Updates for 2025 and outlook for 2026
The article below was originally written in 2023. We have updated it to reflect the 2025 landscape and an outlook for Life Sciences deals in 2026, given the many regulatory, technological and geopolitical changes in the last couple of years.
Updates November 2025
The momentum driving the Life Science sector has undergone a significant recalibration since our original analysis concluded its outlook for 2024. While 2023 saw landmark transactions, 2024 was characterized as a “reset year” for many large pharmaceutical companies, who focused on integrating previous acquisitions. This digestion period, coupled with ongoing regulatory pressures and high costs, led to a 41% decrease in overall M&A deal value in the life sciences sector in 2024, falling to US$130 billion compared to $222 billion in 2023. However, deal volume remained stable or even increased slightly, suggesting companies pivoted to smaller, more strategic acquisitions. By the first half of 2025 (H1 2025), deal value in the US healthcare sector began to rebound, jumping approximately 56% compared to late 2024, indicating a return of larger transactions.
Strategic Drivers and Emerging Innovation
The fundamental drivers of M&A remain strong, rooted in the urgent need for innovation and pipeline replenishment, especially as major pharmaceutical companies face patent expirations.
The Innovation Imperative: AI and Advanced Modalities
The strategic focus has intensified in high-growth areas, particularly those involving advanced technology.
- Artificial Intelligence (AI): AI is rapidly becoming a cornerstone of drug discovery, promising to accelerate R&D timelines, optimize drug formulations, and reduce costs and risks associated with traditional models. The surge in AI partnerships and acquisitions in life sciences continued through 2025, with companies looking to embed advanced analytics into R&D and patient care. In H1 2025 alone, healthcare IT/digital health deal volume saw a 22.7% jump compared to late 2024.
- Antibody-Drug Conjugates (ADCs): Oncology continues to dominate M&A activity. ADCs, which combine targeted antibodies with cytotoxic drugs, are seeing rapid adoption and driving significant M&A interest, building on deals like Pfizer’s 2023 acquisition of Seagen ($43 billion). Novel ADC developers remain prime targets, exemplified by Taiho Pharmaceuticals’ acquisition of Araris Biotech in Q1 2025.
- Metabolic Therapies: The weight-loss and metabolic health market is a global priority, projected to exceed $100 billion. M&A activity is driven by the success of GLP-1 receptor agonists and the intent to address related conditions such as type 2 diabetes. In Q1 2025, investment deals continued in this area, notably with Verdiva Bio raising $410 million in a Series A round for an oral GLP-1 candidate.
Geopolitical Shifts and the China Factor
Life sciences companies are increasingly widening their search for innovation beyond traditional geographical boundaries.
- China’s Role in Innovation: China is emerging as an increasingly important R&D target, particularly for companies seeking to license-in novel oncology treatments like ADCs. Engagement with Chinese biotech firms has deepened, with approximately one-third (31%) of in-licensed molecules by US pharmaceutical multinationals in 2024 originating from China. This demonstrates China’s growing influence on global biopharma innovation.
- Cross-Border Complexity: This deepening relationship introduces geopolitical and national security scrutiny. Furthermore, the US BIOSECURE Act, though slated for 2032 implementation, introduces uncertainty regarding future collaboration models with China under the new US administration.
Outlook for Accelerated M&A in 2026
The environment moving into late 2025 and 2026 is poised for an acceleration of M&A activity, fueled by improved financing conditions and immense strategic pressure.
- The Looming Patent Cliff: The primary driver remains the patent expiration of blockbuster drugs, which is expected to open up a massive US$240 billion growth gap for the top 25 biopharma companies by 2030. This revenue pressure will compel Big Pharma to aggressively acquire late-clinical stage assets in core therapeutic areas like oncology, immunology, and rare diseases. The period between 2025 and 2028 will see some of the largest drugs, such as Merck’s Keytruda and Bristol-Myers Squibb’s Eliquis, losing exclusivity.
