EY Firepower report: life sciences dealmaking – trends in 2025  

Life sciences dealmaking volume is stable, but value is down – how will smaller, smarter deals help to ensure a more confident future?

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Closeup chess board with figures, cute preschool boy at the moment of anticipation while his opponent girl is making her move.

How will smaller, smarter deals help life sciences companies shape the future with confidence?

Life sciences dealmaking volume is stable, but value is down. The 2025 edition of the EY Firepower report explores how life sciences companies can secure a more confident future with smarter, smaller deals.

Key takeaways from the EY 2025 Firepower analysis:

  • 2024: A reset year? Deal value fell in 2024, as life sciences companies turned away from the major M&A plays of 2023 to focus on bolt-ons and other smaller strategic plays.
  • Deal or no deal? Drivers and restraints in 2025. The industry still faces significant growth gaps, has significant M&A Firepower and is expecting policy tailwinds from the incoming US administration; however, high costs and a lack of prime targets may hold dealmakers back.
  • 2025 — Year in prospect: While major deals could come back on the agenda, the past 12 months have shown the industry is also widening its search for value, looking earlier in the product cycle, increasing strategic focus on the AI opportunity and tapping new opportunities including the new wave of innovation from China’s emergent biotech ecosystem.
  • Why deals should be at the center of life sciences strategy. EY analysis shows that dealmaking is critical to growth in the life sciences sector, with the majority of leading company revenues coming from products derived from dealmaking; companies need to partner successfully to shape their future with confidence.

Read on to learn more about the full findings, or select a tile above to skip directly to that topic.

2024: A reset year? 

Source: Capital IQ, EY analysis.


Life sciences M&A fell 41% in value in 2024 as the industry turned away from the big deals for de-risked assets that characterized 2023. For large pharmaceutical companies, 2024 may be a “reset year,” as they digest and integrate the acquisitions made the previous year.

The ongoing regulatory challenges from the pro-active Federal Trade Commission (FTC) and the ongoing implementation of the Inflation Reduction Act (IRA) in the US may also have led to the slow pace of activity this year. With a new administration incoming in January 2025, some of these regulatory uncertainties may be resolved, unlocking dealmaking potential in the new year.


Deal or no deal? Drivers and restraints in 2025

Source: Capital IQ, EY analysis.


At the start of 2025, there are strong structural reasons to expect a return to dealmaking, though some of the regulatory and policymaking aspects remain unclear going into the new year.

Drivers:

  • The industry still holds US$1.3 trillion in dealmaking Firepower, meaning dry powder is there to make bigger deals – though the Firepower is unevenly distributed, with Novo Nordisk and Eli Lilly dominating.
  • The industry still faces upcoming growth gaps, with patent expiries set to open up US$240 billion in growth gaps for the top 25 biopharma companies by 2030.
  • The industry is already experiencing significant post-election tailwinds in dealmaking sentiment as companies anticipate potential new policies, including corporate tax rate cuts and a possible roll-back of the IRA’s drug pricing provisions and the FTC’s interventionist stance, as part of a general deregulatory shift.

Restraints:

  • The key assets remain costly going into the new year, with companies paying high premiums for desirable targets, relative to recent historical averages.
  • After the 2023 M&A spree, there are relatively few highly-prized de-risked assets available for companies to acquire; unconventional targets like AI and tech companies present challenges in terms of culture and integration.
  • Margins remain a concern across the life sciences industry, with costs for all inputs high and bottom lines affected, potentially with a chilling effect on capital allocation strategies.

2025: Year in Prospect

Source: Capital IQ, EY analysis.


Smaller, smarter deals

Despite the headline number drop, life sciences companies did not turn away from dealmaking in 2024. In volume terms, dealmaking was stable, but average deal size dropped, as companies shifted focus to look for longer-range opportunities and milestone-based deal structures to bridge the valuation gap between buyers and sellers.

Instead of investing multi-billions to acquire de-risked, market-ready assets, companies targeted earlier-stage (pre-Phase III) assets, trying to tap innovation at an earlier point in the development cycle.

Companies are also looking for unconventional growth opportunities – including in the emerging AI field.

