Over the past five years, M&A activity has rebounded strongly, driven in part by a step-up in investor activism. M&A has become a critical element in the corporate strategy of every life sciences company, helping to unlock growth and innovation and replenish product portfolios. Divestments of non-core assets, alongside implementing operational efficiencies and streamlining portfolios, released capital to invest in new products, drive growth and help restructure the business. Strategic partnerships and alliances within and between the different life sciences sectors have driven external innovation. For example, partnerships between pharma and technology platform players have become a crucial investment strategy with acquired skills in advanced analytics and GenAI enhancing pharma companies’ approach to M&A.
There are several cross-cutting constraints that could affect the prediction (not having the right skills and talent, funding models, approach to regulation, and data governance in place). The prediction can be realised by life sciences companies turning the constraints into enablers by:
M&A activity is expected to pick up in 2025: The value of M&A deals in life sciences reached US$163bn in 2023 (deals announced up to the end of October), surpassing the US$135bn figure for 2022; for the pharma segment, the value of M&A activity in 2023 exceeded the same period in 2022 by 35%. Among life sciences suppliers, the value of M&A deals increased by nearly 85% year on year to US$28.3bn. Total deals in MedTech, however, fell by nearly 45% year on year to US$13.5bn, as MedTech companies focused on divestments and reorganisations, although deal volume increased.
Pharma’s ‘patent cliff’ requires a more focused proactive approach: between 2022 and 2030, pharma companies will likely lose more than US$236bn in revenue from the anticipated ‘patent cliff’, as 190 drugs (including 69 blockbusters) lose exclusivity. This represents some 46% in sales at risk for the top ten pharma companies over the next decade. Biopharma is therefore looking for innovative assets to fill the gap in their product portfolios, either by increasing R&D spend or through inorganic growth and M&A. They are also reviewing their portfolios to divest lower margin generic products and non-core facilities.
The Australian Healthcare M&A landscape reflects many of the same trends highlighted in the Predictions perspective with M&A playing a key role in corporate strategy by expanding market reach, diversifying service offerings, and enhancing patient outcomes.
Healthcare providers in Australia are on one hand experiencing an increase in healthcare demand driven by an ageing population and rising chronic disease prevalence, a desire for innovative patient-centric care models and integrated service delivery models whilst at the same time facing above inflation cost pressures and increasing regulatory requirements.
This potent combination is prompting providers to seek economies of scale and consider consolidation opportunities often with organisations that have robust compliance regimes or have invested more heavily in patient focussed technology.
Likewise, organisations are using this time to consider divestment of non-core or underperforming assets to focus on their core competencies.
Local M&A activity in the sector has slowed in recent years but both internal dynamics and external economic conditions align to support consolidation across all aspects of the sector including private hospitals/health providers, private health insurers and life sciences.
Our predictions series for the life sciences and healthcare industry looks ahead to the year 2030 to help you see what’s coming and to keep your organisation moving forward.
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