Development stage biotech acquisitions by large pharmaceutical companies filling development pipelines, is amongst the drivers for optimism in pharmaceuticals and life sciences M&A activity in 2023, according to analysis by PwC. 

PwC’s latest UK M&A data shows that whilst healthcare industries, including pharma and life sciences, M&A activity cooled down in 2022 from a record high in 2021, PwC UK remains cautiously optimistic for the year ahead. 

Analysis of UK deal activity shows that the UK saw 234 deals across healthcare industries in 2022, compared to 365 for the previous year, a 36% decline. Further analysis shows that deal volume for the first half of the year was higher than the second half, with 127 UK deals completed in H1 compared to 107 in H2.

This data comes following further insight from PwC highlighting biotech as one the industrial strengths making the UK’s market increasingly attractive for global CEOs, according to PwC’s annual CEO Survey

Stephen Aherne, PwC UK’s pharmaceutical and life sciences leader, said: 

“Whilst deal volumes have dipped in line with global trends, the UK’s strength in biotech is making the UK market an attractive proposition to global CEOs looking to invest. 

“Acquisitions will be needed to achieve companies’ longer-term growth plans. We expect large pharmaceutical companies will seek to fill existing gaps in their development pipeline with development-stage biotech acquisitions. While lower public company valuations may restrict corporates’ dealmaking capacity for larger transactions, they may also create opportunities to acquire innovative assets at a more attractive price.”

Health industries deal volumes and values, 2018-2022

Health industries deal volumes and values, 2018-2022

Pharma hotspots for 2023

PwC has identified the following areas to be M&A activity hotspots for the pharmaceutical and life sciences sector in the next 6-12 months:

  • Biotech acquisitions to fill pipeline: As large pharma companies look for M&A opportunities to achieve their growth plans, mid-size biotech companies (in the US$5-15 billion value range) that can fill in pipeline gaps in the back half of the decade will receive significant attention in 2023. Valuations and competition will remain high for these businesses. More small to mid-range deals, rather than takeovers of larger companies, are expected to continue to dominate M&A activity.
  • Divesting to invest: Large pharmaceutical conglomerates will continue to reshape their portfolios and identify non-core assets to divest. Rising interest rates and declining stock prices may put more pressure on corporate divestiture plans. These divestments are to help generate cash to fund new investments in an effort to optimise portfolios and more closely align them with their core competencies.
  • CRO, CDMO, and Medtech: We expect PE will remain involved and compete with corporates for contract research organisations (CROs), contract development and manufacturing organisations (CDMOs), and medical technology (Medtech) companies. Strong sustainable cash flow generation will likely make these sectors attractive investments in 2023, with competition for companies with mRNA or cell and gene therapy capabilities continuing to be fierce.

Stephen Aherne added: 

“In addition to R&D activity, pharma companies will seek to address gaps in their drug pipeline by directing capital toward medium-sized biotech companies. To further accelerate realised gains from such investment, pharma companies will need to be ready to rapidly integrate and scale up their M&A assets.

“Acquiring digital and tech capabilities is driving cross-sector deals, as established players modernise their business models. Pharma and life science firms are increasingly acquiring or partnering with technology companies to leverage digital solutions. In addition, we expect  players to engage in tech venturing as a means to expand into the digital sales channel by continuously monitoring the start-up sector and engaging in diverse activities, including funding, partnering and acquiring.” 


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