After a year of historic profits in 2021 following the mass roll-out of COVID-19 vaccines and related treatments, big pharma companies armed with cash for deals have been shifting their attention

Overall, pharma, medical and biotech (PMB) was the second most active M&A sector in 2022, after technology. A total of US$254.7 billion worth of deals were announced, a 20 percent drop compared with 2021. Volume fell at a far slower rate, edging down by just 2 percent to 1,187 deals.

Amgen—which did not have a COVID-19 vaccine but brought in additional revenue via a collaboration with Eli Lilly to help supply COVID-19 antibodies—made the biggest deal of 2022 across the sector. The company paid US$28.3 billion for Horizon Pharma, giving it a new pipeline of drugs for rare autoimmune and inflammatory diseases. This was followed by General Electric’s spin-off of GE HealthCare Technologies for US$22 billion.

Johnson & Johnson and Pfizer, respectively, claimed the third- and fourth-largest transactions of the year, the former paying US$19.3 billion for heart pump manufacturer ABIOMED and the latter meeting a price tag of US$11.6 billion for Biohaven Pharmaceutical, maker of the migraine treatment Nurtec ODT.

Several pharmaceutical companies are facing key patent expirations toward the end of the decade. This patent cliff can have a serious impact on pharma groups’ top line and continues to be a major impetus for M&A, as companies restock their drug portfolios to secure their next growth phases.

Biotech is also garnering interest and the reset in valuations in the sector in 2022 makes these companies increasingly appealing targets. Globally, the biotech industry is expected to almost triple in value from US$1.37 trillion in 2022 to US$3.88 trillion by 2030, according to Grand View Research.

The pandemic raised healthcare to the top of the public agenda, and emerging areas such as gene editing and genetic research are seeing increased funding, including government support. The National Institutes of Health awarded several grants totaling US$89 million in 2022 for related research that may uncover new disease treatments or cures. These fundamentals could see PMB retain its second-place position in 2023 and it will almost certainly remain among the top-five M&A sectors.

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