Press release
09 Jan 2023  | London, GB

Firepower 2023: Life sciences M&A target bolt-ons and alliances but major deals are on the agenda entering 2023

  • 2022 was a challenging year for dealmaking; life sciences M&A value for the first 11 months of the year fell to US$105 billion, down 53% compared with the previous year.
  • The right strategic deals are still getting done and sector fundamentals are strong for active dealmaking; more than US$30 billion in new deals agreed in the first half of December 2022.
  • Record levels of dealmaking Firepower are available in the life sciences sector, with biopharma alone commanding more than US$1.4 trillion at the beginning of December 2022.

Global life sciences mergers and acquisitions (M&A) investment totaled US$105 billion in the first 11 months of 2022, with total deal value well down on 2021, according to the 11th edition of the annual EY M&A Firepower report. However, the close of the year witnessed a sharp uptick, with Johnson & Johnson and Amgen both making multibillion dollar acquisitions. The industry holds record levels of Firepower – defined as a company’s capacity to do M&A based on the strength of its balance sheet – but most companies chose to hold off in 2022.

The life sciences industry’s generally cautious M&A stance aligns with broader global dealmaking trends, with an overall drop in 2022 M&A investment worldwide reflecting the uncertainties of ongoing macroeconomic volatility, heightened by ongoing geopolitical tensions.

EY research found that for the first 11 months of the year biopharma M&A value dropped 42% compared with 2021, with Pfizer’s US$11.6 billion acquisition of Biohaven the single largest deal up to December 2022. Alliances remain a significant focus for biopharma and companies’ M&A strategies. However, Amgen’s mid-December announcement that it will pay more than US$28 billion for Horizon Therapeutics may be a signal that the industry is ready to return to the big dealmaking table in 2023.

MedTech is facing industry-specific headwinds such as staffing shortfalls across the health care sector, pushing up costs and driving cutbacks in procurement of medical devices that saw M&A value fall 62% in 2022. Following a bonanza 2021 for MedTech M&A, the fourth quarter of 2022 significantly lifted the overall deal value for the sector, with Johnson & Johnson’s US$16.6 billion acquisition of Abiomed, a heart recovery specialist company, representing about 42% of the total MedTech M&A spend for the year.

Despite the limited activity in 2022 and ongoing global disruption, the spike that occurred late in the year underscores that the life sciences industry has strong structural factors favoring M&A. Valuations for smaller companies have plunged and IPO and special purpose acquisition company (SPAC) activity has dramatically slowed, leaving small biotechs and MedTechs with fewer options for accessing public capital, and greater incentive to seek an exit via acquisition.

Deep reserves of Firepower remain

While biopharma alone held more than US$1.4 trillion in dealmaking Firepower at the beginning of December 2022, with reduced deal premiums being an enticement to use that capital, the industry also has fundamental strategic reasons to pursue acquisitions. The industry’s leading players face a growth gap over the next five years as a wave of market-leading biopharmaceuticals lose patent exclusivity and face market competition from cheaper generic and biosimilar products.

There is also an abundance of potential acquisition targets with an ongoing “innovation renaissance” sweeping through the life sciences sector. This wave of innovation includes a significant clinical pipeline of cell and gene therapies and the mRNA platform, which delivered vaccines against COVID-19. In addition, breakthroughs in digital technologies and artificial intelligence (AI) offer companies the opportunity to deliver better personalized care through virtual and remote channels, as the industry continues its evolution toward a more connected, data-driven “Intelligent Health Ecosystem.”

Subin Baral, EY Global Deals Leader, Life Sciences, says:

“Though biopharma and MedTech companies have been acting cautiously on their M&A activity for most of 2022, the right deals are still getting done. M&A financing has become more challenging with rising interest rates and inflation, and the impact of US legislation like the Inflation Reduction Act; the FTC’s [Federal Trade Commission] tougher stance on antitrust is also an obstacle. But companies have the Firepower to use, and if they can find deals that offer the right strategic fit, they will not hesitate.

In the longer perspective, we may look back on 2022 as the calm before the storm; in the next 12 months companies may unleash their Firepower not just to bring new innovation into their portfolios, but to access the tech and data tools that can transform and improve their entire operating models.

As companies seek to secure growth and future-proof their business models amid a rising tide of innovation, M&A will need to take a central strategic role.”

As companies attempt to protect their portfolio's existing “crown jewels” while adding new value through acquisitions, the EY M&A Firepower report identifies three main areas where companies can seek to optimize the benefits of dealmaking:

  1. Attempt to de-risk deals as far as possible.
  2. Understand what kinds of deals have worked successfully in the past and why.
  3. Ensure they have the right processes in place to integrate new acquisitions.

The full EY report is available at


Notes to editors

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About the EY M&A Firepower report

Now in its 11th year, the EY M&A Firepower report measures companies’ capacity to fund transactions based on the strength of their balance sheets. It has four key inputs: 1. cash and equivalents; 2. existing debt; 3. debt capacity, including credit lines; and 4. market capitalization. In constructing the model, the following assumptions were made: first, a company will not acquire targets that exceed 50% of its existing market capitalization; second, the debt/equity ratio of the combined entity created by a transaction cannot exceed 30%.

While some life sciences companies have made acquisitions that go beyond these upper limits, the intent is to apply a uniform methodology to measure relative changes in Firepower. EY Firepower measures capacity to conduct M&A transactions financed with cash or debt. It does not measure the ability to conduct stock-for-stock transactions. However, increases in a company’s stock price do boost its Firepower under the EY Firepower’s formula, largely because equity enables companies to borrow more to finance transactions.

About EY Health Sciences and Wellness

The rise of the empowered consumer, coupled with technology advancements and the emergence of digitally focused entrants, is changing every aspect of health and care delivery. To retain relevancy in today’s digitally focused, data-infused ecosystem, all participants in health care today must rethink their business practices, including capital strategy, partnering and the creation of patient-centric operating models.

The EY Health Sciences and Wellness architecture brings together a worldwide network of 34,000 professionals to build data-centric approaches to customer engagement and improved outcomes. We help our clients deliver on their strategic goals; design optimized operating models; and form the right partnerships so they may thrive today and succeed in the health systems of tomorrow. We work across the ecosystem to understand the implications of today’s trends, proactively finding solutions to business issues and to seize the upside of disruption in this transformative age.

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