Following the most robust year for life sciences M&A on record, the sector saw a sharp decline in 2022 to levels below what we last experienced pre-pandemic. Many analysts pointed to supply chain issues, clinical development delays and other lingering effects of the COVID-19 pandemic as the cause. The 2021 catalysts of innovation following the pandemic breakout had finally worn off. On the surface, it appeared that key industry players had taken a step back, or even hit pause, but continued background activity tells a different story. While deal flow declined, the underlying drivers of M&A activity throughout 2022 (and continuing through today) remain strong.

During 2022, corporate venture activity saw the second largest year on record, as measured by deal volume. While deal volume remained strong, the dollars invested dipped as corporate investors focused on investing in earlier stage rounds, perhaps to build a longer runway to exit and weather the M&A activity lulls in the market. Nevertheless, the continued emphasis on corporate venture investing, even during a clear dip in M&A activity and even with venture investors pulling back in all respects, demonstrates that despite an uncertain economy, the long-term game plan for the largest biopharma companies remains. The key is to unlock commercial value through building a sustainable and robust innovation pipeline outside of its walls.

With the dual threat of patent expirations and generics chipping away at a biopharma companies’ top lines, their pipeline must always stand ready to take center stage. While innovation fuels growth in any sector, a strong innovation pipeline in biopharma is critical not only to growth but also to survival.

The innovation pipeline

Historically, large corporations have focused their R&D activities solely within the four walls of the corporate enterprise. However, over the past 20 years, many corporations have shifted their R&D efforts to leverage external innovation. In fact, there are now several large, venture-based service providers who assist large corporations in starting, developing and managing corporate venture capital programs. Through these efforts, virtually all big pharma companies have strategic corporate venture arms that invest in emerging companies throughout the entire life sciences ecosystem. In 2022 while M&A activity was down, Pfizer Ventures, Eli Lilly and Novartis, to name just a few, all remained very active corporate investors in the biopharma space.

As a whole, the emphasis in outward-looking R&D has provided the largest industry players with an ability to engage actively and aggressively in the industry far beyond what they would be capable of producing internally. Through these efforts, the large companies, as investors, have become masters at unlocking the ultimate commercial value through optionality. If a technology is successful, the corporate investor could have an inside track to an acquisition or at least a head start on its competition.

But even without the desire of a corporate investor to ultimately acquire an asset in which it invests, many find that supporting companies throughout the ecosystem makes the industry stronger as a whole – and that is good for business.

However, if a technology does turn out to be a failure, the corporate investor can easily cut ties and walk away virtually unscathed (focusing on one of the many other innovations in which it has invested), often with minimal financial loss. With the pressure across the industry to find replacements for moneymakers that will soon face generic competition, investing in external innovation accelerates and exponentially diversifies big pharma’s innovation pipeline. The effects on the broader sector are equally significant. Investment in early-stage assets creates and advances opportunities for all players in the space by boosting a robust platform of innovation across the entire ecosystem.

In addition, as it can take nearly a decade to create and clinically develop a technology and then achieve commercialization, many of the venture deals that are consummated in 2023 will be the headlining M&A deals of the future. This is not to say that early-stage assets aren’t attractive, as we have seen a robust desire among big pharma companies to acquire both early-stage as well as late-stage assets. In both cases, the drivers of M&A activity remain the same: corporate investments continue to push the field forward.

M&A rebound

With the underlying drivers remaining strong, how should we assess an M&A rebound in the life sciences sector? If there is anything to take away as we emerge into a post-COVID-19 world, it is that nothing is certain. Many predicted the likelihood of a healthy rebound to life sciences M&A in 2023. Indeed, we have seen some huge biopharma deals this year, including Pfizer’s $43-billion purchase of Seagen and Merck’s $11-billion acquisition of Prometheus Biosciences.

Unfortunately, the markets hit another unexpected snag with the shocking failure of Silicon Valley Bank, leaving more than $220 billion in flux, and more recently the demise of First Republic Bank. These regional bank failures demonstrate the continued uncertainty in the current market.

Even if 2023 does not deliver the rebound we hoped and expected, the underlying drivers of life sciences M&A remain strong. Big pharma will continue to build a strong, strategic, externally focused pipeline. In addition, private equity firms, as well as big pharma firms, have significant amounts of cash on hand that they are waiting to deploy. With more than $100 billion of patents set to expire by 2030, big pharma will need to replenish through a strong pipeline that must stand ready.

Ultimately, with an industrywide emphasis to build strategic pipelines through corporate venture investing in external innovation (rather than—or in addition to—within its own walls), it is really more a question of when, not if, M&A activity in the space will rebound (and surpass) the deal value and volume we saw in 2021.


Rebecca A. Guzman, a partner with Duane Morris, focuses on the representation of start-up and emerging growth companies with a focus on companies in the biotechnology, pharmaceutical, medical device, diagnostics and healthcare IT industries. Her practice spans the entire corporate lifecycle, from formation through liquidity. Rebecca currently serves as a vice chair of the M&A Division of the firm’s Corporate Practice Group and was named a Most Effective Dealmaker by the Legal Intelligencer. She also regularly advises in all areas of Delaware corporate and alternative entity law. Email:

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