The New York Stock Exchange welcomes Johnson & Johnson (NYSE: JNJ) on December 5, 2023.
NYSE Group
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I just returned to New York City after spending nearly a week in San Francisco for the annual JPMorgan Healthcare Conference. The conference is the nation’s largest gathering of biotech and pharmaceutical executives, investors, analysts (and, of course, health reporters).
The week featured questions about the incoming Trump administration, updates on the business outlook and pharmaceutical portfolio, increased local security, and San Francisco’s first sunny skies in recent memory.
News continued to break throughout the week, even after the conference ended mid-Thursday. The Biden administration on Friday announced the following 15 drugs that will be included in Medicare price negotiations. novo nordiskOzempic, a blockbuster diabetes treatment, and its obesity treatment Wegoby.
However, after companies announced several deals last week, I would like to highlight a few points regarding M&A activity in the industry in 2025.
M&A this year seems to have gotten off to a strong start. But the question is whether it will last.
Some of the deals announced during the conference were especially encouraging. johnson & johnsonproposed a $14.6 billion acquisition of Intracellular Therapies. This is believed to be the largest deal seen in the pharmaceutical industry since 2023. The agreement comes amid a wave of smaller deals from GSK, Eli Lilly and lesser-known radiopharmaceutical companies.
“This equates to five trades in one and a half business days,” Stifel analyst Tim Opler said in an email to clients last week. “This year will be a very different year for M&A than 2024.”
Last year was marked by small, smart deals in the pharmaceutical industry, according to EY’s M&A Firepower report released last week. Big drug companies were seeking lower prices for products and companies in the early stages of development, with the potential for greater returns in the long run.
Although this year started with more activity, the report notes that M&A could be subdued in 2025. Margins continue to come under pressure for biopharmaceutical companies, and the industry’s most prized acquisition targets remain elevated, with continued “reduced appetite for significant investment.” There are factors that can inhibit trading, such as high premiums in the market.
Traders work under a screen displaying the Pfizer Inc. logo on the floor of the New York Stock Exchange just after the opening bell rings on March 11, 2016 in New York.
lucas jackson reuter
This is also true for some major pharmaceutical companies.
“For us, the larger deals are more of an outlier,” J&J CEO Joaquín Duato said in a conference presentation after J&J announced the intracellular therapy deal. said.
“The majority of the value we create is through smaller deals and partnerships that allow us to leverage our scale,” Duato said, pointing to the 75 small deals J&J closed last year. Ta.
But the EY report found that the industry’s $1.3 trillion worth of deal-making “firepower” (referring to the ability to fund and execute deals) and other There are “structural reasons.”
Big drug companies are also bracing for drug patent expirations that could wipe out $300 billion in revenue by 2028, adding to the pressure to offset losses with new products.
pfizerFor example, CEO Albert Bourla said in a conference presentation that the company could face a wave of patent losses in the coming years, costing it about $17 billion to $18 billion in annual revenue. But Bourla said the company’s recent series of deals, including the acquisition of cancer drug developer Seagen, should help offset those losses.
The Trump administration could also provide “significant tailwinds” to the industry by lowering corporate taxes and changing FTC policy “as part of general deregulation,” the EY report said. .
But we’ll have to see how this plays out later this year.
Please feel free to send tips, suggestions, story ideas, and data to Annika at annikakim.constantino@nbcuni.com.
Emerging healthcare technology: Digital health fundraising in 2024 will be defined by a ‘David and Goliath dynamic,’ says report
JPM ends and 2025 officially begins in healthcare. But we can’t jump into the year ahead without first taking a look at the state of venture funding for digital health in 2024.
All in all, this year has been a mix of haves and have-nots.
U.S. digital health startups raised $10.1 billion in 497 deals last year, according to a new report from Rock Health. This total is down from $10.8 billion in 2023 and roughly in line with the $8.2 billion raised before the pandemic in 2019, adjusted for inflation. Last year, there were only 118 digital health M&As, the lowest level in a decade.
Rock Health said increased early-stage financing activity and smaller late-stage deals were responsible for the decline in investments in 2024. This could cause difficulties for late-stage startups that raised funding at very high valuations during the COVID-19 period, potentially heading towards acquisition or complete closure of their operations in 2025. be.
Furthermore, in 2024, large megafunds, health systems, and technology companies will have significant influence over digital health, Rock Health said. For example, venture firms Andreessen Horowitz and General Catalyst secured 20% of all committed LP capital in the US in 2024, making them the sector’s top investors.
Additionally, while artificial intelligence remains a hot investment area in the digital health space, it is becoming harder for startups to compete with established incumbents. Rock Health believes that technology companies like Microsoft, which can afford to build and maintain expensive underlying models, are leading the way in healthcare AI, and companies like Epic, which can deploy applications of these models enterprise-wide, are leading the way. The same goes for other organizations.
There is still room for small AI startups to find a niche in healthcare, but Rock Health said they need to “think carefully about positioning themselves.”
“The dual trends of early-stage startup activity amid larger moves by large healthcare companies have created a David and Goliath dynamic in the world of healthcare innovation,” Rock Health said.
If JPM is any indication, it’s going to be another interesting year in digital health. Let’s see what happens in 2025.
Read the full report here.
Feel free to send tips, suggestions, story ideas, and data to Ashley at ashley.capoot@nbcuni.com.
