Pharmaceuticals: M&A Revival

2025 was another turbulent year for the pharma industry as heightened uncertainty, particularly in the US, prevailed. However, confidence grew over the course of the year, as businesses adjusted to the macro-environment and greater clarity emerged in relation to trade negotiations, assisted in part by the announcement of MFN deals in the US. 

This momentum shift – felt across the industry in the latter stages of 2025 – reinvigorated activity levels and fuelled renewed optimism for the long-anticipated rebound of M&A and investment activity in the sector. 

M&A deal landscape  

Whilst M&A deal volumes remained relatively stable, overall deal value for 2025 ended much higher than 2024's lacklustre performance. Like 2024, deals in the US$1-2 billion range continued to flow but a welcome development came in the form of the return of more sizeable deals, including a number over the US$8 billion mark. Oncology and immunology remained popular therapeutic areas with rare diseases, neurology, respiratory and cardio-metabolic also drawing interest. 

Innovators continued to be the dominant driver of activity and the largest deal of the year saw J&J acquire CNS-focused Intra-Cellular for $14.6 billion, adding approved and clinical-stage therapies to its portfolio. In another transaction in neurology, Novartis announced the year's second largest deal with its proposed acquisition of Avidity and its neuromuscular programmes for US$12 billion. Elsewhere, Merck acquired respiratory-focused Verona Pharma for US$10 billion as well as flu prevention-focused Cidara Therapeutics for US$9.2 billion, Pfizer snapped up obesity-focused Metsera for up to US$10 billion (following a very public battle with Novo Nordisk) and Sanofi acquired Blueprint Medicines for up to US$9.5 billion, expanding its rare / immunological disease portfolio and pipeline. 

These transactions were driven by long-standing strategic ambitions to build and/or replenish pipelines, particularly for those facing material loss of exclusivity and most were focused on late stage / commercial assets. However, as in 2024, innovators also continued to show their willingness to flex their dry powder for the right early stage assets, particularly those with first or best in class potential, such as AbbVie's acquisition of Capstan for up to US$2.1 billion with its potential first in class in vivo CAR-T therapy candidate – a modality which attracted other M&A interest in 2025.

Overall, there is no doubt that a level of disruption in the business environment for the sector remains. However, as noted above, there was a notable mood shift during the year which saw heightened optimism for the sector as 2025 came to a close.

Encouragingly, 2025 signalled the long-awaited return of private equity to the deal table, with some notable deals taking place in 2025. CapVest announced its acquisition of a majority stake in Stada (valuing Stada at approx. US$10 billion), GTCR announced its €4.1 billion acquisition of European generics company Zentiva from Advent, KKR acquired Swedish life sciences company, Biotage, for US$1.2 billion, BC Partners announced its proposed acquisition of French generics company, Biogaran, and SK Capital announced its proposed acquisition of a majority stake in Swixx Biopharma (valuing it in excess of €1.5 billion). 

M&A undertaken by generics players in the sector was largely centred around growth, geographical expansion and / or moving up the value chain. Sun Pharma acquired Checkpoint Therapeutics – a company specialising in immunotherapy and targeted oncology treatments – for up to US$416 million, growing its innovative therapies businesses. Natco Pharma acquired a 35.75% stake in Adcock Ingram for approx. US$220 million in a strategic investment aimed at geographical diversification and revenue stream expansion (providing Natco with a platform to penetrate the South African market). Elsewhere, Lupin acquired VISUPharma to expand its European footprint and ophthalmology business and Torrent Pharma acquired a controlling stake in JB Chemicals & Pharmaceuticals for approximately US$1.4 billion strengthening its presence in the Indian pharma market and building a larger diversified global presence (with the CDMO platform also providing a new long-term avenue of growth for Torrent). 

