JPM ’24: The year’s healthcare barometer gives a more sunny outlook

The JPM Healthcare Conference of 2024 may not have witnessed a mega-merger announcement, but there is anticipation that the M&A market could pick up this year, with predictions that the economic headwinds of recent years could turn into tailwinds. 

The recent M&A Firepower report from EY, formerly known as Ernst & Young, has forecast a surge in life science M&A, attributing it to pharmaceutical companies that have fortified their capital reserves in anticipation of an impending patent cliff later in the decade. 

EY’s M&A Firepower report revealed a significant uptick in spending within the life sciences sector, reaching $191 billion by December 10, 2023.  

This marked a notable increase from the $142 billion recorded in 2022. While the number of completed deals decreased from 126 in 2022 to 118 in 2023, the average deal size experienced a substantial boost, indicative of a strategic shift in the nature of transactions. 

In 2023, major pharmaceutical players dominated the M&A landscape, with 69% of the total investment coming from multinational corporations.  

Notably, Pfizer’s acquisition of Seagen for a staggering $43 billion in March stood out as the largest deal of the year. The trend continued in December, with drugmakers announcing approximately $25 billion worth of U.S.-listed biotech deals, according to a separate analysis by LSEG Deals Intelligence. 

During the conference, a flurry of “bolt-on” deals characterized by big pharmaceutical companies acquiring larger biotechs with maturing pipelines took centre stage.  

Merck & Co’s CEO, Rob Davis, expressed the company’s openness to deals of any size, echoing their recent $680 million acquisition of immune-oncology firm Harpoon Therapeutics. Johnson & Johnson also made significant moves, acquiring Ambrx Biopharma and its synthetic amino acid research for $2 billion. 

Merck & Co’s Keytruda (pembrolizumab) is projected to be the biggest selling drug of 2024, but its U.S. patent runs out in 2028. With sales of $20.9 billion in 2022, the company has a huge revenue gap to fill as the decade progresses. 

Novartis joined the M&A momentum by paying $250 million upfront for Calypso Biotech, specializing in immunotherapy antibody drugs. Eli Lilly’s CEO acknowledged the potential threats to its obesity franchise, identifying Novo Nordisk as a major rival in the GLP-1 market. Both companies are aggressively competing with rival drugs in obesity and type 2 diabetes, making M&A a potential avenue for new entrants aiming to tap into the burgeoning obesity market. 

David Ricks, CEO of Eli Lilly, highlighted the company’s awareness of potential threats from competitors seeking to bolster their positions in the obesity market through M&A. 

The recent approvals of Lilly’s Zepbound (tirzepatide) in November 2023 and Novo Nordisk’s Wegovy (semaglutide) in 2021 have further intensified the competition, making potential targets even more attractive for big pharma companies. 

Aside from speculation about the state of the M&A market, artificial intelligence (AI) and its use in healthcare was a hot topic for discussion. 

The Mayo Clinic unveiled a new partnership with AI startup Cerebras Systems that will develop a foundation AI model that can be trained to analyse the clinic’s structured and unstructured data. 

This includes clinical notes, imaging reports and laboratory readouts, with the first use being to build a language model around genomics data. 

London-based Isomorphic Labs, a drug discovery firm that is part of Alphabet, announced two new deals with Novartis and Eli Lilly, who will collectively pay $82.5 million up front to use the next generation of its AlphaFold technology to find and design new molecules. 

Nvidia, which selected Cambridge, UK’s Alchemab in 2022 to use its supercomputer technology in antibody discovery, will be looking to build relationships with big pharma. 

Amgen and Roche’s Genentech subsidiary are already customers and Kimberly Powell, Nvidia’s vice president of healthcare, hinted at further data-crunching link-ups with multinationals. 

It all adds to the promise of a dynamic year of mergers and acquisitions, with a focus on larger deals and strategic alliances. 

As capital reserves continue to grow and the pharma industry looks for new investments, there is hope for some brighter days in 2024.