Global M&A trends in health industries

Large-cap biopharma players are doubling down on their ‘string of pearls’ strategy, acquiring early- to mid-stage innovation to fill pipeline gaps and hedge against patent cliffs and to fill capability gaps. 

So far, the $1bn–$10bn deal value range remains especially active, with oncology, immunology and rare disease assets leading activity. Examples of such deals announced in the first half of 2025 include Sanofi’s $9.1bn purchase of Blueprint Medicines, which brings with it a commercialised drug and early-stage immunology pipeline; GSK’s acquisition of IDRx, a clinical-stage biopharmaceutical company, for up to $1.15bn; Novartis’ $3.1bn acquisition of Anthos Therapeutics, a clinical-stage biopharmaceutical company with a late-stage medicine in development for the prevention of stroke and systemic embolism in patients with atrial fibrillation; and Lilly’s $2.5bn acquisition of Scorpion Therapeutics’ PI3Kα inhibitor program STX-478, a precision oncology treatment under development.

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The US administration’s anticipated pharmaceutical import tariff and shift toward global reference pricing under MFN affect not just price realisation but also payer models and reimbursement rates. They have the potential to elevate drug prices globally, especially in Europe, as pharmaceutical companies weigh options to mitigate the impact on US profits. Cross-border M&A is facing higher scrutiny, and companies are reassessing supply chains, pricing corridors and geopolitical exposure. The US FDA’s leadership changes and internal restructuring are resulting in missed deadlines, reduced responsiveness and less predictable approval timelines. In this climate, even high-quality assets are being priced lower due to elevated risk premiums.

Trade policy risks, particularly related to China licencing and API sourcing, are now being modelled into due diligence, further elevating the role of IP and geographic footprint in asset selection.

We are seeing an increasing preference for alternative deal structures including earn-outs, royalties, licencing agreements and joint ventures to finance innovation and platform builds, especially in biotech and diagnostics. With biotech valuations remaining volatile, given uncertainty regarding drug approval timelines and the direction of interest rates, more acquirers are leveraging milestone-driven earn-outs, effectively tying additional payments to the achievement of specific, measurable objectives related to the development, regulatory approval or commercial success of a drug candidate or technology.

These earn-out structures are particularly well suited to the pharma industry because of the length of time drug development takes and the risk and regulatory hurdles to move from development to commercial success. Although earn-outs are not new, we expect to see more of them being used to manage risk and move deals forward over the next six months. Examples from the first half of 2025 include Novartis’ $3.1bn (with $925m up front) acquisition of Anthos Therapeutics, BMS’ agreement to licence a next-generation cancer drug from BioNTech for up to $11.1bn (with $1.5bn up front) and Sanofi’s purchase of Dren Bio’s investigational bispecific antibody DR-0201 for up to $1.9bn (with $600m up front). 

In digital health, alternative structures such as co-development partnerships are helping mitigate regulatory and reimbursement risk. These structures offer flexibility for both buyers navigating policy shocks and sellers waiting for IPO markets to recover.

Strategic portfolio reviews have continued in 2025, particularly in response to pricing pressure, cost inflation and regulatory risk. US and global players are spinning out assets with low growth or limited strategic fit. We also expect that assets with high exposure to tariff regimes may be candidates for divestiture in the months to come as companies continue to assess their portfolios and adjust accordingly. Notable moves include carve-outs by Becton Dickinson and Teva’s planned divestiture of its Teva API business and recently completed divestiture of its Teva Takeda business venture in Japan. These transactions, in some cases spurred by activist investors, are often being pursued to free up capital for reinvestment and to streamline supply chains as firms prepare for a prolonged period of trade and reimbursement volatility.

Private equity (PE) firms are under pressure as portfolio companies sit in extended holding periods amid delayed exits and muted IPO markets, often seen as a preferred exit option for early-stage pharmaceuticals and life sciences companies as a means to fund further development activities. Elevated financing costs and soft public valuations are reducing exit options. As a result, we’re seeing more secondary transactions and the use of continuation funds as a way to generate liquidity and preserve upside for high-conviction assets by allowing existing investors to exit or roll over while bringing in new capital to support continued growth. Examples include Thoma Bravo’s sale of a significant ownership stake in NextGen Healthcare to Madison Dearborn Partners and Inflexion’s closing of a £2.3bn ($3.1bn) continuation fund that includes a specialty pharma business and a liquid pharmaceuticals business among its key assets. The current M&A environment, with high-yield spreads and MFN-linked uncertainty, is discouraging short-term flips and instead pushing sponsors to focus on operational value creation and strategic tuck-ins to drive long-term returns.

Acquisitions of health tech and health-adjacent technology platforms, particularly in AI-driven diagnostics, digital therapeutics and care coordination businesses, remain an M&A hotspot. These assets are often capital-light and scalable, offering a hedge against reimbursement exposure and making them particularly attractive to PE. Now, PE players are competing directly with strategics for these targets, especially as MFN- and IRA-linked policies complicate traditional pharma and provider models. Examples of PE deals include Bain’s announced (in April 2025) acquisition of HealthEdge, a next-generation SaaS platform that connects health plans, providers and patients with a suite of end-to-end digital solutions; and New Mountain Capital’s  announced (in May 2025) plans to combine three health tech companies to create an AI-driven revenue cycle management platform that aims to automate hospital and health systems’ administrative workflows and strengthen financial performance. An example from a strategic buyer perspective is Mumbai-based Infinx’s announced (in May 2025) acquisition of i3 Verticals’ healthcare revenue cycle management business. We expect to see more deals in this space during the second half of 2025.

Biopharma M&A volumes will remain resilient, driven by a need to offset patent cliffs and secure innovation externally, though deals valued more than $10bn are considered less likely in the face of current policy uncertainty. We expect most activity will be in the $1bn–$10bn range, supported by the ‘string of pearls’ strategy employed by several major players. However, the outlook is complicated by MFN pricing policy, IRA implementation, and trade-related and regulatory disruptions.

US pharma firms now face pressure to match or fall below global reference prices, complicating deal models and increasing uncertainty in commercial forecasts. Companies outside the US must weigh the trade-offs of price increases abroad, market exits and potential US enforcement. Meanwhile, licencing deals with China, which have grown in strategic importance as China becomes a major biopharma player, have drawn heightened diligence as regulators and lawmakers scrutinise national security risks.

Despite these challenges, the innovation cycle continues to attract capital, particularly for oncology, rare diseases, and cell and gene therapy. Valuations remain compressed in biotech, with many public companies trading below cash. As noted earlier, firms are also modelling IP location shifts and new customs valuation strategies in anticipation of tariff exposure.

As noted in our Spotlight, health services technology companies that advance value-based care, digital engagement or personalised preventive care are attracting significant M&A interest from institutional and PE dealmakers alike. Labor cost pressures and reimbursement uncertainty are leading firms to look for M&A targets that will enable cost efficiency, cash collection improvement and patient engagement. Meanwhile, companies from outside the industry are looking to extend their reach into healthcare, such as tech companies pursuing wearable devices and remote health monitoring solutions. This activity is all in pursuit of a more holistic and efficient approach to healthcare delivery.

Healthcare providers are working through regulatory uncertainty about MFN, Medicare and Medicaid reimbursement in the US, and tariff-related cost pass-throughs, which has made diligence and revenue modelling more complex, slowing some transactions.