Pharma M&A Forecast for 2025 in European Market
The year 2025 is shaping up to be a pivotal time for dealmaking in the life sciences industry, with EY’s annual M&A report emphasizing the importance of robust partnering strategies for future growth. The report highlights that dealmaking is expected to continue growing, with an increasing reliance on inorganic growth to drive revenue and value creation. In fact, a significant portion of revenue in the pharmaceutical sector currently stems from dealmaking, underscoring the essential nature of strategic partnerships for industry players.
The early months of 2025 have already seen major M&A transactions in the pharmaceutical sector, including Johnson & Johnson’s acquisition of Intra-Cellular Therapies, Inc. for a staggering $14.6 billion. This move is set to bolster the development of treatments for various conditions such as schizophrenia, bipolar depression, anxiety, and Alzheimer’s disease-related psychosis and agitation. Similarly, GSK’s announcement of acquiring IDRx Inc. for up to $1.15 billion signals a strategic push into the biopharmaceutical realm, particularly in advancing treatments for gastrointestinal stromal tumors (GIST).
Despite the promising outlook for dealmaking, revenue challenges continue to loom large over the pharma industry, with projections indicating potential revenue losses of $300 billion by 2028 due to patent expiries. As a result, companies are under increasing pressure to seek out innovative opportunities for growth. This includes exploring non-traditional avenues such as AI startups and the burgeoning biotech sector in China, both of which offer accelerated pathways to expansion.
The landscape of innovation in the life sciences industry is also witnessing a shift towards earlier-stage opportunities with lower price tags. Companies are actively seeking out innovative assets at an earlier point in the development cycle, moving away from massive deals towards de-risked assets that offer long-term value. This trend is exemplified by the growing interest in China as a key research and development destination, particularly in the realm of novel oncology treatments like antibody-drug conjugates (ADCs).
The integration of AI into the pharmaceutical sector presents both opportunities and challenges for industry players. The FDA’s draft recommendations on AI underscore the agency’s commitment to ensuring the safety, effectiveness, and quality of drugs and biological products. Moreover, the largest AI M&A deal in the life sciences industry to date – Recursion Pharmaceuticals’ acquisition of Exscientia for $712 million – highlights the growing importance of AI technologies in driving innovation and growth.
Looking ahead, 2025 is poised to be a year of resurgence in dealmaking for the pharmaceutical industry. With optimism surrounding the business environment and the industry’s substantial financial firepower, companies are expected to lean heavily on strategic partnerships and acquisitions to drive revenue growth and value creation. As dealmaking remains central to life sciences strategy, industry players will need to stay agile, adaptive, and forward-thinking in navigating the evolving landscape of M&A activity in the years to come.
