Strategic Growth in Life Sciences M&A with EY Firepower
Small deals are key in helping life sciences companies shape their future with confidence. Although the volume of dealmaking in the life sciences sector remains steady, the value of deals has decreased. The EY Firepower report for 2025 delves into how strategic, smaller deals can pave the way for a more assured future for these companies.
In 2024, there was a noticeable shift in dealmaking strategies within the life sciences industry. Following a year marked by major M&A transactions in 2023, companies redirected their focus to smaller, strategic acquisitions and bolt-on deals. This change led to a decline in the overall value of deals in 2024. It can be considered a “reset year” for large pharmaceutical corporations as they assimilate the previous year’s acquisitions.
One of the factors contributing to the subdued dealmaking activity in 2024 was the regulatory landscape. Challenges from regulatory bodies such as the Federal Trade Commission (FTC) and the implementation of the Inflation Reduction Act (IRA) in the US added layers of complexity to deal negotiations and execution. The impending change in administration set for 2025 could potentially alleviate some of these regulatory uncertainties, spurring a resurgence in dealmaking opportunities.
Looking ahead to 2025, there are promising signs that dealmaking in the life sciences sector may pick up pace. Despite existing challenges, there are several drivers fueling optimism for increased deal activity. The industry boasts a substantial $1.3 trillion in dealmaking Firepower, signaling the financial capacity for sizable transactions. However, the distribution of this Firepower is not uniform, with companies like Novo Nordisk and Eli Lilly holding dominant positions.
An additional impetus for dealmaking stems from projected growth gaps anticipated in the industry. The expiration of patents is projected to create $240 billion in growth opportunities for the top 25 biopharma companies by 2030. Furthermore, the post-election climate in the US is creating a favorable environment for dealmaking, with expectations of potential policy changes, such as corporate tax rate cuts and modifications to drug pricing regulations.
Despite these optimistic drivers, there are also restraints that could temper dealmaking enthusiasm in 2025. Companies may face challenges such as high costs associated with acquisitions and a scarcity of prime targets for strategic partnerships. Nevertheless, the industry is diversifying its search for value, exploring opportunities in early-stage product cycles, emphasizing the potential of AI, and tapping into emerging innovation from China’s biotech ecosystem.
It is evident from EY’s analysis that dealmaking is instrumental for growth and innovation in the life sciences sector. Successful partnerships and strategic acquisitions are crucial for companies to confidently shape their future and navigate the evolving landscape of the industry. Smaller, smarter deals are poised to play a pivotal role in helping life sciences companies carve out a path to sustained success.
