USA Trends and Developments Contributed by: David McIntosh, Matt Byron, Ryan Kramer, Sabrina Kim and Zoe Dettelbach, Ropes & Gray LLP
particularly in areas such as AI in healthcare delivery – suggesting a positive outlook for bio- tech venture equity deals in the coming year. Deal-making trends M&A centres on smaller-value deals and early- stage assets The M&A market in 2024 was relatively flat, with an overall deal value of USD82 billion – sig- nificantly down from USD178 billion in 2023, according to Stifel. The year saw no transac- tions for the acquisition of a biotech or pharma company that exceeded USD5 billion and, while companies remained active in the M&A market, the values of the deals were notably lower than in past years. The largest biotech deal by upfront payment was the acquisition of Alpine Immune Sciences, Inc by Vertex Pharmaceuticals in April for USD4.9 billion, and the highest-value deal in the pharma industry as a whole was Novo Holdings’ acquisition of Catalent and some of its manufacturing facilities for USD16.7 billion in December. These transactions are modest compared to, for example, Pfizer’s USD43 bil- lion acquisition of Seagen in 2023. Despite the drop in individual deal values, deal volume remained healthy. According to Stifel , there were still six acquisitions of public biotech or pharma companies for USD1 billion or more, which is relatively high – albeit down from a record-breaking ten of such acquisitions in 2023. Overall, 2024 had the sixth-highest total number of M&A deals over USD1 billion since 1995, with 15 public and private target acquisitions occur- ring during the year. One explanation for this trend towards smaller deal sizes is that acquisitions in 2024 tended to involve more early-stage assets compared to acquisitions in 2023; earlier-stage assets come with higher risk and thus attract smaller
sums. According to Stifel, in 2024, only 20% of acquisitions involved Phase III or approved assets (down from 40% in 2023). It is impor- tant to note that – while a higher proportion of acquisitions involved earlier-stage assets – large pharmaceutical companies continued to spend more on later-stage assets overall than on early- stage assets, with Stifel reporting that USD49 billion and USD43 billion were spent on Phase III and Phase II assets respectively, compared to USD28 billion and USD21 billion for Phase I and pre-clinical assets respectively. This reflects the greater cost of purchasing later-stage assets, given their higher likelihood of success. Looking ahead to 2025, commentators expect that changes associated with the new admin- istration (including potential Federal Reserve rate cuts) bode well for deal-making activity, and a less hostile antitrust environment paints a positive picture for M&A specifically. Other fac- tors that could spur M&A activity in the coming year include large pharma companies’ impend- ing patent cliffs for certain blockbuster drugs, which could incentivise such companies to fill gaps in their pipelines by pursuing M&A oppor- tunities. The JP Morgan Healthcare Conference set an optimistic tone at the start of 2025, with USD18 billion in acquisitions announced on the first day of the conference, including J&J’s USD14.6 billion takeover of Intra-Cellular Thera- pies. Although M&A did not rebound as strongly as expected in 2024, there is a sense that 2025 will be an active year for M&A, with potential increases in both deal value and deal volume. Licensing driven by lower upfront economics and focus on pipeline development Licensing deal volume and upfront payments remained steady in 2024. According to JP Mor- gan, while the number of licensing deals in 2024 remained lower than its peak during the COV-
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