2023 pharma M&A trends: a year in review
AI-translated from the Chinese original · editorially reviewed
The pharma M&A market rebounded after the pandemic, with deal value surging past USD 200 billion. Large transactions were led by pharma giants, and the market tilted toward buyers. Despite heightened regulatory scrutiny, most deals still closed successfully. Looking ahead to 2024, pharma companies are expected to focus on cost management and hunt for innovative targets, with total deal value holding at USD 225-275 billion.
Big fish eat small fish: cash-rich pharma giants and high-potential targets
In 2023, the pharmaceutical M&A market gradually emerged from the pandemic's shadow, with both deal value and volume returning to pre-pandemic levels. Notably, while deal count slipped 8% year over year, total deal value grew 37% to break USD 200 billion. The reason traces back to the pandemic, which stalled negotiations on major transactions for extended periods; with everything reopened, the industry gravitated toward higher-value, lower-risk targets, pushing deal values up.
The "big keep getting bigger" trend in pharma is now unmistakable. By size, the largest deals included Pfizer's USD 43 billion acquisition of Seagen, Amgen's USD 27.8 billion acquisition of Horizon Therapeutics, Bristol Myers Squibb's USD 14 billion acquisition of Karuna Therapeutics, and AbbVie's USD 10.1 billion acquisition of Immunogen. The Pfizer deal alone displays the hallmarks of today's M&A wave: a pharma giant, ample cash, and a target with major growth potential.
Which therapeutic areas attracted the money?
Several therapeutic areas ran especially hot in the 2023 deal market: oncology, immunology, and weight-loss drugs. According to Leerink, oncology topped deal value with 11 transactions totaling USD 49 billion, followed by immunology with 7 deals worth USD 25 billion. Rare diseases also saw 9 deals reaching USD 13 billion.
Notably, the weight-loss market was a highlight of the year. After the major successes of Novo Nordisk and Eli Lilly, a gold rush began as drugmakers piled in. Key deals included Roche's USD 2.7 billion acquisition of obesity drug developer Carmot Therapeutics and AZ's USD 2 billion investment in China's Eccogene, while weight-loss giant Novo Nordisk was not to be outdone, spending USD 500 million to acquire Embark Biotech to cement its leadership.
A market tilted toward buyers
Pharma giants currently hold more than USD 1 trillion in investable capital, near an all-time high. By contrast, more than half of biotech companies lack enough cash to sustain operations beyond 18 months, tilting the entire M&A market toward buyers. Sellers, however, can offset this disadvantage through milestone payments tied to late-stage drug development.
Many biotech companies are therefore turning to the IPO market, private equity, and private credit. Compared with a traditional acquisition, these routes offer greater operational flexibility and more R&D funding while preserving control over key drug programs.
The challenge from regulators
No discussion of M&A is complete without regulatory review. In recent years the Federal Trade Commission (FTC) has stepped up scrutiny of pharma-industry deals. According to Mergermarket research, from 2021 through the first half of 2023 the FTC issued "second requests" on 24% of transactions, requiring companies to submit additional documents to resolve concerns — up from 15% in 2015-2020. The FTC has also required divestitures of products that could create monopolies.
The year's most contested deal was Amgen's acquisition of Horizon Therapeutics. The FTC initially sued to block the transaction, but Amgen ultimately agreed to several antitrust conditions and the case ended in an out-of-court settlement, allowing Amgen to complete the acquisition.
Judging by the results, regulatory review is not an insurmountable barrier — most deals still close. The biggest effect of more second requests is slowing deal timelines and forcing companies to think through potential antitrust issues before transacting.
Looking ahead to 2024: where pharma M&A goes next
Total annual deal value is expected to hold in the USD 225-275 billion range, with more large deals of USD 5-15 billion likely to emerge.
Facing high inflation and interest rates, drugmakers will increasingly prioritize cost management and profit growth through mergers and acquisitions. With a wave of blockbuster patent expirations looming over the next decade, pharma giants will keep deploying their cash toward innovative, high-growth targets, including gene therapies and biologics.
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