Smaller, smarter deals: Global Life Sciences dealmaking volume stable but value down as companies turn to innovative early-stage assets

• Global dealmaking volume stable in 2024, but value down 41% year-on-year to US$130 billion as companies pivoted to smaller, smarter deals
• 19 Irish life sciences M&A transactions last year, up 171% compared on 2023 deal volume
• Irish deals valued at €198 million, representing a year-on-year decline of 86% due to the absence of mega deals
• Artificial Intelligence and China increasingly important areas of focus and investment, with leading bio-pharma companies holding an estimated US$1.3 trillion in ‘firepower’

Dublin, 14 February 2025: The global life sciences industry has pivoted from major dealmaking to smaller, smarter deals with mergers and acquisitions (M&A) investment totalling US$130 billion in 2024, a 41% decrease compared with US$222 billion in 2023, as the industry turned away from the big deals for de-risked assets that characterised 2023. Though global deal value was down, volume remained stable, however average deal size dropped as companies shifted focus to look for earlier-stage opportunities with lower price tags. That’s according to the 12^th edition of the annual EY M&A Firepower report, which tracks global M&A investment in life sciences.  

According to the report, instead of investing multibillions to acquire de-risked, market-ready assets, more than half (51%) of 2024 biopharma deals targeted earlier-stage (pre-Phase III) assets, trying to tap innovation at an earlier point in the development cycle. The slower pace of activity in 2024 may be a natural ‘reset’ after the heightened activity of the previous year.

In Ireland, 19 M&A transactions took place across the life sciences sector in 2024, representing an increase of 171% compared to 2023 deal volume, where seven deals were completed. The disclosed enterprise value of these 19 deals was €198 million, which represented a year-on-year decline of 86% compared to 2024. However, this is driven primarily by the absence of a mega deal during 2024, with Amryt Pharma’s sale to Italian pharmaceutical company Chiesi Farmaceutici in 2023 at an enterprise value of €1.3 billion, accounting for almost 85% of total value in 2024.  Excluding this deal would see M&A value for 2024 up by 76% year on year in Ireland. In relation to Irish equity capital fundraising activities, there was a notable increase in the number of deals in 2024 in the sector, with 17 companies successfully raising growth capital totalling €503 million. This equates to a 254% increase in value terms compared to the €142m funding raised in 2023.

Johanna McLoughlin, Partner and Life Sciences Sector Lead at EY Ireland, says:

“Globally in 2024, large pharmaceutical companies focused on integrating acquisitions made in 2023. At the same time, the appetite for M&A remained strong, with biopharma companies signing more deals in 2024 than the previous year, focused in particular on smart, bolt-on moves, that complement or expand an existing business and product offering.

“This focus on innovative early-stage assets is expected to continue into 2025, although there is also growing optimism around the business environment, which could see the industry unleash more of its US$1.3 trillion in ‘firepower’. There is likely to be an increased focus on securing the next generation of growth for many in the life sciences sector as 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.”

Fergal McAleavey, Corporate Finance Partner at EY Ireland, says:

“While the total disclosed value of life sciences deals in Ireland was down in 2024, we saw a significant increase in activity and the volume of deals across the year, with growth of 171% compared to 2023. This increase highlights the quality of Irish businesses operating in the life sciences sector currently. More than seven in ten (74%) of the deals in 2024 were backed by international companies and private equity firms, up from 71% in 2023, reflecting global firms’ continued interest in the Irish life sciences sector and their favourable view of Ireland as a suitable place for investment.

“In relation to equity capital fundraising activities, we saw 17 Irish life sciences companies successfully raising growth capital last year, with Nuritas, SynOx Therapeutics, PrivaPath Diagnostics, Luminate Medical, CroiValve, Mainstay Medical, Loci Orthopaedics and 2024 EY Entrepreneur Of The Year finalist Fire1 all having raised in excess of €10m during 2024. This investment will give these innovative companies the opportunity to continue to scale and build their businesses and bodes well for the continued growth of a vibrant life sciences industry here in Ireland.”

Global 2025 dealmaking outlook

The EY M&A Firepower report reveals there are strong structural reasons to expect a return to dealmaking; the industry is still holding 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 report also found potential restraints to the 2025 market; the reduced number of high-quality de-risked assets, the ongoing margin pressure on life sciences companies reducing appetite for big spending and the fact that the most prized targets are still commanding high premiums in the market (a median of 75% in 2024, well above historical norms). 

The life sciences AI opportunity

According to the EY report, a surge in life sciences artificial intelligence (AI) partnerships highlights the opportunities the technology offers to life sciences companies, resulting in over US$55b in potential deal value, spread over more than 330 deals in the past five years. Recursion Pharmaceuticals completed the largest life sciences AI M&A deal to date in August 2024, acquiring Exscientia for US$712m and most leading life sciences companies have now established one or more AI partnership. AI seems to offer gains across the value chain from operations to commercial strategy. However, the report details three challenges the industry will face to successfully partner with these technology companies: finding the right data strategy, learning to use AI end-to-end, and getting education and integration strategies in place across the firm.

China: widening the search for innovation value

As life sciences companies widen the search for new value drivers beyond the traditional fields of innovation, the EY M&A Firepower report reveals China is becoming an increasingly important research and development (R&D) target for companies seeking to license-in antibody-drug conjugates (ADCs) and other novel oncology treatments. The first-ever full buyout of an innovative Chinese biotech by a big pharma saw AstraZeneca pay US$1.2b to acquire Gracell Biotechnologies Inc in 2024. Additionally, one of the biggest potential value biobucks deals in the US (where there could be milestone payments if the alliance meets its clinical and commercial goals) of 2024 was Novartis/Shanghai Argo Biopharmaceutical Co Ltd ($4.2b). The report also notes that approximately 85% of China out-licensing deals are focused on oncology. However, challenges to the growth of China’s life sciences innovation economy include the US BIOSECURE Act, due to take effect in 2032 and the uncertainties of the China-US relationship under the incoming US administration.

Looking to 2025 and beyond:

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

The full EY report is available here.

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About the EY M&A Firepower report

Now in its 12th year, the EY M&A Firepower report measures companies’ capacity to fund transactions based on the strength of their balance sheets. It has four key inputs: 1. cash and equivalents; 2. existing debt; 3. debt capacity, including credit lines; and 4. market capitalization. In constructing the model, the following assumptions were made: first, a company will not acquire targets that exceed 50% of its existing market capitalization; second, the debt/equity ratio of the combined entity created by a transaction cannot exceed 30%.

While some life sciences companies have made acquisitions that go beyond these upper limits, the intent is to apply a uniform methodology to measure relative changes in Firepower. The EY Firepower report measures capacity to conduct M&A transactions financed with cash or debt. It does not measure the ability to conduct stock-for-stock transactions. However, increases in a company’s stock price do boost its Firepower under the EY Firepower report’s formula, largely because equity enables companies to borrow more to finance transactions.