Key Takeaways From The LSX USA Congress

In September, A&O Shearman was proud to sponsor the LSX USA Congress held in Boston, Massachusetts. The conference convenes leaders from biotech, medtech and pharmatech to facilitate partnerships and investment and discuss the issues and trends shaping the life sciences and healthcare industry. As a leading firm in the sector, A&O Shearman supports clients globally on transformational mergers, licensing and collaboration agreements, and the full spectrum of strategic partnering arrangements that drive R&D pipelines. We work across the industry, including with biotech, pharma, consumer healthcare, data and medtech companies.

Dealmaking headwinds persist

The life sciences and healthcare sector is an inherently collaborative and creative industry, and those traits remain crucial to countering the difficult funding market that continues through 2025. Uncertainty over tariffs, interest rates, prescription drug pricing and geopolitical conflicts is injecting volatility into valuations and access to capital. These macro variables continue to influence deal timing, structure and pricing, and they have extended diligence cycles. Yet the message from the conference was not one of retrenchment. Fundraising is occurring, innovation remains vibrant, and well-matched partners are finding ways to transact. Investors were encouraged to be bolder about exchanging ideas, form syndicates around promising platforms and bring conviction to earlier stage opportunities. For smaller biotechs, cultivating relationships with large pharma and embedding strategic partnerships into the financing plan were recurring themes.

Partnerships as capital efficiency

In a capital constrained environment, partnership is not merely optional—it is a capital efficiency strategy. Companies are using divestitures to sharpen focus, co developing to share cost and risk, and licensing by indication or territory to advance assets while conserving resources and leveraging external expertise. These structures enable companies to keep programs moving without overextending balance sheets, while buyers gain optionality through phased economics and rights tailored to their strategic needs.

The supply demand imbalance for de risked assets

There is more demand for de risked assets than supply. Buyers seeking either proven, non novel products or innovative assets with established data often confront competitive processes and premium pricing. As a result, many are looking earlier in the development continuum. Later stage deals face added friction from supply chain uncertainty and higher manufacturing costs, while earlier stage transactions shift more R&D investment to the buyer and therefore tend to feature lower upfront valuations, tranched funding, and milestone heavy economics. This is pushing dealmakers to craft structures that balance risk sharing with sufficient incentives to keep programs on track.

The patent cliff as a catalyst for M&A

Throughout the conference, speakers highlighted the looming patent cliff that will affect a significant number of high revenue products over the next five years. Large pharma executives noted that planning for loss of exclusivity is a constant feature of portfolio management, but the magnitude of expirations ahead raises the stakes. The consensus was clear: internal R&D alone cannot close the gap. Expect a steady pickup in M&A and late stage partnering as companies look to fill anticipated revenue holes, diversify therapeutic exposure and secure platform technologies that can generate multiple shots on goal.

AI: acceleration and disruption

Artificial intelligence is accelerating drug discovery, trial design and data analysis, while simultaneously reshaping capital flows. Where capital is available, AI centric companies are capturing a meaningful share, heightening competition for funding across the broader life sciences ecosystem. Diagnostics companies are among those deploying AI in particularly promising ways, but the quality of outputs depends on the quality of inputs. Historical limitations in data collection—such as the underrepresentation of women in certain clinical trials—can propagate bias into models. A pragmatic approach discussed at the conference was to partner with "tech tech": let technology firms focus on building and refining models, while pharma and biotech provide the proprietary domain data and governance required to train those models responsibly and effectively. This division of labor can accelerate timelines while mitigating risk.

What this means for M&A in 2025

Taken together, these dynamics point to an M&A market that is selective but active. Strategic acquirers are sharpening their theses around core therapeutic areas and platform capabilities. Boards are insisting on disciplined capital allocation, which favors structured deals, earn outs and option based collaborations. Sellers who can articulate clear value inflection points, present clean data packages and offer rights that align with buyer strategy are best positioned. Meanwhile, the patent cliff and the maturation of AI enabled discovery are likely to sustain deal flow as buyers seek both near term revenue and long term growth engines.

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