4 minute read 5 Apr 2021
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Life sciences executives taking longer-view look at M&A strategy

The pandemic accelerates life sciences portfolio review as companies search for new markets and capabilities.

In brief
  • Life sciences executives focus on digital and customer engagement after pandemic accelerates virtual health care.
  • Most (89%) life sciences companies say profit declined in 2020, but the pandemic shock is expected to be short-lived.
  • Highest priorities for C-suites are accelerating portfolio reviews and M&A bolt-on acquisitions to add capabilities or new markets.

The COVID-19 pandemic has forced life sciences companies to examine all aspects of their operations, and in many cases, accelerate portfolio reviews as they focus on investing in their core business for the post-pandemic future.

Life sciences executives in the 23rd edition of the EY Global Capital Confidence Barometer (pdf) say that they are increasing investments in areas such as digital transformation (67%) and customer engagement (65%) to help grow long-term value. These investments make sense as the pandemic changed the way patients receive care, with telemedicine becoming more pervasive and greater use of virtual technologies to conduct clinical trials.

The pandemic has also had a mixed impact on life sciences companies. Indeed, 89% of executives saw a decline in profitability because of the pandemic. Although many big pharmas have been at the forefront of developing and delivering COVID-19 treatments and vaccinations, other biopharmas were affected. Patients were unable or unwilling to see their physicians, resulting in fewer new prescriptions written and treatments administered (e.g., cancer drugs). Medtech companies were hurt by delays as hospitals temporarily halted nonessential procedures.

But the impact on profits is expected to be short-lived: 76% expect a return in profitability during 2021 or 2022, underscoring that while there may be short-term disruptions in treatments, there is little elasticity in long-term demand.

One way life sciences companies are responding to the pandemic is by examining their long-term business plan to ensure the portfolio aligns with future needs. A vast majority of executives (90%) said that they had conducted a comprehensive strategic and portfolio review, with 56% of respondents noting the pandemic accelerated the timing of the review.

Strategic portfolio review


of life sciences respondents said they had conducted a comprehensive strategic and portfolio review.

If the pandemic highlights the validity of the digital investments life sciences companies have already made, it also underscores the need for additional investment. A majority of life sciences executives (61%) believe they have overperformed on digital transformation, and 67% expect to increase that investment.

Digitization has been an area of focus in life sciences over the last decade, but the pandemic pushed companies to demonstrate how quickly they could provide health care products and services in a virtual environment, including conducting drug trials and serving patients through telehealth.

The latter also factors into the other investment priority: 65% plan to increase their strategic focus and investment in customer engagement.

Geopolitical uncertainty will be a key factor affecting future investments: 89% of executives say they either stopped planned investments in the past 12 months or are delaying them until they get further clarification.

Bolt-on acquisitions favored

Many life sciences executives are also taking a wait-and-see approach to dealmaking in 2021, after the sector was one of the more active ones in in 2020. Only 43% of executives said they expected their company to actively pursue M&A in the next 12 months, below both the sector average since 2010 (46%) and the response of their global peers (49%). Aside from being more active than most sectors in 2020, the current high valuations of many targets may make it hard for companies to justify the cost of M&A relative to investing internally.

In fact, two-thirds of life sciences companies said they canceled or failed to complete a planned acquisition in the past 12 months, with disagreement on price or valuation the most frequently cited reason.

When M&A happens, smaller bolt-on acquisitions are the deal of choice (41%). As focused companies tend to outperform those less focused, companies are using bolt-ons to add capabilities in areas that are strategic priorities.

Seeking new operational capabilities

Another 39% say acquisitions would be focused on increasing operational capabilities. These acquisitions could include investments into strategic priorities, such as cell and gene therapy (CGT) and the RNA technologies that have proved effective in developing vaccines against COVID-19.

Separately, almost half say the main strategic drivers for pursuing acquisitions center on tools to achieve future growth, such as new types of products from adjacent business (27%) and talent (22%). As a result of a changing regulatory climate, another third of companies are also responding to changes in the global trade picture and the need to secure or reshore supply chains. This concern became an increasing priority because of COVID-19.

Preparing for the future

The pandemic highlighted the need to bolster digital capabilities, changed how patients expect to receive care and accelerated a new technology for developing vaccines.

Even as the timing of when we move past the pandemic is uncertain, what is certain is the need for life sciences companies to continue to re-evaluate their long-term strategy and invest in the assets and capabilities that will enable it. And the fastest way to do that is through M&A or partnering, rather than to build it yourself.


The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.