The healthcare and life sciences sector is expected to lead in deal activity this year. What that will look like depends on valuations, interest rates, and compliance with a complex global regulatory landscape. Companies in the sector will need to consider all factors before proceeding with a deal, whether it be through M&A, an IPO or licensing.
Innovative therapies catch investors’ attention
Expect greater emphasis on breakthrough therapies. Investors will likely focus on companies with strong pipelines and promising clinical data, anticipating high returns from successful market entries. Adam Farlow, partner, London, says, “Market conditions are continuing to improve. While 2025 will not be a banner year, there is growing optimism that the right deals will get done. The winners will be those that maintain optionality – prepping for IPO, but maintaining flexibility for M&A, licensing and additional private funding rounds.”
Roel Meers, partner, Brussels, adds, “Biotech funding in EMEA is likely to continue its rebound in 2025, with investors focusing on fewer, high-quality early-stage companies and proven management teams, fuelling innovation in areas like AI-driven drug discovery and advanced therapies. While venture capital activity has increased, challenges like underperforming IPOs, high interest rates, regulation, and selective acquisitions by Big Pharma are pushing early-stage firms to explore alternative financing strategies to sustain operations and innovation.”
Additionally, expect to see significant growth and investment opportunities in Asia’s healthcare and life sciences sector, with China emerging as a major market. Zhang Hong, partner, FenXun Partners, Shanghai,* says, “Asia's healthcare and life sciences sector is set for significant growth, with China emerging as a major market. Key focus areas include biotech innovations and AI-driven drug discovery, supported by improving market conditions and global investor interest. China's biotech industry is also becoming a crucial supplier to big pharma facing patent cliff issues, making the region an attractive destination for investors and industry leaders.”
Opportunities abound with diversification
Investors will seek to capitalize on the expanding healthcare markets and the rise of local biotech and life sciences companies in these areas. Jane Hobson, partner, London, notes that consumer healthcare is another growing area. “Consumer healthcare is a sector that is ripe for consolidation and so there will likely be activity there,” says Hobson.
Licensing and collaboration deals are here to stay, according to Oren Livne, partner, New York. “The outlook for collaborations and licensing deals remains strong, with pharma companies continuing to seek products to fill their pipelines and biotechs continuing to look for ways to fund their operations,” says Livne.
The outlook for healthcare and life sciences in the US
Healthcare and life sciences companies doing business in North America will be following developments in the US for insights and clarifications on policy and legislative proposals in order to plan and implement their business strategies effectively. "Being nimble and patient will be key for long-term success,” states Randall Sunberg, partner, New York.
Announcements made at this year’s JP Morgan Healthcare week underscore the industry's commitment to innovation, collaboration, and enhanced patient care. Vanina Caniza, partner, Buenos Aires, shares this insight, “With a promising outlook for innovation and growth, the healthcare and life sciences sector is poised to lead deal activity this year. However, companies must navigate a complex global regulatory landscape, geopolitical challenges, and market volatility. These factors are crucial considerations when pursuing M&A, IPOs, and licensing deals, as they can significantly impact the success and sustainability of such ventures.”
* Baker McKenzie FenXun (FTZ) Joint Operation Office is a joint operation between Baker & McKenzie LLP, an Illinois limited liability partnership, and FenXun Partners, a Chinese law firm. The Joint Operation has been approved by the Shanghai Justice Bureau.