The life sciences AI opportunity

Source: Capital IQ, EY analysis.


The surge in AI partnerships and acquisitions in the past five years signals the opportunities the technology offers to life sciences companies – the biggest focus is on using AI to optimize drug discovery and development, but AI offers gains across the value chain from operations to commercial strategy.

Though life sciences companies are looking at AI opportunities across the value chain, one of the biggest challenges going forward will be finding a way of successfully integrating these technology companies to the demands of the life sciences industry. The EY CEO Confidence Index shows that life sciences CEOs see emerging technologies, including AI, as the biggest disruptor of the next 12 months, alongside access to talent. This signals the scale of the opportunity and challenge this new wave of innovation brings for the sector. Working with the disruptive potential and talent present in the rapidly expanding AI sector means life sciences companies will need to adapt their own mindsets and operational approaches to get the maximum from these cross-sector collaborations. In particular, life sciences companies need to build these capabilities:

  • The right data strategy: AI needs data, but life sciences data carries a heavy regulatory burden and companies need to negotiate this conflict intelligently.
  • Using AI end-to-end: AI needs to be embedded in processes and workflows for maximum efficacy, not used as a one-off tool for problem-solving.
  • Education: Life sciences teams need confidence in using and trusting AI, but also need to be able to critique outputs and feedback to optimize workstreams.
  • Integration: companies need to solve the integration at every level from IT systems to people and cultures – tech and life sciences need to educate each other and form a true marriage for maximum mutual benefit.
AI companies seriously thinking about partnering with pharma need to understand the industry’s expectations.

China: Widening the search for innovation value

Source: Capital IQ, EY analysis.


Life sciences companies are widening the search for new value drivers beyond the traditional fields of innovation. Novel modalities, from next-generation radiopharmaceuticals to multi-specific antibodies, are firmly on the dealmaking radar, after antibody-drug conjugates (ADCs) captured billions in M&A investment in 2023.

Digital technologies and AI are opening new frontiers in health care. R&D is also booming in geographies traditionally off the innovation map, particularly China, which is becoming an increasingly important target for companies seeking to license-in ADCs and other novel oncology treatments.

One of the biggest challenges to the growth of the new China life sciences innovation economy will be the US BIOSECURE Act due to take effect in 2032, which may limit companies’ ability to collaborate across borders. With the China-US relationship facing an uncertain future in the new administration, life sciences innovation is just one of the areas where a new working model needs to be negotiated in the years ahead.

Our industry has to keep reinventing itself with innovative R&D pipelines.

Why deals should be at the center of life sciences strategy


  • Products acquired through M&A generate the largest share of leading biopharma companies' overall revenues (45% in 2023).
  • A decade ago, products derived from in-house R&D were the biggest source of company sales, but revenues from M&A products have outstripped organic revenue growth with a 6.9% 10-year CAGR.
  • Alliance/joint venture-derived products have grown even more dramatically, with an 6.9% 10-year CAGR, and represented 20% of company revenues in 2023.
  • Projections indicate that by 2028 over two-thirds (68%) of biopharma revenues will come from products acquired through M&A, joint ventures (JVs) or alliances.
  • With dealmaking set to remain the key to growth, life sciences companies will need a dynamic and pro-active partnership strategy to approach the future with confidence.

In conclusion:

  • Deals will continue at the center of life sciences strategy, and companies need a robust partnering approach to secure future growth.
  • Smaller, smarter deals offer strong potential returns on investment for companies with the agility to tap these strategic opportunities.
  • Therapeutic area focus will remain a key priority in dealmaking, and we expect portfolio prioritization to continue with companies divesting non-core assets and investing in priority areas.
  • Opportunities outside traditional technological and geographical areas of innovation – such as AI startups and China biotech – will continue to offer potential accelerated routes to growth.
  • Across all dealmaking strategies, end-to-end execution is critical to realizing a strong return on investment, with culture and change experience at the center of execution strategies.   
  Subin Baral

Companies need to focus on getting dealmaking right, from targeting to executing, to craft a partnering strategy that will enable them to shape the future with confidence.

Subin Baral
EY Global Life Sciences Deals Leader

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