‘Global healthcare M&A to recover this year... AI-China’

131 life sciences M&A deals made in 2024 - average deal size USD 1 billion

“M&A expected to pick up gradually in 2025, but some regulatory and policy concerns remain”

Life sciences companies seek growth opportunities in emerging AI fields and collaboration with China

Artificial intelligence (AI) and China are expected to be the keywords for mergers and acquisitions (M&A) in the global bio and healthcare sector this year.

 

On the 14th, KoreaBIO disclosed a report by global accounting consulting firm Ernst & Young (EY) that contained the prospects above.

 

According to the report, 130 M&A deals were made in the global bio-healthcare sector last year, including 95 for biopharmaceuticals and 36 for medical devices.

 

This was similar to the previous year's 130 (81 biopharma and 49 medical devices).

 

Deal values were down significantly from the previous year.

 

The value of M&A deals last year was USD 130 billion (approximately KRW 190 trillion), down 41% from the previous year.

 

Unlike 2023, which was dominated by large deals in safe-haven (risk-free) assets such as government bonds, last year was full of smaller deals.

 

Bio-Healthcare M&A Deals (Source: Bio-Healthcare M&A)

The report characterizes 2024 as a “reset year” for big pharma that was digesting and integrating acquisitions made the previous year.

 

Regulation by the U.S.

 

Federal Trade Commission (FTC) and the implementation of the Inflation Reduction Act (IRA) contributed to a slowdown in M&A activities last year.

 

The average M&A deal size in 2024 was USD 1 billion (about KRW 1.5 trillion), which was down 42% from the previous year.

 

Rather than invest billions of dollars to acquire less risky, market-ready assets, companies are looking to innovate by acquiring early-stage assets that are in pre-Phase III clinical development.

 

“This means that global bio-healthcare M&A last year was smaller but smarter than in previous years,” the report concludes.

 

The report predicted that the market will likely recover this year, but uncertainty remains.

 

The industry has USD 1.3 trillion (KRW 190 billion) of M&A firepower, but some regulations and policies could be in the way, it said.

 

The report cited emerging areas of ▲AI and ▲Chinese partnerships as trends in M&A this year.

 

Over the past 5 years, the value of healthcare AI M&A deals has exceeded USD 60 billion.

 

Most leading companies have formed at least one partnership for AI collaboration.

 

In 2024, the number of deals reached a record high.

 

The number and value of deals over the past 5 years reached 41 deals in 2020 (USD 5 billion), 54 deals in 2021 (USD 16.4 billion), 77 deals in 2022 (USD 15.5 billion), 55 deals in 2023 (USD 13.9 billion), and 87 deals in 2024 (USD 13.6 billion).

 

Trends in AI-related Bio-Healthcare M&A Deals (Source: Bio-Healthcare M&A)

The largest AI-related deal to date was the August 2024 acquisition of Exscientia by Recursion Pharmaceuticals.

 

Recursion acquired Exscientia for USD 712 million.

 

“The surge in AI partnerships and acquisitions over the past 5 years is indicative of the opportunities that AI presents to life sciences companies,” the report said, noting that the biggest focus is on using AI to discover new drugs and optimize development.

 

The report added, “AI is delivering benefits across the value chain, from operations to commercial strategy, and the EY CEO Confidence Index shows that life sciences CEOs see emerging technologies, including AI, as the biggest disruptors over the next 12 months, along with talent acquisition.” The report also found that China is becoming a more important partner for companies looking to transfer technology for antibody-drug conjugates (ADCs) and other novel oncology therapies.

 

In 2023, deals involving new modalities, such as ADCs, next-generation radiopharmaceuticals, and multi-specific antibodies, had been made in the Chinese market.

 

The report also found that 43% of M&A with Chinese companies were aimed at acquiring ADCs.

 

AstraZeneca paid USD 1.2 billion to acquire China's Gracell Biotech.

 

It was the first outright acquisition of an innovative Chinese company by a global Big Pharma.

 

Novartis' purchase of Shanghai Argo Biopharmaceuticals last year was also considered potentially the largest deal.

 

However, the U.S.

 

Biosecure Act is seen as the biggest challenge to the growth of China's life sciences sector.

 

“This could limit the ability of companies to collaborate across borders,” the report said, adding that “the U.S.-China relationship also faces uncertainty under the Trump administration in 2025.”