Biotech and Pharma M&A in 2025 is off to a promising start, but will it sustain?

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After spending nearly a week in San Francisco for the annual JPMorgan Health Care Conference, I am now back in New York City.

Recent developments included discussions about the new Trump administration, reports on business prospects and drug strategies, increased security measures, and a rare sunny day in San Francisco.

The Biden administration announced the next 15 drugs included in Medicare price negotiations on Friday, including 's blockbuster diabetes drug Ozempic and its obesity counterpart Wegovy.

In 2025, I will analyze the M&A activity in the industry based on the deals announced last week.

The beginning of the M&A market seems promising this year, but the uncertainty remains about its sustainability.

The proposed $14.6 billion buyout of Intra-Cellular Therapies by  boosted optimism during the conference, making it the biggest transaction in the pharmaceutical industry since 2023. This agreement was announced alongside smaller deals from GSK, Eli Lilly, and lesser-known radiopharmaceutical companies.

""M&A activity in 2025 is expected to be significantly different from 2024, with five deals completed in just 1.5 business days, according to Stifel analyst Tim Opler in an email to clients last week," said Stifel analyst Tim Opler in an email to clients last week."

EY's M&A Firepower report revealed that last year saw smaller and smarter deals in the pharmaceutical industry. Big pharma focused on acquiring companies and products with lower price tags, which could yield higher returns in the long run.

Despite the increased activity at the beginning of the year, the report suggests that there may be constraints on M&A in 2025 due to ongoing margin pressure on biopharma companies, which is limiting their willingness to spend large amounts of money on acquisitions. Additionally, the most sought-after acquisition targets in the industry are still commanding high premiums in the market, which could further dampen transactions.

That tracks for some large pharma companies.

J&J CEO Joaquin Duato stated that larger deals are considered outliers for the company.

J&J's value creation is mainly driven by smaller deals and partnerships, as Duato highlighted, citing the 75 such deals inked last year.

According to the EY report, there are "strong structural reasons to anticipate a resurgence of dealmaking," owing to the industry's $1.3 trillion in dealmaking "capabilities," which denote the capacity to finance transactions and execute deals.

By 2028, large pharma companies could lose $300 billion in revenues due to upcoming drug patent expirations, prompting them to intensify their efforts to develop new products to compensate for the losses.

Albert Bourla, the CEO of Pfizer, stated during a conference presentation that the company may face a wave of patent losses in the next few years, which could potentially threaten $17 billion to $18 billion in annual sales. However, Bourla believes that the company's recent deals, such as its acquisition of cancer drug developer Seagen, will help mitigate those losses.

The EY report suggests that the Trump administration could provide "significant tailwinds" to the industry by reducing corporate taxes or modifying FTC policy as part of a broader deregulatory strategy.

We'll have to wait and see how this unfolds later this year.

Rewritten sentence: Please provide any tips, suggestions, story ideas, and data to Annika at [email protected].

In 2024, the digital health fundraising landscape will be characterized by a "David and Goliath dynamic," according to a report.

Before we can focus on the health-care sector in 2025, we must first examine the venture funding landscape for digital health in 2024.

Overall, it was a year of contrasts between those who had and those who did not.

In 2023, digital health startups in the U.S. raised $10.1 billion across 497 deals, which is a decrease from the previous year's total of $10.8 billion. This amount is roughly equivalent to the $8.2 billion raised in 2019, before the pandemic, when adjusted for inflation. Additionally, the number of digital health M&A deals reached a decade low in 2023, with only 118 deals taking place.

The lower investment in 2024 is due to an increase in early-stage fundraising activity and smaller late-stage deals, according to Rock Health. This could pose a challenge for later-stage startups that raised money at high valuations during Covid, potentially leading to acquisitions or shutting down operations entirely in 2025.

In 2024, large megafunds, health-systems, and tech companies held a significant amount of influence over digital health, according to Rock Health. Andreessen Horowitz and General Catalyst, who invested 20% of all committed LP capital in the U.S. in 2024, were the top investors in the sector.

While AI remained a popular investment area in digital health, it's becoming increasingly challenging for startups to outperform large incumbents. According to Rock Health, tech giants like Microsoft, who can afford to develop and maintain costly foundation models, are gaining an edge in healthcare AI. Additionally, organizations like Epic, which can apply these models on a broad scale across their enterprise, are also seeing success.

To succeed in the health care industry, smaller AI startups must carefully consider their positioning.

The healthcare innovation landscape has been transformed into a David and Goliath dynamic due to the concurrent rise of early-stage startups and significant actions taken by large healthcare players, according to Rock Health.

If JPM's performance is any indication, we can expect another exciting year in digital health. Let's see what 2025 has in store.

Read the full report here.

Rewritten sentence: Please provide any tips, suggestions, story ideas, and data to Ashley at [email protected].