Precision science is ruling the M&A scene as pharmas prepare for loss of exclusivity on key products, PwC says in a new report. Biotechs should be prepared with a dual-track process with the IPO window now open.
After January through March marked the strongest quarter for M&A since 2020, PwC predicts that large pharma companies will continue to pursue smaller, “more bespoke bets on science” and avoid larger more transformative deals.
“BioPharma M&A has entered a new phase driven less by scale and more by precision science. We expect M&A to remain strong through year-end as large caps close LOE [loss of exclusivity] gaps with high-conviction science across cardiometabolic, CNS, immunology, and oncology,” Roel van den Akker, principal, US Pharmaceutical & Life Sciences Deals Leader at PwC, said in a prepared statement.
Almost every major pharma company has executed a deal in the past 12 months, underscoring the sense of urgency these companies are feeling as many approach business-altering patent cliffs, PwC wrote in its mid-year deals outlook, published Wednesday.
“After sitting out the first half of the decade and only making smaller deals, large pharmaceutical players are digging into their deep pockets to offset the estimated $300B+ of branded pharma revenue exposed to LOE this decade,” PwC wrote.
The deals centered around small bolt-ons and mid-cap biotechs, particularly in differentiated science, GLP-1 expansion and next-gen modalities such as RNA, ADCs and gene editing.
The small deals are likely to continue, with AI proving a highlight. “AI’s growing ability to deliver efficiencies and synergies autonomously now rivals the benefits that large-scale M&A traditionally delivered,” according to the report. “AI-enabled R&D—both as an investment thesis and as a synergy lever within acquired pipelines and services platforms—is also moving from pitch deck narrative to core deal consideration.”
U.S. and European pharmas are also continuing to head to China for dealmaking, particularly in oncology, immunology and metabolic disease.
“These broad discovery and development pacts are adding geopolitical complexity, while providing cutting-edge science at more favorable deal terms,” PwC wrote.
While the IPO window has been pushed open with record-setting debuts from the likes of Kailera Therapeutics and Parabilis Medicines, many biotechs are better suited for M&A, PwC noted. A biotech must have significant clinical proof before heading to the public markets, leading many to conclude that a smaller, early science–based M&A deal with a large pharma is more prudent.
Rather than pick one or the other, biotechs should consider a dual-track process to maximize value, PwC said.
Private equity has also entered the scene, with interest in sizable transactions across the life sciences ecosystem. PwC sees this continuing, with the potential for these financial buyers to carve out assets from larger pharmas in the second half.
“Capital and appetite are abundant. The scarce resource is differentiated assets with near-term commercial potential in the right therapeutic areas,” PwC said. “Dealmakers that explicitly underwrite policy risk, embrace milestone-weighted deal structures, and bring AI-enabled insights to the table will be best positioned to lead this market.”
