Developing IQVIA’s positions on key trends in the pharma and life sciences industries, with a focus on EMEA.
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Developing IQVIA’s positions on key trends in the pharma and life sciences industries, with a focus on EMEA.
Learn more
Developing IQVIA’s positions on key trends in the pharma and life sciences industries, with a focus on EMEA.
Learn more
Developing IQVIA’s positions on key trends in the pharma and life sciences industries, with a focus on EMEA.
Learn more
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SEARCH JOBSIn the second part of our M&A blog series, we will discuss trends in dealmaking focus as acquirers seek value in a dramatically changing market environment. We will further provide an outlook on deal momentum for the remainder of 2023.
Consistent with blog 1, deals included in our analysis meet specific criteria: they involve a biopharma target, the acquisition of a majority stake in the target entity, and an enterprise value equal to or exceeding $1Bn, while we excluded acquisitions of products and divisions as well as licensing deals.
Recent trends in M&A deal activity indicate a significant decline in acquirers’ risk appetite compared to previous years, as they seek greater certainty to navigate a fast-approaching patent cliff and other post-COVID challenges (see Figure 1). Specifically,
Instead of taking on undue risk through acquisitions, dealmakers appear to prefer hedging their early-stage bets via collaborations and partnerships. These may precede taking full ownership at a later stage once sufficient data is available to better appraise the residual risk profile, and thus a target’s fair value.
In addition to acquirers’ changing risk appetite, the observed M&A deal pattern is driven by a combination of a surge in deal capacity and a challenging biotech funding environment starting in mid- to late 2021, which we elaborated on in our first blog. The effective closure of the IPO market since 2022 has been especially important in elevating M&A as the preferred, strategic exit route for many cash-strapped biotech companies with late-stage assets, and this trend is likely to continue given the current outlook for IPOs.
Oncology and immunology continue to dominate as the leading therapy areas in focus of M&A activity, collectively accounting for an average share of 55% of deal value and 46% of deal volume over the time period from 2019 to H1/2023. Interestingly, cardiometabolic-focused acquisitions have seen a notable uptick in H1/2023, a reflection of the renaissance for cardiometabolic innovation and the excitement around recent therapeutic breakthroughs, e.g., in obesity or NASH.
Driven by key external trends, the modalities in focus of M&A deals have changed significantly over the past five years (see Figure 2):
Over the past five years, strategic bolt-on acquisitions with a deal value of less than $6.5Bn were much preferred over mega deals and accounted for 83% of all M&A transactions. This trend has recently been buoyed by the aforementioned risk aversion of potential acquirers, while greater scrutiny by the Federal Trade Commission (FTC) may potentially discourage larger deals.
On the supply side, our analysis has identified 283 unpartnered phase 3 assets alone which are owned by pre-commercial biotech companies without any revenues. Notably, oncology emerges as the prominent therapeutic focus, with additional significant presence in infectious disease, immunology, CNS and ophthalmology. Furthermore, several currently unpartnered mid- to late-stage assets will reach key milestones in H2/2023 which is likely to turn their respective companies into sought after acquisition targets, for example:
Such rich supply of potential targets meets with a formidable deal capacity, which in our first blog we estimated as $0.8Tn among the top 15 pharma companies. This is nicely supported by the recent Q2 earnings season where several companies mentioned that they are seeking large acquisitions and / or are size agnostic. Therefore, at the current run rate, we could expect M&A deal value to reach $140 -160Bn by the end of 2023.
While greater scrutiny by the FTC increases uncertainty for dealmakers, its impact is not yet clear at this time. On the one hand, the FTC challenged Amgen’s proposed $28Bn acquisition of Horizon Therapeutics and recently also demanded more data from Pfizer on their proposed $43Bn acquisition of Seagen. On the other hand, Microsoft just won a high-profile court case against the FTC which had challenged its planned acquisition of Activision.
This dynamic illustrates that subdued deal momentum across the board, as a result of a more activist regulator, is not a forgone conclusion. Instead, dealmakers may learn to proactively mitigate potential regulatory risks, while greater FTC scrutiny may end up impacting specific deals, or deal types, rather than discouraging all M&A indiscriminately.
The renewed deal momentum observed in H1/2023, combined with strong underlying fundamentals, bodes well for the full-year 2023 outlook. Reflecting on the industry's history, these developments raise the possibility of a return to levels of deal activity historically seen, despite remaining below the peak activity observed in 2019.
Key data and information sources
IQVIA Pharma Deals; IQVIA Forecast Link; Mergermarket; Refinitiv Workspace; IQVIA Institute report: Global Trends in R&D 2023; company financial reports; company press releases and deal announcements; IQVIA EMEA Thought Leadership desk research and analysis
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