- Financial Catalysts: Despite current market caution, Big Pharma still holds near-record levels of dealmaking capacity, estimated at more than $1.5 trillion in 2025, and US$1.3 trillion in Firepower going into 2025. The expectation of an incoming US administration being more business-friendly could also ease regulatory uncertainty related to the Inflation Reduction Act (IRA) and corporate tax rates, potentially unlocking this dry powder for larger deals.
- Deal Structure Evolution: To manage risks and bridge valuation gaps, deal structures are increasingly utilizing earnouts, contingent payments, and strategic licensing agreements, reflecting a more disciplined and programmatic approach to M&A. Licensing and joint ventures are expected to remain indispensable for accessing innovation without the burden of a full acquisition.
In essence, 2026 is anticipated to see the return of megadeals (>$10B), while the strategic acquisition of innovative platforms, especially in AI and next-generation oncology, will solidify M&A as the key strategy for securing future revenue growth, as projections indicate that over two-thirds (68%) of biopharma revenues will come from products acquired through M&A, JVs, or alliances by 2028.
Introduction
In the business context, we refer to “deal landscape” as the overall environment and conditions in which business deals, particularly mergers and acquisitions – M&A, take place. It encompasses the various factors that influence deal-making, such as the types of deals being made, the stakeholders involved, the availability of attractive assets on the market, and the value of the deals. The deal landscape can also include emerging trends, such as an increase in partnerships, joint ventures, and unconventional pairings, as well as the impact of factors like sustainability and geopolitical disruptions on deal activity. In the following analysis, we will explore the deal landscape in the specific life science sector, in the wake of the Covid-19 pandemic, which is still felt today. We will be looking at case studies and trends from 2023 and looking ahead into 2024.
The Impact of COVID-19 had on Deal-making in the Life-science Industry
The COVID-19 pandemic brought a significant shift in the perspective of the Life Science sector, prompting stakeholders to prepare for future outbreaks. The current trends focus on increased investments in research, modifications in infrastructure, and international collaborations to ensure readiness for health emergencies. The pandemic emphasized the need for creating vaccines and diagnostic tools, highlighting the necessity for global collaboration to tackle public health challenges and prevention.
Furthermore, the crisis accelerated the digitalization of Life Sciences operations. Companies rapidly integrated technologies such as AI, automation, and e-therapies. This shift has created new market prospects and bolstered collaborations between digital startups, software companies, and life science entities.
Digital transformation has been particularly impactful within the pharmaceutical sector. AI algorithms are analyzing vast amounts of biological data to expedite drug discovery processes and potentially reduce development timelines. Automation technologies have streamlined manufacturing processes, increasing efficiency and scalability of production.
However, life science firms face obstacles in maneuvering through ongoing change, intense competition, and constantly evolving regulations, such as the change of regulation in Europe. Staying ahead in the healthcare industry requires distinguishing oneself from competitors and meeting the increasingly high expectations of patients and providers in a constantly changing environment.
The Current State of the Life-science Deal Landscape
The pandemic destabilized the previously stagnant life science industry. In 2023, this rapidly evolving sector experienced dynamic changes in the deal landscape. Our analysis examines the major trends influencing the current state of the life science deal landscape. By exploring the forces propelling transformation and their implications, we provide insights into the future evolution of the industry.
Mergers and Acquisitions (M&A)
Despite a decrease in this activity over the past decade, companies are now actively pursuing opportunities for mergers and acquisitions to strengthen their portfolios, expand their pipelines, gain access to innovative technologies, and achieve the right balance for sustainable and profitable growth.
As of 2023 Life Science companies started experiencing higher values in mergers and acquisitions due to increased competition and demand for drugs to treat multiple diseases.
It was this year, for example, that Roche announced its plan to acquire Carmot, a company that specializes in developing small molecules to treat metabolic diseases, including obesity. The deal is estimated to be worth $2.7 billion upfront, with an additional $400 million in milestone payments.
R&D innovation
91% of life science companies planned to invest in R&D innovation in 2023. The innovation concentrated on new treatments, precision medicine, advances in gene therapy, CRISPR technology, and immunotherapy.
