Biotech, pharma M&A picks up in 2025

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I’m back in New York City after spending nearly a week in San Francisco for the annual JPMorgan Health Care Conference – the largest gathering in the U.S. of biotech and pharma execs, investors and analysts (and health reporters, of course). 

The week featured questions about the incoming Trump administration, updates on business outlooks and drug portfolios, heightened security on the ground and, for the first time in recent memory, sunny weather in San Francisco. 

The news kept coming all week, even after the conference ended mid-Thursday. The Biden administration on Friday announced the next 15 drugs included in Medicare price negotiations, which include Novo Nordisk‘s blockbuster diabetes drug Ozempic and its obesity counterpart Wegovy. 

But after companies announced a handful of deals last week, I’ll zero in on some takeaways for M&A activity in the industry in 2025. 

M&A appears to be off to a good start this year. But the question is whether it will last. 

Some of the deals announced during the conference boosted optimism, particularly Johnson & Johnson‘s proposed $14.6 billion buyout of Intra-Cellular Therapies. That appears to be the biggest transaction we’ve seen in the pharmaceutical industry since 2023. That agreement came amid a wave of smaller deals from GSK, Eli Lilly and lesser known radiopharmaceutical companies. 

“That’s five deals in one and a half business days,” Stifel analyst Tim Opler said in an email to clients last week. “This is going to be a very different year for M&A than 2024.” 

Last year was marked by smaller and smarter deals in the pharmaceutical industry, according to EY’s M&A Firepower report released last week. Big pharma sought deals with lower price tags for products and companies in earlier development, which could pay off more handsomely in the long run. 

While this year has started off with more activity, the report pointed to potential restraints on M&A in 2025: Ongoing margin pressure on biopharma companies is still “reducing the appetite for big spending,” and the most prized acquisition targets in the industry are still commanding high premiums in the market, among other factors that could dampen transactions.

That tracks for some large pharma companies. 

During a presentation at the conference after J&J announced its Intra-Cellular Therapies deal, J&J CEO Joaquin Duato said “for us, larger deals are more outliers.”

“The majority of the value that we create is through smaller deals and partnerships where we can use our scale,” Duato said, pointing to the 75 smaller deals that J&J inked last year. 

But the EY report said there are “strong structural reasons to expect a return to dealmaking,” including the industry’s $1.3 trillion in dealmaking “firepower,” which refers to the ability to fund transactions and make deals. 

Large pharma companies are also bracing for upcoming drug patent expirations that could wipe out $300 billion in revenues by 2028, putting more pressure on them to offset losses with new products. 

Pfizer, for example, faces a wave of patent losses over the next few years that could threaten some $17 billion to $18 billion in annual sales, the company’s CEO Albert Bourla said during a presentation at the conference. But Bourla said the company’s series of deals in recent years, such as its acquisition of cancer drug developer Seagen, should help offset those losses. 

The Trump administration could also offer “significant tailwinds” to the industry by cutting corporate taxes or changing FTC policy “as part of a general deregulatory shift,” according to the EY report. 

But we’ll have to see how this all plays out later this year. 

Feel free to send any tips, suggestions, story ideas and data to Annika at [email protected].

Now that JPM has come to a close, 2025 is officially underway for the health-care sector. But we can’t dive into the year ahead without first taking a look at the venture funding landscape for digital health in 2024. 

On the whole, it was a year of the haves and the have nots. 

Digital health startups in the U.S. raised $10.1 billion across 497 deals last year, according to a new report from Rock Health. That total fell from $10.8 billion in 2023, and is about in line with the $8.2 billion raised prior to the pandemic in 2019 when adjusting for inflation. Digital health M&A hit a decade low last year, as the segment notched just 118 deals.

An increase in early-stage fundraising activity, along with smaller late-stage deals, account for the lower investment in 2024, Rock Health said. This could spell trouble for later-stage startups that raised money at sky-high valuations during Covid, potentially pushing them toward acquisitions or shuttering operations entirely in 2025.

Additionally, large megafunds, health-systems and tech companies held an outsized amount of influence over digital health in 2024, Rock Health said. Venture firms Andreessen Horowitz and General Catalyst, which secured 20% of all committed LP capital in the U.S. in 2024, were the sector’s top investors, for instance. 

And while artificial intelligence was still a hot investment area within digital health, it’s becoming harder for startups to beat out large incumbents. Rock Health said tech companies like Microsoft that can afford to build and maintain expensive foundation models pulled ahead in health-care AI, as did organizations like Epic that can deploy applications of those models on an enterprise-wide scale. 

There’s still room for smaller AI startups to find a niche within health care, but Rock Health said they’ll need to “think carefully about their positioning.” 

“These dual trends—early-stage startup activity amidst big moves by large healthcare players—have created a David and Goliath dynamic in the healthcare innovation landscape,” Rock Health said.

If JPM was any indication, we’re in for another interesting year in digital health. We’ll see what 2025 has in store. 

Read the full report here. 

Feel free to send any tips, suggestions, story ideas and data to Ashley at [email protected].