Press release

11 Jan 2021 New York, US

Firepower 2021: life sciences M&A falls to one of lowest totals since 2014, as biopharmas refocus on alliances and bolt-on deals

NEW YORK, 11 JANUARY 2021. Life sciences mergers and acquisitions (M&A) activity totaled US$159b in 2020, down from US$306b in 2019, reaching one of the lowest levels since 2014, according to the 2021 EY M&A Firepower report, launched today.

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  • 2020 life sciences M&A value fell to US$159b 
  • Only 12% of biopharma’s Firepower was deployed 
  • Medtech deals were driven by increasing growth gaps with a focus on diagnostics and virtual care

Life sciences mergers and acquisitions (M&A) activity totaled US$159b in 2020, down from US$306b in 2019, reaching one of the lowest levels since 2014, according to the 2021 EY M&A Firepower report, launched today. A single megadeal – AstraZeneca’s December purchase of Alexion Pharmaceuticals – accounted for a quarter of the annual life sciences M&A spend. Setting aside the challenges of doing diligence and closing deals virtually due to the COVID-19 pandemic, persistently high valuations for biopharma and medtech targets kept many would-be buyers on the sidelines, in what was already expected to be a difficult year. In this unfavorable environment, biopharma acquirers refocused their energy on alliances and smaller, bolt-on deals in high-priority therapeutic areas. Medtechs experienced revenue slowdowns due to the cancellation or deferment of procedures in 2020.

The EY report finds that despite 2020 market volatility, life sciences companies closed the year with record levels of Firepower, which EY defines as a company’s capacity to do M&A based on the strength of its balance sheet. Only 12% of biopharma’s Firepower was deployed in 2020, compared with 20% in 2019. Medtech’s Firepower for deals expanded 41% in 2020, reaching an all-time high, yet only 7% was deployed this year, down from 10% in 2019.

Peter Behner, EY Global Health Sciences and Wellness Strategy and Transactions Leader, says:

“Life sciences M&A activity is beginning to rebound but will not reach the heights of 2019. However, multiple factors point to an active deal-making year in 2021. For biopharmas, therapeutic focus, especially in fragmented areas like oncology or immunology, remains an important long-term driver for deals as the need to reduce commercial complexity grows. Moreover, ample liquidity and private equity buyers create opportunities for divestments and further therapeutic depth. Growth gaps could also create new urgency for deals depending on clinical trial delays or sales slow-downs caused by the pandemic.”

These trends point to 2021 being an active year for life sciences deals, following an uptick in deals in the second half of 2020. Biopharmas are likely to focus on smaller acquisitions and partnerships that mitigate financial risk, while medtechs are likely to spend more aggressively on acquisitions to close increasing growth gaps (the difference between companies’ revenue growth and the overall industry’s sales expansion). 

John Babitt, EY LLP Life Sciences Partner, says:

“We believe 2020 was an impressive year for medtech, in spite of procedures getting postponed, as M&A Firepower approached a historical high for the industry of nearly US$500 billion. However, a recently active and frothy IPO market and Special Purpose Acquisition Corporation interest has complicated recent deal activity. As a vaccine is deployed and more predictability returns to the medtech space, it could set up 2021 to be a very active M&A market for the sector.”

Key findings highlighted in this year’s EY M&A Firepower report:

  • Volume over value: There was only one biopharma megadeal in 2020. High valuations and strong public markets likely led acquirers to focus on smaller deals.
  • Alliances remained a way to hedge risk and gain access to must-have technologies or products, especially digital. In terms of both volume and value, biopharma alliance activity in 2020 was thriving: through to November 30, buyers signed 261 partnerships worth close to US$140b in upfront and milestone payments. 
  • Shrinking growth gaps in biopharma: Robust supply chains and quick pivots to COVID-19-linked products, especially vaccines, have helped big biopharmas limit the near-term sales impact caused by the virus. As a result, growth gaps shrank in 2020 from US$60b to less than US$35b.
  • Unused Firepower in medtech: Major medtechs have significant capital reserves. Combined with the fact that at the top 35 medtechs, growth gaps increased by US$9b to US$29b, as procedures were delayed or cancelled, 2021 could be the year that medtechs unleash their dealmaking power. Two of the year’s largest life sciences deals showcase that potential, with opportunities emerging in diagnostics and remote care. 

The full report is available at


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About the EY Firepower

Now in its ninth year, the EY Firepower 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. That is 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.