Driving Innovation and Value in Health Industries through M&AÂ
Key Trends in Health Industries M&A
Pharmaceuticals and Life Sciences
- Biotech Acquisitions: Large pharmaceutical companies are focusing on acquiring biotech firms to counter patent cliffs and fill pipeline gaps. These acquisitions are essential to sustain growth and innovation.
- Divestitures for Value Creation: Companies are strategically divesting non-core or low-growth assets to generate cash for new investments aligned with their core competencies. This trend is expected to continue as firms optimize their portfolios.
- Alternative Financing: Partnerships and joint ventures are becoming increasingly popular as companies seek alternative financing to achieve their transformation goals without heavily impacting their P&L statements.
The demand for GLP-1 drugs, used to treat type 2 diabetes and promote weight loss, has driven significant M&A activity. Notable deals include Roche’s acquisition of Carmot Therapeutics and Novo Nordisk’s proposed acquisition of Catalent. These acquisitions aim to enhance manufacturing capabilities to meet the high demand for GLP-1 drugs.
- Digital Innovation and AI: Healthcare services companies are actively seeking M&A opportunities to integrate digital technologies, analytics, and AI to improve patient care and operational efficiency.
- Consumer Healthcare: The growing demand for consumer health products, driven by demographic changes and rising income levels, is making companies in this sector attractive acquisition targets.
Strategic Themes for 2024
The US Federal Trade Commission (FTC) and other regulators are closely monitoring M&A activity to ensure it does not disrupt patient care or increase costs. The industry is particularly watching the FTC’s review of the Novo Nordisk–Catalent deal for insights into future regulatory actions on vertical mergers.
With higher interest rates, companies are under pressure to demonstrate higher returns for shareholders. This has led to a focus on divesting non-core assets to free up capital for strategic acquisitions.
Private Equity and Fragmented Sectors
Private equity firms are expected to continue consolidating fragmented sectors such as private clinics, dental clinics, and specialist care providers, capitalizing on the opportunities for rollups and growth.
Companies are increasingly acquiring or partnering with technology firms to enhance their digital capabilities, delivering cost-effective, value-based care through advanced analytics and smart health devices.
Key Actions for Dealmakers
Dealmakers in the health industries need to think strategically and act proactively to identify transactions that drive growth and create sustained outcomes. The continuous need for business model transformation to keep pace with the evolving environment will fuel steady M&A activity throughout 2024.