What’s Driving Pharma Investors in 2025

Pharmaceutical Executive: What’s causing the increase in M&A in 2025?
Ash Shehata: I think a lot of things. This year, it's really about smart diligence. At the end of the day, there's a lot of capabilities that we think are going to be driving that. Commercial success (operational and financial) and tax are driving a lot of the trends we're seeing. There's also some bigger groundwork underway for the healthcare and life sciences industry around global innovation, fueled by the future of AI.

Clearly there's an impact right now on the financial markets due to inflation lowering. That's going to drive deal activity a bit more this year, although people are maybe a little bit more cautious of what happens in the out years. At the end of the day there's a generally optimistic environment for the biopharma market. As we start to see capital market improvements, biotechs are clearly going to be back on the radar for this year, and we believe that will continue beyond this year. A lot of the portfolios that are sitting in private equity, with venture capitalists, as well as in corporates are also undergoing quite a bit of review. That's also going to drive a variety of deal activity. There's a lot of fundamentals, whether it's economics, some of it is just timing in the market trajectory. It's hard to even have this discussion, of course, without the political impact, but clearly that's also starting to get factored in as well. All in all, it's driving a pretty good level of activity.

PE: Do you think that the industry was waiting to see the results of the election before committing to a strategy for the coming year?
Shehata: There may have been a little of that, but I think a lot of the issues we've seen across the industry have generally been bipartisan. That’s true whether we talk about things like the IRA, transparency in pricing, negotiating contracts, and all of those things. Some of the pressures that we're seeing on the payment side, through the payers, the discourse around PBMs, all of those things have generally had somewhat of a bipartisan support going into the election year.

When those unknowns became knowns, as we got closer to election day, and clearly now, the industry showed a willingness to go forward. You have a combination of the financial markets easing and the election getting past us now, that's making for a pretty good and enticing deal market right now. That might go at least until the midterms, when we might see yet another turn of the election results. But I think that is creating a little bit of pressure right now to try to get some of these deal deals done, as long as the financial environment remains positive.

PE: What are the other factors that you think are most likely to impact deal activity?
Shehata: The big issue we start to see looking down the road is whether the true impact of technology and AI is going to start to take hold. We think that will take have a significant role in driving development around healthcare and life sciences deals and even acquiring innovative technologies. But at the end of the day, some of those impacts, at least in the pharmaceutical life sciences industry, will likely be delayed in 2025.

It's optimistic, but I think a lot of the novel and innovative therapies may not get the full benefit for some of the AI discovery programs.