.
Another trend sparking M&A activity, according to West Monroe analyst Jennifer O’Brien, is the recent round of divestitures by big pharma companies.
“They’re freeing up capital and investing in their core focus areas, putting money into where they see more potential growth,” O’Brien said in an interview.
Companies that have spun off their consumer groups in recent years include Merck, GSK and Novartis, which have each been active this year in the M&A market. In April, Merck snapped up Prometheus for $10.8 billion and GSK paid $2 billion for Bellus. Two months later, Novartis picked up Chinook for $3.2 billion.
Another company in an advantageous position to pursue M&A is J&J. With its spinoff of consumer health unit Kenvue, the company has an additional $13.2 billion in potential M&A funding gained from its initial public offering, it said last month.
With interest rates at higher than 7%, Powers says having available firepower on hand is even more important than usual for companies seeking deals. He pointed to Takeda’s $62 billion acquisition of Shire in 2018, for which the Japanese company secured a $31 billion bridge loan at around 4%.
“If they were to do that same deal today, their volume cost would essentially double, if not higher,” Powers said.

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