In terms of transaction dynamics, we continued to see two different tales. In-demand assets benefited from good levels of competitive tension but many other assets continued to endure longer, harder processes (including soft launches, fake auctions and bilateral processes) as well as the need for creativity to get deals across the line, such as seller reinvestments, earn-outs, contingent value rights and deferred consideration structures. However, with momentum in the sector's deal activity levels increasing, this may well change in 2026.

Investment activity  

The uncertainty caused by the year's turbulence was reflected in VC investment activity, with deal volume and total deal value broadly flat across the US and Europe in 2025 compared with 2024. However, after a notable dip in confidence around Q2, like M&A activity, investment momentum built in the second half of 2025 as investor confidence recovered. 

Key themes included investor interest in AI-driven companies, with larger rounds including Isomorphic Lab's US$600 million first external financing, and oncology-focused Pathos AI's US$365m Series D in May. Similar to M&A themes, oncology, neurology, obesity / cardiometabolic, as well as platform assets, drew significant investment dollars and, as in previous years, corporate venture continued to play a key role in this space with the likes of Eli Lilly, Sanofi, Pfizer and AbbVie remaining active corporate VC investors in 2025.

Linked to a wider industry trend – the sustained rise of China's biotechs – 2025 saw investment flow into new US and European companies developing assets licensed from China, a trend which looks set to continue (geopolitics aside). Examples include: 

• Verdiva Bio which raised US$411 million in its oversubscribed Series A with its oral and injectable obesity-focused pipeline licensed from Sciwind Biosciences; and
• Kailera which raised a US$600 million Series B to support the advancement of its portfolio licensed from Jiangsu Hengrui.

In terms of IPOs, activity levels in the US were muted, despite an initial flurry in the first two months of the year. Meanwhile European activity remained all but dormant, with only one IPO across the continent. Bucking this trend and reflective of the surge of confidence in China's biotech scene, there were 16 biotech IPOs on the Hong Kong Stock Exchange in 2025.

Regulatory 

As we reported last year, the sector remains a priority for merger control authorities, with many willing to use their call-in powers for transactions below merger thresholds (with increased attention on so-called 'killer acquisitions' – deals involving smaller targets but aimed at preventing competing products from reaching the market). FDI regimes continue to expand and pharmaceuticals (often defined broadly) is commonly classed as a sensitive sector for which mandatory notification obligations may be triggered even for minority shareholdings. As such, early attention to the regulatory workstream remains an essential part of managing a cross-border pharma transaction to a successful close.

The change of administration in the US seems, at least for the moment, to be resulting in a less interventionist approach on M&A deals. All of the US deals over US$9 billion in the sector in 2025 were cleared in their first 30-day period (including Pfizer/Metsera, which was cleared during the government shut down), reflective of a more permissive approach. 

Outlook for 2026 

Whilst significant geo-political events could have an impact on how 2026 plays out, our current expectation is that activity in the sector will continue to gain momentum. The strategic imperatives for M&A remain (including significant patent cliffs, generics drive for growth and private equity's need for exits and fresh deployment of cash) and macro conditions have been improving with interest rates falling, inflation stabilising and equity markets performing well. Given these factors, we expect to see the resurgence of mega deals continue in 2026. 

Whilst continued acquisition focus on later stage / commercial assets is anticipated, if confidence continues to increase, we may see innovators looking to acquire earlier stage assets (versus the current trend which generally sees licensing preferred for earlier stage R&D). In terms of therapeutic areas, 2026 looks set to replicate recent trends which, as noted above, have seen a focus on oncology, immunology, rare diseases, neurology, respiratory and cardio-metabolic.

China will also remain a key theme for 2026. While much of this activity will continue to be focused on licensing deals by big pharma, we expect to see investment continuing to flow into Western companies whose pipelines are licensed from Chinese biotechs (including under the so-called NewCo model).

Overall, there is no doubt that a level of disruption in the business environment for the sector remains. However, as noted above, there was a notable mood shift during the year which saw heightened optimism for the sector as 2025 came to a close. Caution has, perhaps, given way to acceptance and the drivers of transactional activity are outweighing hesitation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.