Investment Trends in Life Sciences

A pharmaceutical company’s pipeline contains all assets under development. A full, diverse pipeline is a critical measure for future success, noting the high failure rate across the Research and Development (R&D) journey. As the demand for cutting-edge treatments accelerates, catalyzed by an aging population, an increasing rate of chronic disease, and evolving patient needs, large companies are looking beyond their own laboratories. Mergers and Acquisitions (M&A) and partnerships with agile biotechs play a major role to secure growth and innovation. 

The world’s largest drug companies command over $1.5 trillion in liquidity, poised for strategic deals as of 2025.¹ This immense financial power converges with an urgent need: up to $250 billion in revenue, including $120B from the top 15 firms, is threatened by patent expirations before 2030.² This unique intersection is fundamentally reshaping the biopharma industry. Simply having capital isn’t enough: to succeed in this dynamic landscape, companies must master brokering deals that align with their existing portfolios while fitting their long-term vision, valuing novel assets accurately, and seamlessly integrating cutting-edge technologies. Future leaders in pharma will be defined by strategic intelligence and foresight, not just investment volume.

Global uncertainties are impacting deal trends

The biopharma landscape is heavily influenced by global uncertainties and evolving policy frameworks. Recent discussions around tariffs, including the initiated “Section 232” investigation into the industry, which may result in unprecedented levies specifically targeting drugs, put companies with global supply chains on alert. Further, potential drug price decreases, through a “Most-Favored Nation” model, create significant ambiguity about future market potential. This pervasive uncertainty, reflected in the Federal Reserve's economic report “Beige Book” referencing "uncertainty" a record 89 times in April, is impacting the global appetite for deals and shifting geographical focuses.³

Big Pharma isn’t only chasing huge acquisitions anymore. Instead, they’re making more focused deals, both at early and advanced stages. These transactions aim to bring in new ideas, balance risk, and secure long-term revenue. A prime example is Roche’s $1.4B upfront payment to Zealand Pharma for the co-development of petrelintide, an obesity asset that is being tested on participants in clinical trials (Phase II).⁴ Such agreements highlight a new norm: targeting promising, often platform-based assets with proven track records. Even amidst global policy uncertainties like tariffs and evolving drug pricing, these strategic moves are essential for securing future revenue.⁵

Current investment focus: fewer but larger deals

Biopharma dealmaking has entered a new phase, characterized by strategic shifts in M&A and licensing activities, driven by the urgent need for pipeline replenishment and targeted innovation. Over the last five years, strategic alliances in biopharma have outpaced M&A in both volume of deals (64%) and total value (54%), even though M&A is consistently noted by executives as one of the most important industry drivers.²

The M&A landscape is evolving from a period of high volume and lower individual transaction values towards a renewed focus on more substantial deals. For instance, the second quarter (Q) of 2025 saw 130 biopharma deals totaling $33B, marking a 15 percent increase in deal value but only a 3 percent increase in deal volume year-over-year.² While Q2 2025 deal value was down 12 percent quarter-over-quarter from Q1 2025's $37B, the trend shows a sharp rebound from Q4 2024's $20B.² This pivot is underscored by the rise in median M&A upfront payments, which increased 3.5 times in Q1 2025, signaling a return to larger deal sizes.⁶ Deals over $50M increased by 29 percent quarter-over-quarter in Q2 2025.² Strategic alliances, encompassing both licensing and partnerships, represent a consistent and robust avenue for pipeline expansion. While the volume of these alliances has seen some fluctuation, decreasing slightly in recent years (e.g., 269 deals in 2024 compared to 292 in 2021), the total value has significantly increased, rising from $119B in 2021 to $171B in 2024.

The current motto of dealmaking seems to be “Quality over Quantity”, reflecting a strategic choice to focus on assets perceived to have higher potential, lower risk, or a more direct impact on filling revenue gaps in the short run. The disproportionate increase in value implies that companies are willing to pay a premium for the right assets – in line with strategic priorities like competing in high-potential therapies or securing future growth and offsetting patent cliffs. Acquiring more mature assets is also an indicator that companies are trying to reduce uncertainty and risks while accelerating time-to-market. 

Strategically shaping portfolios for tomorrow

Effective investment strategies today are shaped by imperatives to manage revenue exposure, accelerate growth, embrace scientific advancements, and maintain a competitive edge in an increasingly globalized innovation race. This drives a reorientation toward diversified, forward-looking portfolios taking into account a multitude of elements and novel operational paradigms.

