In all probabilities, it is expected that mergers & acquisitions in the pharma and life sciences sectors will hit a healthy level in 2024, with deals reaching $225 billion to $275 billion, according to PwC’s new US Deals 2024 Outlook report.
The report lays significance on the precision medicine opportunities across oncology along with immunology, the areas that especially go on to see high levels when it comes to dealmaking activity. The consultancy firm also goes on to predict that the weight loss as well as cardiovascular diseases spectrum will witness increased investor interest next year after it went through some renaissance in 2023.
Apparently, 2023 was a reasonably robust year for the pharmaceutical and life sciences industries, with both deal value as well as volume of M&A reaching pre-pandemic levels, as per the report, thereby adding that the firm anticipates similar levels of action next year as well.
All said and done, the industry will still have to deal with the geopolitical challenges as well as regulatory uncertainties, in addition to what PwC states as the reality when it comes to higher interest rates, all of which might propel investors to pinpoint more on margin accretion than just put their finances into growth-driven dealmaking.
The report states that as regulators’ versions on key deal factors go on to become better understood, there might be a return of larger deals in addition to the continued interest in the $5 billion to $15 billion deals so as to fill the targeted strategic gaps.
When it comes to IPOs, PwC expects a gradual uptick in activity, with a shift towards young companies that happen to have strong clinical data.
Beyond the IPOs and M&As, still there would be companies in 2024 that will look forward to more creative funding structures that will go on to offer strong support for their R&D activities while at the same time allowing them to retain control over compounds that are critical. Interestingly, these funding structures could have in it private equity as well as private credit, along with other solutions like asset swaps, joint ventures that are innovative, divestitures, collaborations, and profit-sharing agreements.
The PwC report also goes on to identify certain key drivers of dealmaking that could go on to enable the pharmaceutical and biotech companies to secure funding in a more effective way.
Investors, in a way, could be more drawn towards companies that have clear core areas than going to those that work in order to diversify their portfolios. Apart from this, the current and impending patent expirations will most likely push big companies to seek out the deals in an attempt to address the issues in their pipelines, as per the report.
It is well to be noted that the biopharma sector went on to face many difficulties this year, which included a fraught macroeconomic environment, interest rates that were seen climbing, and rapidly prudent investors, all of which led to a marked drop in the activity of IPOs this year, specifically compared with the last pandemic-driven high of 2021.
Significantly, numerous companies happened to have trouble staying afloat in 2023 and were, as a matter of fact, forced to launch either some broad cost-cutting programs or else reduce their workforces.
The sector also faced many regulatory challenges in 2023, which included the new merger guidelines roiled out by the FTC that would go on to elevate the antitrust scrutiny on deals, in addition to many FDA rejections, several of which have forced companies to leave the programs.
PwC states that the competition when it comes to high-quality assets will remain fierce and the regulatory landscape will be challenging. As the implications of the IRA are now better understood, one can expect that companies will go on to direct innovation dollars more towards biologics, and that too at the expense of small molecules.