In 2023, Moderna demonstrated its commitment to research and development (R&D) through various initiatives. One notable example is its upfront payment of $35 million alongside a $5 million pre-paid research funding investment. Furthermore, Moderna solidified its presence in the oncology sector by entering into a collaboration agreement with CytomX Therapeutics, which entailed a significant R&D investment. These collaborations and funding endeavors underscore Moderna’s dedication to advancing scientific research and technological innovations within the biotech industry.
Life science R&D organizations are overcoming financial obstacles that impede their high-risk, high-cost R&D model by propelling digital transformation and reorganizing commercial activities while shifting strategies.
Real-world evidence – RWE – has aided Life Science companies in comprehending disease progression, overseeing patient safety, and assessing clinical and financial efficiency.
AI is transforming drug discovery by extracting concepts and connections from information, which decreases the cost and time related to preclinical testing.
Throughout the world, regulators collaborate with interested parties to develop groups of experts, exchange research outcomes, scrutinize reports, and disseminate information. This across-the-board collaboration quickens the development of vaccines and treatments.
One example of collaboration between HTA bodies in Europe is the Voluntary European HTA Network (VEHTA). This network brings together HTA bodies from EU Member States, as well as EMA and the European Commission, to work on joint clinical assessments of new medicines. An instance of this collaboration is the joint clinical assessment of CAR-T cell therapy for cancer treatment, which involved multiple HTA bodies and was coordinated by EMA. This exemplifies the collaborative approach to evaluating innovative therapies across Europe.
This collaboration aims to improve the availability of innovative medicines and medical devices, ensure efficient resource use, and enhance health technology quality.
Patient centricity
The advent of at-home medical tests, including those for pregnancy, blood glucose levels, and faecal occult, empowers individuals to conveniently monitor their health from the comfort of home. These tests not only offer privacy and convenience but also provide companies with a valuable resource: vast amounts of patient data.
In the context of the COVID-19 pandemic, self-administered rapid antigen tests have further accelerated this trend, contributing to the collection of extensive patient data crucial for monitoring and managing the ongoing public health crisis. This wealth of data opens up new avenues for research and development, ultimately advancing healthcare innovation and improving patient outcomes.
Consequently, Life-science firms can now start to obtain real-time patient data through personal devices remotely. As patient-centric healthcare gains momentum, many Life Science companies explore direct-to-consumer (DTC) routes to enable direct patient engagement from any location. Wearable devices are user-friendly and enhance medication adherence. Patient-centered care is indispensable for precision medicine and personalized healthcare. The advancements made have created new opportunities for digital collaborations, facilitating Life Science companies in organizing and scrutinizing data to boost their patient-centered offerings.
Strategic Collaborations and Partnerships
Collaborations among pharmaceutical companies, biotech firms, and academic institutions have become a prevalent approach to sharing risks, combining knowledge, and accelerating drug development. For example, Novartis, a Swiss multinational pharmaceutical company, has formed several collaborations with Harvard University to advance research in the biomedical sciences, resulting in high-quality research output.
In the initial stages of 2023, there was a hopeful anticipation among dealmakers for a robust wave of M&A in the healthcare and life sciences sectors, along with expectations of revived capital markets activity. Regrettably, these expectations were not met, and the subdued transactional atmosphere persisted throughout the year. Despite a sparse number of noteworthy deals involving major pharmaceutical companies in the latter part of the year, there were indications of possible recovery with emerging opportunities in licensing deals for pharmaceuticals, medical technology, and biotechnology trading assets.
Amidst the turbulence of the year, one company that managed to secure a successful collaboration is Roche Diagnostics, whose partnership with PocDoc is a testament to resilience and innovation. Selected to participate in Roche’s Startup Creasphere program, PocDoc’s integration into the initiative underscores the power of strategic alliances to drive innovation in the life sciences, even in the midst of sustained hardship.
