Happy Tuesday! I'm back in New York City after spending nearly a week in San Francisco for the annual JPMorgan Health Care Conference – the largest gathering in the U.S. of biotech and pharma execs, investors and analysts (and health reporters, of course).
The week featured questions about the incoming Trump administration, updates on business outlooks and drug portfolios, heightened security on the ground and, for the first time in recent memory, sunny weather in San Francisco.
The news kept coming all week, even after the conference ended mid-Thursday. The Biden administration on Friday announced the next 15 drugs included in Medicare price negotiations, which include Novo Nordisk's blockbuster diabetes drug Ozempic and its obesity counterpart Wegovy.
But after companies announced a handful of deals last week, I'll zero in on some takeaways for M&A activity in the industry in 2025.
M&A appears to be off to a good start this year. But the question is whether it will last.
Some of the deals announced during the conference boosted optimism, particularly
Johnson & Johnson's proposed $14.6 billion buyout of Intra-Cellular Therapies. That appears to be the biggest transaction we've seen in the pharmaceutical industry since 2023. That agreement came amid a wave of smaller deals from GSK, Eli Lilly and lesser known radiopharmaceutical companies.
"That's five deals in one and a half business days," Stifel analyst Tim Opler said in an email to clients last week. "This is going to be a very different year for M&A than 2024."
Last year was marked by smaller and smarter deals in the pharmaceutical industry, according to EY's M&A Firepower report released last week. Big pharma sought deals with lower price tags for products and companies in earlier development, which could pay off more handsomely in the long run.
While this year has started off with more activity, the report pointed to potential restraints on M&A in 2025: Ongoing margin pressure on biopharma companies is still "reducing the appetite for big spending," and the most prized acquisition targets in the industry are still commanding high premiums in the market, among other factors that could dampen transactions.
That tracks for some large pharma companies.
During a presentation at the conference after J&J announced its Intra-Cellular Therapies deal, J&J CEO Joaquin Duato said "for us, larger deals are more outliers."
"The majority of the value that we create is through smaller deals and partnerships where we can use our scale," Duato said, pointing to the 75 smaller deals that J&J inked last year.
But the EY report said there are "strong structural reasons to expect a return to dealmaking," including the industry's $1.3 trillion in dealmaking "firepower," which refers to the ability to fund transactions and make deals.
Large pharma companies are also bracing for upcoming drug patent expirations that could wipe out $300 billion in revenues by 2028, putting more pressure on them to offset losses with new products.
Pfizer, for example, faces a wave of patent losses over the next few years that could threaten some $17 billion to $18 billion in annual sales, the company's CEO Albert Bourla said during a presentation at the conference. But Bourla said the company's series of deals in recent years, such as its acquisition of cancer drug developer Seagen, should help offset those losses.
The Trump administration could also offer "significant tailwinds" to the industry by cutting corporate taxes or changing FTC policy "as part of a general deregulatory shift," according to the EY report.
But we'll have to see how this all plays out later this year.
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