Big Pharma executives have not been shy about their desire for deals, but companies have been battling macro headwinds alongside Trump’s policies on drug pricing and tariff threats.
A string of deals has analysts optimistic for more activity in the second half, as total deal value for the first half is nearing the sum of all 2024 deals. Pfizer, Biogen, Merck, Eli Lilly and Gilead still have capital to deploy, according to Jefferies, and there are plenty of biotechs that might fit neatly into some cracks in these Big Pharmas’ pipelines.
First, Sanofi made the second biggest acquisition of the year so far with $9.5 billion offered for rare disease biopharma Blueprint Medicines. Then BioNTech pledged $1.25 billion to buy rival CureVac, which got BMO Capital Markets wondering if the dam was finally breaking and momentum beginning to build. And on Monday, Sage Therapeutics was acquired by Supernus Pharmaceuticals for up to $795 million.
“It feels as if we are starting to get some traction in the sector with some recent ASCO deals (Blueprint Medicines) and now CureVac. Still, macro concerns remain, but we appreciate recent developments in M&A,” BMO’s Evan Seigerman wrote on Thursday.
Jefferies also noted Intra-Cellular, which was acquired by Johnson & Johnson for $14 billion to kick off the year. Thanks to these larger acquisitions, total deal value for this year has already reached $36 billion, compared to $44 billion for all of 2024.
Big Pharma executives have not been shy about their desire for deals, but companies headed into the year still battling macro headwinds and added overhangs of the Trump administration moves on drug pricing and tariffs.
“From a macro perspective, uncertainty from potential sector specific tariffs and new drug pricing policies make investment decisions more challenging for BD teams but we think we have passed ‘peak negativity,’” Jefferies said in a Friday report.
Even if tariffs result from the Trump administration’s Section 232 review, Jefferies thinks they will be “less bad than feared.” Biopharma stocks have been volatile along with the broader markets as policies are proposed and retracted. Jefferies said that this kind of environment does not typically breed deals as companies wait for clarity but sees the markets and valuations stabilizing over the next three to five months.
TThe FDA has been a source of uncertainty, after failing to meet several PDUFA deadlines in recent weeks, while simultaneously meeting or even beating other approval decision timelines. That had been a major concern after the agency gutted its workforce after President Donald Trump took office.
Which Biotechs Will Get Bought?
If the S&P Biotechnology Select Industry Index, the XBI, does stabilize, companies could begin scrambling for deals after a long drought. Jefferies has some ideas of where we might see deals.
Akero Therapeutics is a “highly de-risked attractive M&A candidate,” according to Jefferies. The biotech could have potential sales of $2–3 billion and has strong Phase II data for a therapy in cirrhosis metabolic dysfunction-associated steatohepatitis (MASH). This space has recently been reinvigorated after GSK bought Boston Pharma for $2 billion in May. The space had seemed relatively closed after the May 2024 approval of Madrigal Pharmaceuticals’ Rezdiffra, but now it seems Big Pharma is again interested.
Another potential target Jefferies identified is Scholar Rock, which is expecting an FDA decision for apitegromab in spinal muscular atrophy in September. This would provide a lucky buyer with a near term revenue-generating asset—in addition to a Phase II obesity asset, with for that drug due this month.
Obesity in general could be a major target for Big Pharma, with the leaders in that space —Novo Nordisk and Eli Lilly—signing a flurry of licensing deals of late.
More dealmaking in China, which has been sprouting myriad programs for U.S.-based companies to license, could also be on the horizon. This could unfortunately come at the expense of U.S.-based biotechs, Jefferies noted.
“Pharma/large-cap companies have benefited from in-licensing Chinese assets at attractive valuations, but this makes for a tougher M&A environment for U.S. small-caps as pharma increasingly turns to overseas business development opportunities instead of shopping local,” Jefferies said.