But what assets are being targeted across all types of deals? An increasing transaction volume for early-stage assets, growing from 47 percent in 2021 to 55.9 percent in 2024, underscores a persistent appetite for foundational innovation.² The strategic pursuit of breakthroughs in the longer-term is concurrently balanced by a recent re-emergence of demand for late-stage assets. This is not contradictory, as it shows the urgent need for products that can quickly address impending revenue gaps and deliver near-term market gains. Between these are assets at Phase II of their clinical development path, which reflect a healthy balance of de-risking, market readiness, and revenue potential. As a result, Phase II assets are at the sweet spot of deal value, consistently commanding over 20 percent of the annual total.² In terms of modality, biologics have significantly outpaced small molecules in investment, with a nearly five times differential in upfront cash. Antibody-Drug Conjugates (ADCs) and bispecific antibody therapies are particularly popular. On the other hand, cell and gene therapies have witnessed a pullback, as investors and partners shift towards more standard modalities, reflecting a cautious approach to these lower maturity, higher risk modalities.

To counter the impending revenue gaps from patent expiries mentioned in the introduction, pharmaceutical companies are intensifying efforts in high-growth therapeutic areas with high unmet need – like immunology and inflammation, cardiometabolic, oncology, and neuroscience, reinforcing existing strengths.² However, a therapeutic focus alone is no longer sufficient. Companies are increasingly pursuing novel platforms, which offer scientific novelty while also enabling multiple pipeline opportunities from a single foundational approach. This is innately true in many next-generation therapies, such as antibody-based therapies, monoclonal antibodies (mAbs), or antibody drug conjugates (ADCs), cellular therapies, such as chimeric-antigen receptor T-cell therapy (CAR-T), and nucleic acid-based therapies, like messenger RNA (mRNA). Platforms often integrate key technologies for applications like gene editing, such as CRISPR-Cas9 or TALENs, and drug delivery, such as lipid or polymeric nanoparticles. Further trends are relevant across the discovery and development path, including Artificial Intelligence, in-vivo predictive models, like organs-on-a-chip, and diagnostics, like next-generation sequencing. These technologies all help de-risk assets earlier, allowing companies to invest more confidently earlier in a therapeutic’s development journey. 

Companies are also looking toward new innovation hubs like China, which has undergone a profound and rapid transformation.⁷ Global large-cap pharma’s share of deals and upfront payments to China-domiciled biopharma companies has sharply increased.⁸ Further, out-licensing has overtaken in-licensing deals in both number and volume.⁹ Overall, the focus in terms of therapeutic area, platform technology, modality, and geography has increased immensely, increasing the associated operational complexities in parallel.

The overlooked risk: too much innovation 

Innovation frequently originates within specialized biotech firms. Major pharmaceutical companies, possessing extensive development and commercialization capabilities, partner with these agile biotechs through licensing deals to develop groundbreaking assets. For example, Bristol-Myers Squibb, Novartis, and Gilead Sciences lead in CAR-T cell therapy, while Pfizer, Roche, and AstraZeneca are at the forefront of ADCs, continually expanding pipelines via strategic partnerships and acquisitions. 

Ultimately, small-cap biotechs are critical engines of innovation, pioneering breakthroughs often acquired or licensed by larger corporations. Their inherent agility and willingness to embrace novel areas and take calculated risks are vital for pushing the boundaries of scientific discovery.  However, an inherent, often overlooked, risk in innovation-driven investment strategies is the potential disconnect between cutting-edge R&D and the practical realities of manufacturing and delivering accessible therapies. While companies excel at bringing pipeline assets to regulatory approval, many struggle with efficient production and launch. This is particularly true for many innovative modalities, which are often low-volume, high-value therapies requiring specialized manufacturing capabilities. A failure to bridge this gap can necessitate massive, unplanned investments into manufacturing infrastructure or complex outsourcing arrangements, ultimately hindering patient access and commercial success.

Despite global uncertainties, the drive to fill pipelines and secure future revenue remains a powerful catalyst for deal activity. Future success in biopharma is not merely about accumulating assets, but about making "smart bets" that are precisely aligned with long-term strategic goals. This requires a deep understanding of market dynamics, accurate valuation of novel assets, and seamless integration of new technologies and capabilities – from discovery through approval, commercialization, production, and delivery to patients. Without this holistic approach, even the most groundbreaking innovations risk failure before large-scale adoption and impact on patient outcomes.