The Present and Future of M&A: Q&A with Subin Baral

Subin Baral
Global life sciences deals leader
EY

The past few years have been a roller coaster ride for M&A in pharma and biotech. After the highs of the pandemic came crashing down, 2024 saw interest return to this sector in the industry. Subin Baral, global life sciences deals leader at EY, spoke with Pharmaceutical Executive about the past year in M&A and what 2025 potentially holds.

Pharmaceutical Executive: How significant an issue is pricing and access to drugs and medical devices?
Subin Baral: In general there is a steady trend towards need for more clinical and even real-world evidence to validate pricing levels and win reimbursement, and the provisions of the Inflation Reduction Act in the US have pushed drug pricing in particular up the agenda. The IRA provisions make it more difficult to evaluate portfolio assets, since they may be affected in the near future by tightening restrictions on price for a particular drug class or therapeutic class, and this is a challenge for dealmakers. Within the industry there is some expectation that the new administration in the US may relax or remove the IRA provisions, which would potentially help unleash M&A in 2025 and beyond.

PE: How big of an impact is digital transformation expected to have?
Baral: Digital transformation has been held back by lack of investment at scale in the life sciences, but we are seeing technologies begin to win validation, with AI at the forefront. We saw a record 87 deals targeting AI technology in 2024, including Recursion’s deal to merge with Exscientia, probably the biggest pure AI deal in the life sciences space to date. We have particularly seen a focus on R&D, with 87% of AI dealmaking in the sector focused on using AI to improve R&D efficiency. Bending the cost curve on drug development would be a huge result for the industry, but in fact there are opportunities for AI, and other digital technologies, across the life sciences value chain. To make digital transformation work, however, life sciences companies need to learn how to work most effectively with tech partners, which means setting expectations correctly, and understanding the differences in workflow, mindset and culture more generally, all key themes in successful partnering.

PE: What trends have been identified in R&D within the Pharma industry?
Baral: Oncology continues to be the biggest focus for Pharma dealmaking, since the relentless innovation in that field has made it the biggest and the highest-growth therapeutic area. However, we are also seeing a resurgence in R&D in the immunology and CNS fields, among others, which have attracted dealmaking spend in the past two years. GLP-1, and other next-generation anti-obesity medicines, have also been a huge breakthrough, and the scale of the clinical and commercial opportunities from anti-obesity R&D are drawing many companies into this space. The other over-arching key trend is the move towards more complex modalities, including antibody-drug conjugates (ADCs), next-generation radiopharmaceuticals, and cell and gene therapies. One interesting development is the emergence of Chinese R&D as an important target for dealmakers–innovative Chinese biotechs have attracted greatly increased alliance funding from Big Pharma players, with ADCs and oncology therapies in general the major focus.

PE: How are evolving customer expectations influencing strategy?
Baral: This is one of the biggest areas where we can expect digital technology and AI to make a big difference to strategy in the long term. With the amount of data available in health care today, from genetic data through behavioral data and all the other personal information captured in the digital footprint, we have the tools for health care to potentially become far more personalized and pro-active, and to bring to care delivery the quality of user experience we expect in other areas of life, from retail to travel. However, this involves using data and technology more effectively and at greater scale than the industry does at present. In MedTech we already have many “smart devices” that can capture user data at levels never seen before–the challenge is to use that data to improve the experience for the user herself, and that’s a challenge the industry will be able to tackle in a more digital, less analog future.