Strategies for Successful Collaborations, Mergers, and Acquisitions
Effective collaborations, mergers, and acquisitions in the Life Science industry require a comprehensive approach that considers scientific, strategic, operational, and cultural factors. In the book ‘Getting to Yes’, Roger Fisher, William Ury, and Bruce Patton emphasize the importance of understanding the interests underlying the positions of each party involved in negotiations. As they stated, ‘The more you bring their interests to the surface and acknowledge them, the more effectively you can deal with the problem.’ This idea is particularly relevant in the context of Life Science collaborations, where recognizing and aligning diverse interests can lead to mutually beneficial outcomes. By acknowledging the unique strengths and perspectives of all stakeholders, organizations can foster a collaborative environment that is conducive to innovation and growth. This comprehensive approach not only ensures smoother integration processes but also increases the likelihood of long-term success in navigating the complexities inherent in the industry.
Closing deals in the Life Science industry depends on several critical factors, including scientific and cultural alignment, strategic fit, stakeholder engagement, and effective negotiation. These factors ensure that the collaboration aligns with long-term objectives, streamlines processes post-closure, and fosters smooth integration. Additionally, it’s imperative to consider financial and operational factors, alongside the aforementioned ones, to ensure success. This section explores the critical factors that contribute to the success of collaborations, mergers, and acquisitions.
The human element is crucial in life science deals. No deal can be achieved without individuals who believe in the strength of the partnership and have the will to work together. Their expertise, innovation, and collaborative efforts are essential in driving research, development, and commercialization within the industry. Scientists and researchers contribute their expertise to discover innovative therapies and treatments, while executives and investors provide strategic direction and financial resources to advance these innovations. Regulatory professionals ensure compliance with healthcare regulations, while healthcare providers and patients evaluate the success and impact of advancements in real-world settings. The collaboration of professionals from diverse fields within the life sciences industry is crucial for advancing and tackling significant healthcare issues.
Complementary expertise and capabilities
When entities in a deal each bring specific expertise and capabilities to the collaboration, it can improve research and development, operational efficiency, and the ability to navigate intricate regulatory environments.
Flexible Strategic Alignment
In the dynamic life science industry, successful collaborations rely on adaptability and strategic alignment. Companies must be able to adjust their strategies quickly to navigate changes in technologies, market trends, and regulatory landscapes. This adaptability ensures that collaborations or mergers not only make strategic sense but also facilitate the attainment of common objectives amidst shifts in industry dynamics.
Regulatory comprehension and Compliance
Understanding and adhering to regulations is crucial in the life sciences industry, where companies must navigate intricate requirements across multiple regions. Noncompliance can result in penalties, remediation expenses, and harm to reputation. Compliance with regulations is essential in expediting market access for innovative products. Regulatory intelligence is vital to achieving global competitiveness and success in the industry (see also the section about: “Regulatory Considerations” below).
Long-Term Perspective
A strategic commitment fosters transparent communication, trust-building, and a dedicated focus on long-term value creation – all crucial elements for achieving success in strategic partnerships. Additionally, cultivating alliances and collaborations with regulatory agencies and local companies helps to boost deal flow, facilitate market access, and ensure a comprehensive understanding of regulatory approval processes. This emphasizes the importance of adopting a strategic, long-term approach to partnerships to achieve enduring success and mutually beneficial results.
Health Equity Alignment
Aligning a Life-science deal with health equity means ensuring fair and equal opportunities for all individuals to reach their full potential in every area of health and well-being. Achieving health equity in the Life-science context not only represents the correct path to take but can also profit companies in tangible ways. Companies investing in reaching patient populations without prior access to their products can develop more equitable offerings and services, which may lead to an increase in market size, share, and return on investment.
Financial Considerations
A strong financial base is vital for the success of any life sciences transaction. It’s critical to have an in-depth comprehension of the financial landscape, including elements such as valuation, funding mechanisms, and potential return on investment. This understanding ensures that collaborations and mergers not only advance the objectives of all involved parties but also maximize value creation. Balancing the use of dilutive and non-dilutive funding is essential for navigating the financial complexities of partnerships. This approach guarantees wise resource allocation and long-term sustainability.
Regulatory Considerations
Regulatory considerations are imperative in life science deals, encompassing antitrust and intellectual property matters. The life science industry is highly regulated, with stringent guidelines governing aspects like clinical trials. Comprehending and adhering to these regulations is vital, as non-compliance can lead to severe fines, reputational harm, and legal liability. Furthermore, the regulatory environment for Life Science transactions is continually evolving. There is amplified scrutiny of significant transactions, and cross-border deals in essential therapeutic areas are resurging. To guarantee compliance and a thriving result of the transaction, it is crucial to keep up with these regulatory obligations and possible risks.
