Acceleration of M&A: Interview with Subin Baral on Pharmaceutical Execution

The 14th annual M&A Firepower POV report recently released by EY sheds light on the significant surge in M&A activity within the life sciences industry in 2025. The report highlights a notable 81% increase in total spending, totaling $240 billion compared to the previous year, despite a 12% drop in deal volume. This trend signifies a strategic shift towards seeking de-risked in- or near-market assets, resulting in companies being willing to pay premium prices, as reflected in the remarkable 107% growth in average deal sizes.

One of the key insights from the report is the intense competition in high-demand areas such as GLP-1, anti-obesity treatments, oncology, and CNS. Particularly in the Medtech sector, which outpaced biopharma with a striking 116% increase in investment compared to 65%, the top three deals in 2025 were all in Medtech, underscoring a strong emphasis on high-growth opportunities in the life sciences realm.

What’s driving this uptick in M&A activity? The industry is currently grappling with patent expiries, necessitating the replacement of revenues generated by expiring patents. Research by EY indicates that leading biopharma companies lack the pipeline assets essential for revenue replacement, projecting a collective “growth gap” surpassing $370 billion by 2032. This emphasizes the urgency for acquisitions as companies face a shortage of high-quality, low-risk assets, intensifying competition in the dealmaking landscape.

China’s role in biopharma innovation is becoming increasingly pivotal, as it emerges as a key source of R&D innovation. The surge of investment into “in China, for Global” partnerships between multinational biopharma companies and domestic Chinese biotechs is on the rise. These partnerships accounted for over one-third of alliance biobucks spent by US and European pharma players in 2025, a significant increase from less than 1% a decade ago. This shift highlights the growing significance of alliances for investment, with a potential total spend of approximately $234 billion on alliance deals, offering companies a gateway to engage with China and invest in novel technologies.

Looking ahead, M&A is projected to maintain momentum in the coming years, fueled by existing growth gaps and ongoing innovation in various therapeutic areas and technologies like AI. Companies in the life sciences sector heavily depend on dealmaking, with up to two-thirds of their revenue portfolios derived from deals. The analysis suggests that companies engaging in diversified dealmaking outperform those that are less active, emphasizing the structural role of M&A in revenue growth. As companies navigate the challenges of dealmaking, such as the high stakes of successful execution, leveraging AI for target identification and integration streamlining is anticipated to gain momentum.

The industry’s record $2.1 trillion firepower, with biopharma holding $1.6 trillion and Medtech the remainder, underscores its capacity to raise and deploy capital for strategic initiatives. However, the distribution of this firepower remains uneven, with some companies better equipped for dealmaking than others due to varying market capitalizations. While the availability of substantial firepower is noteworthy, it does not assure equal dealmaking readiness among all companies. For those with both significant firepower and growth gaps, a surge in dealmaking activity is likely on the horizon.