2024 M&A Recap: Q&A with Subin Baral

Subin Baral
Deals leader
EY Global Life Sciences

After a post-pandemic slump, the life sciences industry saw a strong return for M&A in the latter half of 2023. Many in the industry were curious to see how the first half of 2024 would go, and if the momentum would stay strong. Pharmaceutical Executive spoke with Subin Baral, deals leader at EY Global Life Sciences, about the first half of 2024 from an M&S perspective.

Pharmaceutical Executive: What has defined global M&A in the half of 2024?

Subin Baral: In the Life sciences sector, the momentum from 2023Q4 continued throughout the first half of 2024 as the underlying fundamentals for dealmaking remain robust.

On the demand side, large bio-pharma companies are actively looking for dealmaking opportunities due to (i) loss of revenue due to impending patent cliffs (est. $300B), (ii) insufficient internal R&D pipeline, and (iii) ~$1.5 trillion of Firepower to fund deals.On the supply side, there is a large pool of available assets–approximately 55% of Biotech companies have 24 months or less of cashflows to fund their operations–allowing for the right deals.

Based on our analyses, deal volume in the first half of 2024 was up demonstrated 15% compared to the same period in 2023 (with a significant portion in the range of US$1-4 billion range).Deal value reached an impressive US$87 billion, while down from US $110 billion from 2023 largely due to the Pfizer/Seagen mega-deal. If we normalize for Pfizer/Seagen, the total deal value is up 30% in 2024. The large-scale M&A was unlikely to sustain throughout 2024 and the evidence form the first half is that while we can anticipate one-off mega-deals, smaller transactions will be the major focus. Approximately 60% of the deals were targeting early to mid-stage deals (Phase1-Phase 2) and we expect this trends to continue in the second half of this year.

PE: What can the industry expect in regard to M&A in the second half of 2024?
Baral: We expect the second half to follow a similar trend of the first six months in 2024. Despite some headwinds in regulatory, economic, and geo-political environment, right deals will continue to get done.Given the valuation premiums and lack of quality late-stage assets, early-mid-stage deals will likely dominate the rest of the year. We also anticipate that various partnership models will continue to flourish as buyers consider innovative deal structures, provided there is strategic alignment.

MedTech M&A has been quiet, but the Johnson & Johnson/Shockwave deal is the biggest of the year so far, and a few other moves suggest that some of the big MedTechs may be ready to come back to the table, with high-growth revenue opportunities emerging especially in cardiovascular area.

PE: What has caused the shift to smaller, high potential deals in the life sciences industry?
Baral: As indicated above, ~60% of deals in the first six months comprised of early- or mid-stage assets compared to 44% across the 12 months of 2023, so the shift is clearly visible. There are fewer quality late-stage assets and large deals are harder to justify due to high valuation premiums and execution complexities, including anti-trust and value creation.As a result, companies are travelling further afield in their search for value and break into white spaces, including cancer treatments like next-general radiopharmaceuticals, multi-specific antibodies and protein degradation therapeutics, all of which have the potential to be the “next antibody-drug conjugates”. Exploring these high-potential areas means getting in early on innovations hence deals are getting done earlier in these areas and with milestones at lower upfront prices.

PE: How are companies adapting to the modern regulatory landscape?
Baral: Both the Inflation Reduction Act (IRA) and the Anti-trust provisions are putting significant constraints in dealmaking. Companies are working proactively with the regulators on the anti-trust front, however we are observing considerable negotiations between the buyers and sellers on the revenue potential due to pricing uncertainties. This environment incentivizes companies to pursue smaller earlier-stage deals rather than bigger transactions.

In addition, the geopolitical environment will impact dealmaking; for example, the opportunities in China may be reduced for US companies by the BIOSECURE Act.