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Pharmaceutical & life sciences deals insights: 2021 midyear outlook

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What's driving deals in 2021

PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for the rest of 2021.

Shifting toward the new normal

The first half of 2021 saw a continued return to normal deal activity for the pharmaceutical and life sciences (PLS) sector with strong deal volume. A variety of factors have limited the number of large, transformational deals at this point in the year. Still, sector participants continue to look to M&A to innovate and maximize the potential of their portfolios.

In the second half of the year, we expect M&A activity to continue to be a focus for the sector. Large pharmaceutical companies have strong balance sheets and capital continues to be readily available. Biotech funding continues to trend well, pushing valuation up. Special purpose acquisition companies (SPACs) have continued to move towards the mainstream as a viable alternative to traditional M&A and IPOs continue to be a hotspot for investors and companies looking for the capital needed to fuel growth.

Pharmaceutical and life sciences deals outlook

We expect the second half of 2021 to continue the return to strong levels of M&A activity seen in recent years. While headwinds and tailwinds exist, the need to optimize portfolios and innovate will lead sector participants to deploy capital through M&A.

Regulatory uncertainty has presented some concern for the sector in the form of more involved antitrust reviews. The Federal Trade Commission (FTC) announced it will work with domestic and international competition enforcement agencies to review the approach to mergers in the PLS sector. The impact of this review remains to be seen and sector participants should consider the challenges of larger transactions (such as Illumina’s proposed acquisition of Grail, Inc.) when weighing transformative deals.

Drug pricing will remain a key focus, although perhaps not to the same level as previously. In the wake of the 2020 US election, there is uncertainty about how further regulation may play out as the government grapples with other high priority issues. So far, significant drug pricing reform has been excluded from recent bills advancing through the House and Senate. The uncertainty around policy presents challenges for this sector as it seeks to optimize deployment of capital and other resources.

During the first half of 2021, some PLS deals have revolved around the need to secure supply chains. We expect this trend to continue in the second half of the year as companies contend with localized challenges, whether they are caused by further regionalized COVID-19 outbreaks or other factors. India’s recent struggles to control pandemic outbreaks present an area of concern for the sector due to the concentration of the sector’s global manufacturing output originating in the country. While companies opted to maintain flexibility over the last year, we expect them to take more definitive steps in adapting their long-term supply chain strategies in a post-pandemic world.

Sub-sector outlook


Despite the subsector’s largest deal of the year to date being $7 billion, we believe there is still a strong likelihood of at least one transformational deal happening before the end of the year. We expect a continued flow of bolt-on acquisitions as companies seek to innovate in traditional therapeutic areas while enhancing their presence in the cell and gene therapy space, a market that has experienced extensive investment in recent years.


While the biotech subsector did not see any megadeals in the first half of 2021, we see the potential for several deals in the $5 billion to $15 billion range in the second half of the year. Market volatility has limited M&A within the biotech subsector, while many smaller industry participants have looked to IPOs and SPACs as ways to gain access to capital while maintaining control. This is in contrast to the types of deals that have historically been the more common path to liquidity.

Medical device

The medical device subsector has experienced a rebound in deal activity from the lows seen toward the end of 2020 and is poised for continued investment in M&A with the continuing recovery from the pandemic. Many participants in the subsector strengthened their financial position over the last year and are seeking opportunities to deploy capital. This is observed perhaps most notably in the diagnostics market, with deal activity over the last quarter. Assets that enable the evolution of business models towards a post-COVID-19 environment may also attract interest including technologies involved in telemedicine, remote patient monitoring and robotics. Private equity buyers may also become more active in the sector given attractive fundamentals and assets coming to market.

Other services

As predicted in our year-end outlook, the CRO and CDMO spaces experienced notable deal value in the first half of the year, highlighted by the sector’s two largest deals of the year to date: Thermo Fisher’s acquisition of PPD and ICON’s acquisition of PRA Health Sciences. We expect this area to stay active as the companies look to acquire and leverage unique capabilities and geographic footprints to gain a competitive advantage in the marketplace.

“The sector saw strong deal activity in the first half of 2021, especially in the CRO space. We expect this to continue as the industry builds on momentum, strong balance sheets and access to capital.”

Glenn Hunzinger, US PLS Leader

Key deal drivers

Nature of capital

The entire PLS sector continues to see strong interest from a variety of strategic and financial investors. Building on the high level of investment from private equity in recent years, the sector saw the emergence of SPAC transactions drive a continued influx of capital, particularly within the biotech subsector, which had a majority of the sector’s SPAC deals during the beginning of 2021. The continued influx of capital has increased valuations and options for biotechs, causing big pharma to look for more creative approaches to dealmaking and partnerships. 

Commitment to purpose and talent

Investors’ increasing awareness of environmental, social and governance (ESG) issues adds an additional lens for companies to consider when looking at deals. Public perception of the industry has generally shifted positively due to its contributions toward ending the pandemic. The sector will continue to look to ensure deals will not harm reputations as responsible business leaders and ESG will continue to be a more important factor and consideration of future partners and targets.

Innovation and transformation

With a heightened public awareness of the drug development and regulatory approval process, we expect companies to continue to invest in digital and analytical tools that will accelerate the drug development timelines. We expect sector participants to continue to look for greater collaboration, partnerships and even acquisition of tech-focused firms that can bring this innovation to scale, furthering the presence of AI and machine-learning from drug discovery to commercialization.

Contact us

Sky Milch

US Pharmaceutical & Life Sciences Deals Leader, PwC US

Glenn Hunzinger

Partner, Pharmaceutical and Life Sciences Consulting Solutions Leader, PwC US

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