The year 2025 began with the annual J.P. Morgan Healthcare Conference (“JPM”) in San Francisco and a series of spectacular transactions, suggesting increased dynamism in the pharmaceutical M&A market - despite, or perhaps because of, the new U.S. administration under President Trump.
For instance, J&J announced the acquisition of Intra-Cellular Therapies for a reported USD 14.6 billion, strengthening its portfolio in neuropsychiatric and neurodegenerative diseases. Following a rather subdued 2024, this marks the first transaction outside the GLP-1 sector to surpass the USD 5 billion threshold. Other billion-dollar acquisitions, including GSK and Eli Lilly in oncology, as well as Novartis in cardiovascular therapies, further underscore the active start to M&A in 2025. Additionally, major licensing and partnership agreements, such as Gilead Sciences' collaboration with Leo Pharma in inflammatory diseases - potentially worth billions - highlight the sector's momentum.
In the venture capital sector, "mega rounds" (financing rounds exceeding USD 50 million) have also been notable in 2025. Compared to January 2024, investment volume in January 2025 grew by USD 2 billion.
M&A Growth Drivers
The pharmaceutical industry faces the challenge of a looming "patent cliff," with potential revenue losses exceeding USD 300 billion due to patent expirations. The most prominent example is Merck’s Keytruda™, the world's best-selling drug with approximately USD 20 billion in revenue. It became clear at JPM that internal R&D alone will not suffice to offset these anticipated revenue losses.
Both the impending patent cliff and the financial resources of the world's leading pharmaceutical companies - estimated by J.P. Morgan at up to USD 1.3 trillion - are expected to be key drivers of increased M&A activity in the pharmaceutical sector in 2025 and beyond.
Additionally, the so-called "Trump factor" is likely to play a role. New appointments at the U.S. Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) are expected to create a more M&A-friendly environment for the pharmaceutical industry. However, potential risks remain, particularly regarding the U.S. market, including a shifting regulatory landscape and the possibility of a trade conflict between the U.S. and the EU. Such a conflict could significantly impact the German pharmaceutical industry, given the U.S.A.'s importance as its largest market.
Late-stage assets, particularly those in advanced clinical trials (Phase 2 or 3), process validation, or nearing market entry, remain in high demand. Companies seek to strategically complement their existing business areas. A prime example is J&J’s acquisition of Intra-Cellular Therapies, in which it obtained Caplyta™, a promising late-stage asset with blockbuster potential for neuropsychiatric disorders.
Key M&A Focus Areas for 2025/26
We expect increased deal activity in the following therapeutic areas in 2025/26:
- Oncology: While interest in Antibody-Drug Conjugates (ADCs) remains strong, personalized cancer therapies - such as checkpoint inhibitors, bispecific antibodies, tumor-infiltrating lymphocytes (TILs), adaptive T-cell therapies, and oncolytic viruses - are gaining traction.
- Immunology & Inflammation (I&I): The connection between I&I and neurological disorders is drawing significant attention due to promising new approvals. J&J’s acquisition of Intra-Cellular Therapies is unlikely to be the only M&A deal in this high-growth field in 2025/26.
- Cardio-metabolic diseases: GLP-1 candidates continue to be highly sought after, especially those with differentiation potential or best-in-class status. Verdiva Bio’s USD 400 million funding round underscores strong investor interest.
- Rare diseases: After years of relative neglect, this sector is regaining attention. One reason could be the growing appreciation of incentives under the U.S. Inflation Reduction Act, which offers expedited approvals and greater pricing flexibility.
- Artificial Intelligence (AI): AI is set to become a major deal driver in the coming years. Its applications in research, development, and diagnostics are attracting significant interest. While strategic partnerships with AI-specialized firms currently dominate, we expect a wave of acquisitions in pharma services and operations, integrating AI into drug development and expanding AI-driven value chains.
Specific Deal Structures
Given the intense competition for promising late-stage assets, pharmaceutical companies are increasingly open to acquiring biotech firms with early-stage assets (i.e., those up to Phase 1 with promising initial data).
Early-stage assets involve higher risks and valuation gaps between buyers and sellers, necessitating more creative deal structures. A prime example is Eli Lilly’s acquisition of Scorpion Therapeu-tics, Inc.’s PI3Kα inhibitor program for up to USD 2.5 billion. This deal was structured as a full acquisition of Scorpion Therapeutics while spinning off all non-PI3Kα assets into a separate NewCo, where the existing shareholders retained a majority stake, and Eli Lilly held a minority interest. Sources familiar with the deal indicate that the total transaction volume includes a USD 1 billion upfront payment and milestone-based payments of up to USD 1.5 billion.
While milestone-based payments are common in pharma acquisitions—especially for early-stage assets—the structuring of deal payments into upfront and predominantly milestone-based payments has become so widespread that a common saying at JPM was that M&A transactions are becoming the new licensing deals in the pharmaceutical industry.
Growing Interest in Chinese Assets
Interest in Chinese assets remains high, particularly in the form of licensing and partnership opportunities. Favorable regulatory conditions—allowing startups to initiate clinical trials within approximately 18 months after their founding, compared to several years in the U.S. and Europe—and significant investments in innovation and infrastructure have substantially improved research quality in China. Recent success stories, such as Brukinsa™ and Ivonescimab, have demonstrated superior efficacy compared to established blockbusters like J&J/AbbVie’s Imbruvica™ and Merck’s Keytruda™.
Venture capital-funded startups, such as Verdiva Bio, which are based on inlicensed Chinese assets, and the conclusion of large-scale licensing and partnership agreements—such as those signed by AbbVie, Roche, and Avenzo Therapeutics with Chinese partners in 2025, each worth billions—highlight the growing trend of Chinese assets attracting both financial investors and strategic partners.
Key Takeaways:
- Expiring patents, pharma's significant financial resources, and a presumably more deal-friendly environment in the U.S. suggest increased M&A activity in 2025.
- There is a particular focus on personalized cancer therapies, neuroinflammatory processes, and new GLP-1 candidates.
- AI technologies are attracting a lot of attention; strategic partnerships are still likely to be preferred over M&A activity in 2025.
- More creative deal structures will play an important role, particularly for early-stage assets, to mitigate the risks associated with therapeutic approaches that have not yet been clinically validated.
- Given the improved quality of Chinese assets, interest in out-licensing and partnering opportunities in particular is high. Unless there are significant changes in the macroeconomic and regulatory environment (due to potential trade conflicts), we expect to see a further increase in M&A activity involving Chinese assets in 2025.
