5 minute read 9 Jan 2023
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How life sciences companies can secure value through better dealmaking

By Subin Baral

Global Deals Leader, Life Sciences

Committed to helping life sciences companies create focused business models that outperform. Family-focused. Loves road trips and the outdoors.

5 minute read 9 Jan 2023
Related topics Health Life sciences

Show resources

  • 2023 EY M&A Firepower report (pdf)

Despite a downturn in dealmaking, as companies seek to secure growth through innovation, M&A will need to take a central strategic role. 

In brief
  • 2022 was a slow year for dealmaking in the life sciences but the final quarter saw a major uptick.
  • Conditions are right for major M&A with record firepower and a wealth of targets for 2023.
  • Companies will focus on the right strategic deals, which will include access to data and new technologies to secure future growth.

Looking ahead to 2023, we see three major themes that will shape how the life sciences industry uses its M&A Firepower, defined as the capacity to conduct acquisitions based on the strength of the balance sheet, in the near future:

  1. The industry’s leading players face significant upcoming growth gaps, particularly because of patent expiries looming in the biopharma sector, but it has the Firepower to close these gaps through dealmaking.
  2. Political, economic and regulatory uncertainties are affecting the industry’s deal appetite but falling valuations and declining IPO and SPAC markets are creating a “buyer’s market,” which will prompt the big players to invest in deals.
  3. The most important targets are not only the novel drugs and devices that offer immediate value, but also the innovative technologies emerging outside the sector, including artificial intelligence (AI), big data, robotics and others.

As these changes accelerate, life sciences companies will need to rethink their business models to adapt to the emergence of an intelligent health ecosystem that can deliver more efficacious, cost-effective, personalized care to patients. Dealmaking – both acquisitions and agile collaborations to access innovation both within and beyond the life sciences sector — will play a critical role in how companies evolve and thrive within this new ecosystem. 

Overall, M&A investment for the first 11 months of 2022 has fallen 53% compared to the full year of 2021. In all, 117 deals were signed, a 27% decline compared with 2021.

Biopharma M&A investment fell 42%, with much investment focus going towards alliances rather than acquisitions. MedTech, facing industry-specific headwinds such as staffing shortfalls across the health care sector pushing up costs and driving cutbacks in procurement of medical devices, saw a 62% M&A value drop despite Johnson & Johnson’s US$16.6 billion acquisition of Abiomed in November, the biggest life sciences deal in the first 11 months of 2022.

Yet, though M&A financing is more complex against a background of ascending interest rates and inflation and despite the impact of legislation in the US, in a longer perspective 2022 may come to be recognized as the calm before the storm. The dealmaking dip has the potential to become into a dealmaking deluge in 2023, as companies seek innovation not just in their portfolios but across their entire operating models.

We saw a potential early sign of this shift in December 2022, when Amgen announced it will pay US$28.5 billion to acquire Horizon Therapeutics, and there are strong reasons to suspect Amgen will not be the only big player making a return to the big dealmaking table in 2023.

There are persuasive underlying reasons for life sciences companies to adopt a more aggressive M&A strategy: 

  • Factor 1: The life sciences industry has deep reserves of Firepower. The Biopharma industry alone holds over US$1.4 trillion in Firepower: an 11% increase on 2021, and the highest level recorded since the Firepower report began tracking Biopharma’s deployable capital.
  • Can’t view infographic above? Click here for description.#Drivers and deterrents on life sciences dealmaking in 2023



    Reason Driver or Deterrent
    Record levels of Firepower available to industry Driver
    Despite falling valuations, high premiums remain for most-sought assets Deterrent
    Falling valuations and limited cash runways increases pressure on smaller companies to exit Driver
    Inflation and other macroeconomic uncertainties causing rise in cost of capital Deterrent
    Closing IPO and SPAC window narrows access to public markets for small companies Driver
    Policymaker interventions with uncertain impacts on drug pricing, market access and antitrust regulation Deterrent
    Innovation renaissance makes available a number of high potential new modalities as possible M&A targets Driver
    Alliances, rather than M&A, may assume strategic priority Deterrent
    Looming growth gaps due to patent expiry require inorganic growth to close them Driver
  • Factor 2: The industry faces looming growth gaps, particularly with regard to Biopharma patent expiries. Companies need strong pipelines and deep therapeutic focus to realize value, which will give them further incentive to seek high-value acquisitions.  
  • Factor 3: There is an ongoing innovation renaissance in the life sciences sector, including advances in cell and gene therapies, mRNA, digital technologies and data analytics. This offers companies potential access to products that can secure their future growth.
  • Factor 4: Following the market corrections of 2021-22, the valuation drop in the sector will increase the incentives to acquire, as a “buyer’s market” takes shape.
  • Factor 5: Smaller life sciences companies also have reduced access to public markets as IPO and SPAC funding becomes more challenging, narrowing the options for smaller companies. The need for financing will drive smaller companies toward M&A.

Moreover, life sciences companies may face competition from acquirers from outside the sector, and risk missing growth opportunities if they fail to make a move. For example, private equity funds have Firepower to deploy, and analysts have suggested that PE may increasingly take over from traditional life sciences companies in funding drug development and other areas of R&D.

How to make dealmaking work

It is imperative that companies give serious strategic thought to how to identify and execute the most effective M&A moves possible. We see three main areas where companies can seek to gain the maximum value from deals:

  1. Attempt to de-risk deals as far as possible
  2. Analyze what kinds of deals have worked successfully in the past
  3. Have good processes in place to integrate new acquisitions

Successful M&A depends not only on completing the deal efficiently and cost-effectively, but on having the right teams and processes in place to achieve rapid and effective integration of the companies and teams being brought together. In general, companies should follow this five-point plan for M&A success:

  1. Clearly identify and define the value drivers and guiding principles of the deal to ensure alignment throughout the process.
  2. Establish an end-to-end plan to guide the company through each phase of the M&A process, with governance and integration leaders and teams to take responsibility for each stage of the process.
  3. Focus upfront on successful cultural collaboration between the companies and finding the right level of integration versus independence: some acquisitions may suit full integration, others will add more value if they preserve their own research culture as far as possible.
  4. Make optimal use of tools and technology to manage timelines, monitor work streams, and identify and deliver synergy value.
  5. Focus on change management and communication to achieve buy-in to a common purpose and vision, help align the broader organizations and reduce the risk of workforce uncertainty and demotivation.

The life sciences industry has got the resources, the incentives and the opportunities to lean into making major, transformation M&A moves again in 2023. But companies must not lose sight of the fact that finding and acquiring the right target is only the first step — the process of M&A must be optimized end-to-end if it is to deliver the long-term results companies are seeking. 


Despite a downturn in dealmaking in 2022, the life sciences industry has an opportunity to begin making major M&A moves again in 2023. M&A, alliances and partnerships will inevitably be an important factor in how companies succeed in accessing these innovations.

About this article

By Subin Baral

Global Deals Leader, Life Sciences

Committed to helping life sciences companies create focused business models that outperform. Family-focused. Loves road trips and the outdoors.

Related topics Health Life sciences