Handshake Birds Eye View
A single deal accounted for nearly half of the total combined $324.594 billion value of the top 15 deals of 2015—compared with a combined $203.8 billion for the 15 biggest mergers and acquisitions of 2014. [© Yuri Arcurs/Fotolia.com]
Louis Lehot
Louis Lehot, Foley & Lardner

The biotechnology sector has long been characterized by its constant innovation, rapid technological progress, and unyielding commitment to combating diseases. These attributes are more than passingly related to the sector’s propensity for collaborative ventures and mergers and acquisitions (M&A). Prospects for entering into agreements and joining forces with large pharmaceutical powerhouses have consistently kindled the ambitions of both small and medium-sized biotechnology enterprises. Collaborations and M&A deals have become so deeply ingrained in the biotechnology landscape that they act as a vital force propelling innovation and expansion.

Eric Chow
Eric Chow, Foley & Lardner

Traditionally, biotechnology M&A deals were primarily centered around licensing agreements. However, they have evolved to encompass a wider array of strategies. These include acquiring cutting-edge technologies, harnessing the power of data analytics, and adopting innovative platforms that facilitate personalized medicine and streamline the drug discovery process.

Although recent years have seen a discernible slowdown in M&A undertakings within the sector, we see transformative change on the horizon, and it’s rapidly approaching.

In the coming years, many top-tier medications that are currently among the only options for the treatment of prevalent illnesses are set to relinquish their highly prized sole rights. This will precipitate intense rivalry between medications that will soon fall off the patent cliff, and medications that represent generic and biosimilar options. Because the sector faces this impending patent cliff, industry observers predict a surge in M&A and market consolidation.1

The link between patent cliffs and increased M&A activity is well documented in the pharmaceutical industry. Academic research has also repeatedly demonstrated that when pharmaceutical companies confront patent expirations, they tend to seek refuge in M&A deals.

“A significant number of blockbuster drugs are losing their exclusivity in the next five years, and we expect that generic and biosimilar competition will be particularly fierce and intense due to cost-containment pressures,” reports Fitch Solutions. “We expect M&A and market consolidation rates to increase in the short to medium term as pharmaceutical companies turn to acquisitions to maintain a constant revenue stream and protect against the upcoming patent cliff.”2

These agreements function as a safeguard against the decline in revenue that occurs after patent expiration, and they serve as a channel for acquiring new streams of innovation. In the intricate realm of pharmaceutical development, the importance of mergers and acquisitions rivals that of scientific breakthroughs.

Many groundbreaking pharmaceuticals owe their existence to strategic mergers and acquisitions that enabled their creation and eventual introduction to the market.

Scientific advances and innovation

Another driving force behind the changing landscape of biotech M&A is an ongoing stream of scientific breakthroughs and technological innovations. The intersections between fields such as genomics, artificial intelligence, and precision medicine have led to the emergence of fresh therapeutic approaches and a deeper comprehension of disease biology. Biotechnology companies now aim to capitalize on these advances through strategic partnerships, collaborations, and M&A deals.

For instance, the increasing emphasis on gene editing technologies such as CRISPR-Cas9 has resulted in several high-profile acquisitions. Companies compete to secure intellectual property, talent, and platforms that enable them to harness the potential of gene editing for therapeutic use. Similarly, progress in data science and computational biology has prompted collaborations between biotechnology firms and data technology companies as the industry recognizes the importance of data-driven decision making in drug development.

Changing market forces

The shifting dynamics of the healthcare market also impact trends in biotechnology M&A. The hunt for orphan drug designation status under FDA guidelines—a status that companies desire because it allows them to claim incentives for drugs and biologics that target rare diseases meeting defined criteria—has created a specialized market that can be highly profitable. Incentives include tax credits for qualified clinical trials, exemptions from user fees, potential for seven-year market exclusivity, and more. As a result, many biotechnology companies seek to acquire or partner with firms skilled in rare disease research and development. These targeted acquisitions enable companies to enter specialized markets and address unmet medical needs more effectively.

Vigilant venture capital investors

Venture capitalists are closely monitoring these changes in the biotechnology M&A landscape due to the potential for substantial returns on investment. Venture capital investors are also becoming more discerning, concentrating on companies offering innovative technologies and promising drug candidates, along with a capable management team and a clear strategic vision. Biotechnology startups that align with the evolving dynamics of the industry are more likely to capture the interest of venture capitalists aiming to invest in the next wave of transformative healthcare solutions.

Significant price tags

The path to these strategic acquisitions often entails high costs. Premiums on biopharmaceutical acquisitions have often exceeded 100%, partially driven by the substantial funding that biotechnology companies have obtained from public markets and private investors. These robust valuations have necessitated higher monetary offers from potential buyers, resulting in high-value deals with staggering price tags.

Furthermore, leading pharmaceutical corporations and private equity firms possess substantial capital reserves ready for deployment. With patents worth over $100 billion set to expire by 2030, big pharma needs a deeper, more robust, and more sustainable pipeline, and entrepreneurs and investors should seize the opportunity.


The evolution of the biotechnology industry is precipitating a profound transformation in M&A activity. As scientific breakthroughs, shifting market forces, and the demand for personalized medicine reshape the sector, biotechnology companies are reimagining their approach to M&A activity. As the biotechnology landscape continues to evolve, the role of venture capital investors will remain pivotal in fostering innovation and driving positive change within the industry.

Despite lingering uncertainties, the industry-wide emphasis on cultivating strategic pipelines through external innovation—often facilitated by corporate venture investments—lays the foundation for a resurgence in M&A activities.

Although the road ahead may be unpredictable, the fundamental dynamics of the life sciences sector are poised to fuel a renaissance in mergers and acquisitions.


Louis Lehot and Eric Chow are partners at Foley & Lardner



  1. Gardner J. Big pharma’s looming threat: a patent cliff of ‘tectonic magnitude.’ BioPharma Dive. Published February 21, 2023.
  2. BMI, Fitch Solutions. Big Pharma Turns To M&A To Safeguard Against Patent Cliffs. Published January 19, 2023.
Previous articleWhy Recombinants Are Essential for Assay Development and Production
Next articleNew Drugs May Help Rebuild Momentum against Cardiovascular Disease
Previous articleWhy Recombinants Are Essential for Assay Development and Production
Next articleNew Drugs May Help Rebuild Momentum against Cardiovascular Disease