In the year to date, deal value has fallen sharply, but volume has decreased only marginally.

Megadeals, common in the sector two or three years ago, are less frequent now.

However, we did see some sizeable deals in Q3, including cross-border transactions, following the plummet in activity when Covid-19 first gripped.

These included:

• Gilead’s USD21 billion acquisition of Immunomedics
• Siemens Healthineers’ purchase of Varian for USD16.4bn
• Bristol-Myers Squibb’s USD13bn MyoKardia takeover
• Sanofi’s USD3.4bn purchase of Principia Biopharma

The prevailing trends are smaller bolt-on acquisitions and a growth in consortium deals (where partners pool IP and R&D to spread costs, striking licensing and revenue share agreements once products go to market).

Here certain areas are ripe for transactions, particularly digital medicine, pharma companies digitising operations, IT businesses anxious to enter the healthcare space, genetics, viral treatments and vaccines.

Affordable care

It remains to be seen how far a Biden administration can push its plans to extend the Affordable Care Act (Obamacare). Much will depend on whether Republicans hold sway in the new Senate.

Although there may be pricing pressure on the sector, we do not expect this to be an overly significant burden on pharma companies, insurers or health care providers - at least in the nearer term. By and large they have benefited from healthcare reforms.

The Covid-19 crisis has forced a wide range of companies to divert resources towards developing a vaccine, perhaps at the expense of funding other R&D programmes. Getting these back on track could actually act as a stimulus to collaborative deals.

Cross-border investment

As trade tensions between the U.S. and China gradually ease, we expect to see more interest from Chinese companies in the U.S. healthcare sector.

With the exception of some biotech deals, investments in this area have escaped deep scrutiny by the Committee on Foreign Investment in the U.S. (CFIUS).

With the U.S. likely to take a more multilateral approach to international affairs, once the presidential transition is complete, we could see well-financed Chinese inbound investors returning to the U.S. market for the first time in many months.