M&A and IPOs got off to a quick start in 2025 only to crash into a wall of policy challenges. Upfront payment for licensing transactions, however, grew as pharmas looked for less-risky deals.
M&A value in biopharma climbed 101% in the first quarter of the year as compared to the last three months of 2024, setting off a wave of optimism and excitement. But that cheer was quickly met with reality and drugmakers are now back to being cautious, GlobalData reported.
Deal value for the quarter was $37.7 billion compared to $18.8 billion for the fourth quarter of 2024. The bulk of that came from Johnson & Johnson’s $14.6 billion purchase of neuropsychiatric drugmaker Intra-Cellular. Compared to the first quarter of 2024, total deal value declined 32%.
“Apart from a flurry of large-scale deals driven by big pharma, the industry remains cautious given the uncertainty surrounding [President Donald] Trump’s as-yet-unspecified policies,” Ophelia Chan, senior business fundamentals analyst at GlobalData, said in a statement. “So far, the start of 2025 continues to be shaped primarily by bolt-on transactions.”
J.P. Morgan clocked Q1 deals at a slightly lower $25.2 billion across 27 transactions. But the investment bank also noted the trend of higher values among the deals.
Many industry watchers have suggested, like Chan, that the president’s tariff policies are distracting the industry from deals. Biogen CEO Chris Viehbacher admitted as much on a first-quarter earnings call on May 1.
“Dealmakers are closely monitoring further details of new policies and awaiting greater clarity on forthcoming regulations,” Chan said. “Some companies may adopt a wait-and-see approach, holding off on transactions until there is more insight into how Trump’s tariffs will affect industry, while others are awaiting what the administration will say on M&As.”
Chan noted that Trump’s first term was seen as encouraging to deals, with efforts to smooth the regulatory process, in turn spiking more megadeals and increasing overall M&A activity. But that has yet to bare out in his second term, given other policy disruptions.
Despite the caution around M&A, pharmas continued to pour money into licensing transactions, which can be less risky for the larger company. J.P. Morgan noted that upfront payments ticked up in the first quarter, rising to 8% of the total transaction value in the first quarter compared to 7% in 2024. This is a positive trend, but pales in comparison to the historical high of 13% recorded in 2019.
There were nine deals announced in the quarter that paid out $100 million or more upfront, compared to just four in the same period a year earlier, J.P. Morgan said. The largest upfront payment recorded in the first quarter was Roche’s $1.4 billion offering to Zealand Pharma for an obesity combo opportunity. Pharmas focused on Phase II opportunities, with a median of $165 million spent upfront on these deals. Total licensing transaction value for the first quarter was $56.8 billion.
Antibody drug conjugates and bispecific antibodies were popular targets for licensing deals. Obesity medications, like the Zealand deal, were also big, with nine R&D partnerships signed totaling $10.9 billion, J.P. Morgan said.
China was also a key area for deals, with five larger pharmas signing partnerships in the region.
Meanwhile, a few biotechs also climbed out of the IPO window, only to fall precipitously once they landed on the floor of the Nasdaq. J.P. Morgan noted that $770 million was raised across four IPOs that were completed through March 31. Obesity biotech Metsera was the highlight of the IPO class, raising $316 million. Shares of the company have since increased 26% on the $18 IPO price.
Editor’s note (May 7): The IPO chart and reference to Metsera was updated to reflect the IPO price, not the first day trading price. BioSpace regrets the error.
