Global healthcare anticipates wave of smaller, higher impact deals in 2025
Published on 18th February 2025
More targeted market dynamics are reshaping investment strategies, deal structures and tech integration in healthcare
The JP Morgan Healthcare Conference is a pivotal annual gathering for the global biotech and healthcare industries – and innovators, investors and thought leaders in mid-January converged on San Francisco to identify dealmaking opportunities, technological advances and new medical products that could emerge in 2025.
Market and legal developments that were the focus of this year's symposium included an anticipated rebound of dealmaking in the second half of the year as healthcare innovation and AI-driven transformation continues at pace and its legal and regulatory implications proliferate.
Investors are demonstrating measured optimism and a strategic approach to dealmaking amid a pivot towards precise, targeted acquisitions and diverse therapeutic portfolios beyond conventional domains. The leveraging of intellectual property (IP) for additional capital raising and licensing opportunities alongside the integration of artificial intelligence (AI) technology across industry partnerships were both a focus for the conference as the sector navigates market volatility.
Small deals, big impact
The notable market shift from previous years is this emergence of smaller, more targeted deals across various therapeutic areas. This suggests that a maturing industry is now ready to invest in the value of diverse therapeutic targets and modalities, such as metabolic, central nervous system and gene therapies. The caveat for this investment focus is that securing capital will require stricter criticism of milestones for research and development and IP transparency.
The mood music at the conference echoed recent developments in the UK: there are fewer deals with larger check sizes and pricing is more cautious. Meanwhile, fundraisings are being allocated to derisk investments into earlier-stage businesses and are based increasingly on meeting commercial milestones.
The trend towards smaller, targeted deals with stricter royalty and payment regimes will likely put
pressure on deal negotiations. This will require dealmakers to come up with "smart" commercial terms and payment provisions to reflect expectations of both investors and life sciences and healthcare partners.
2025 M&A wave
The consensus is that there will be a wave of merger and acquisition (M&A) activity and transactions in the capital markets in the second half of 2025. But this increase will occur amid a challenging initial public offering (IPO) landscape. Big pharma is expected to continue to pursue deals to bolster the M&A pipeline as a cliff edge of expiring patents nears for many of their blockbuster drugs. The response is likely to foreshadow increases in acquisitions from both early and late-stage assets.
Big pharma is using the tough fundraising climate as an opportunity to acquire businesses that would not ordinarily be "on the market" in a normal funding environment. There have been a number of recent instances too of management teams encouraged by existing investors to follow an exit strategy rather than support on the next funding cycle.
The upcoming "patent cliff" and the market entry of generics will likely head drugmakers towards leveraging late-stage patents to delay entry and utilizing any remaining IP protections, which could include secondary patents on formulations or methods of use that extend exclusivity beyond the primary patent expiration.
AI revolution in healthcare
The application of AI and machine learning (ML) in healthcare continues to generate excitement among investors. This includes AI- and ML-driven drug discovery from clinical trials and diagnostics to improve operations in healthcare systems.
The recent announcements of partnerships between big pharma service providers and big tech companies, such as with Mayo Clinic and IQVIA, further highlights the significance of data-driven platform collaborations across these industries.
Osborne Clarke comment
Integrating AI into clinical trials is set to revolutionize medical research as it addresses long-standing challenges and enhances patient recruitment, data management and regulatory compliance.
From a legal perspective, issues related to data management, consent, liability and regulatory compliance will likely become the primary legal concerns associated with the transformative development driven by AI and ML.
Please contact our US team and overseas experts who attended this year's JP Morgan Healthcare Conference if you wish to discuss further any of the market and legal trends and implications raised in San Francisco.