Due Diligence and Negotiations
In the complex world of life sciences deals, due diligence and negotiation go hand in hand. Thorough diligence serves as a guide, directing stakeholders through complexities. Strategic negotiations mould the partnership’s outlines. Understanding the intricacies of deal flows, seed funding, and the balance between dilutive and non-dilutive funding are crucial to driving successful collaborations in the ever-evolving life sciences industry.
Thorough due diligence is crucial for informed decision-making in Life Science deals. Financial scrutiny assesses the financial health of the parties involved to evaluate the potential for profitable collaboration. Legal assessments ensure compliance with regulatory frameworks and identify potential liabilities. Scientific due diligence examines the technical aspects of the venture, validates its feasibility, and determines its potential for success. A thorough due diligence approach establishes a strong foundation for negotiations and builds trust among stakeholders.
Negotiating terms in the life sciences industry requires a careful balancing act that extends beyond financial figures. Pricing negotiations impact financial commitments, striking a balance between fair valuation and sustainability. Discussions regarding intellectual property safeguard innovations and promote mutually beneficial sharing of assets. Governance considerations shape collaboration structure by defining roles and responsibilities. Optimal deal structures require balance between dilutive funding that involves giving up equity shares and non-dilutive funding such as grants or partnerships, which do not require relinquishing ownership.
Case Studies of Successful Life-science Deals
There have been numerous successful collaborations, mergers, and acquisitions in the life sciences industry. These deals were driven by various factors such as complementary strengths, innovative technologies, and a shared vision for the future. Lessons to be learned from these deals include the significance of forging strategic partnerships, the imperative to outperform competition through innovation, and the value of a robust corporate culture that nurtures collaboration and creativity. Here are some examples:
In 2021, Illumina acquired Grail, a healthcare company that focuses on multi-cancer early detection, for approximately $7.1 billion. This acquisition allowed Illumina to fully acquire Grail, which developed a blood test for screening multiple types of cancer.
Also in 2021 Alexion Pharmaceuticals was acquired by AstraZeneca This $39 billion deal allowed AstraZeneca to broaden its reach in the rare disease and immunology fields with Alexion’s medicine portfolio.
Horizon Therapeutics, a specialty biopharmaceutical company, was acquired by Amgen in a $28 billion all-cash transaction. This merger is the third-largest in the pharmaceutical sector’s history and the biggest healthcare deal of 2022.
Final words
The life science industry is at the forefront of transformative change, emphasized by the impact of COVID-19. This shift has not only transformed our approach to global health crises but also redefined deal-making in the sector. The surge in mergers and acquisitions, heightened focus on R&D innovation, and seamless integration of digital technologies have become crucial factors driving the direction of deal flow. As the industry adapts to change, balancing dilutive and non-dilutive funding becomes a crucial factor in shaping collaborative ventures. Effective deal-making requires a forward-thinking mindset, alignment of strategy, and comprehension of regulatory considerations and a human, impact and ethical approach.
So what does the rest of 2024 look like? Emily Jane Cook & Kristian A. Werling, partners at McDermott Will & Emery, summarized it well in their report on the European Health & Life Sciences Symposium 2023. It appears that the life sciences transaction landscape is being influenced by a number of factors. The impact of higher interest rates on the cost of capital, coupled with challenges in obtaining financing, has reshaped the dealmaking environment. Regulatory uncertainties, particularly with respect to drug pricing controls in the US, add further complexity to the equation. Despite these challenges, there are signs of resilience and adaptation within the industry. Large pharmaceutical companies, bolstered by their cash reserves, are actively seeking strategic acquisitions, while private equity firms are showing increased interest in the life sciences sector. However, regulatory scrutiny, antitrust considerations and evolving financing models remain significant hurdles. As we move into the new year, we hope to see a stabilization in valuations and a more active dealmaking climate.
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