Current Trends in M&A Activity

In terms of M&A activity, 2022 is a rather quiet year so far compared to record-breaking year 2021 when private equity investments boomed. In this article, read about recent trends and an outlook on M&A deals in the life science industry.

Upswing in biopharma M&As in Q2 2022

According to a report by J.P. Morgan, 274 M&A deals were recorded across healthcare and life sciences in H1 2021, but only 145 deals in H1 2022. Medtech and life science service companies largely accounted for this 2021 peak in M&A activity. However, looking at deals in the biotech and pharma sphere only, 2021 was not quite as active. While back then, higher valuations of early-stage biotech companies caused big pharma to hold off on their intentions to acquire and biotechs felt less pressure to accept a buying offer, alternatives such as strategic partnerships and business alliances were of great interest to the biopharma sphere. This changed in the second quarter of 2022: M&A activity increased by 126 percent between April to June 2022 compared to the first quarter of the year with larger pharma companies buying out innovative early-stage biotech companies to complement their pipelines.

One of the reasons for the upswing in biopharma M&As is the downward trend in biotech venture financing rounds and IPOs, which we covered in previous articles. As it is becoming harder for biotech start-ups to raise capital, big pharma companies are in an increasingly good position to acquire these smaller organizations. At the same time, as valuations plunge and investors are more apprehensive in funding, more and more biopharma companies see themselves forced to downsize and let staff go.

Oncology remains popular for dealmakers

One of the biggest M&A transactions this year was the acquisition of Turning Point Therapeutics by Bristol Myers Squibb in August with a deal sized at USD 4.1bn. Through this deal, the pharma company expands its precision oncology portfolio with a pipeline of investigational drugs targeting oncogenic drivers of non-small cell lung cancer and advanced solid tumors. Oncology remains the primary therapeutic area dealmakers are interested in. Popular key activities of drug development include antibody cell therapy and gene therapy. Read our article on the largest life science M&A deals in 2022 for more information.

Back to pre-pandemic status?

Earlier this year, all the signs indicated that M&A activity would continue to pick up pace towards the end of 2022: Valuations declined and big pharma companies kept looking for opportunities to secure their long-term growth. However, this prognosis is now subject to doubt as the market faces ongoing uncertainties due to the tense macroeconomic situation.

Despite the fact that the overall market for life science companies moved closer to how it was before the pandemic, the life science sector still shows relatively strong activity compared to the broader economy.