Pharmaceutical merger and acquisition activity is experiencing a dramatic resurgence as major companies capitalize on depressed biotech valuations and cash-strapped smaller firms struggle to access capital. The sector's deal momentum surged 63% in the first quarter of 2025, marking a sharp reversal from the 26% decline seen over the previous 12 months, according to Pitchbook data.
Major Deals Signal Market Recovery
Novartis led the charge with its $1.7 billion acquisition of oligonucleotide biotech Regulus Therapeutics, announced Wednesday morning. The Swiss pharmaceutical giant followed German peer Merck KGaA, which sealed a $3.9 billion deal to acquire SpringWorks Therapeutics earlier in the week. These transactions represent a significant shift from the relatively quiet deal environment that characterized much of 2024.
The acquisition spree extends beyond these headline deals. Sanofi emerged as a major buyer with a $9.5 billion purchase of rare disease specialist Blueprint Medicines, while Bristol Myers Squibb announced a massive licensing agreement with BioNTech worth potentially more than $11 billion for a solid tumor bispecific therapy.
Small Biotechs Become Prime Targets
The challenging market environment has created unprecedented opportunities for pharmaceutical acquirers. According to Jefferies analysis, 22% of biotechs are now trading below their cash value—the highest percentage in at least nine years, with approximately 80 companies falling into this category. The previous peak was 68 companies in 2022.
"If valuations remain pressured, we predict the number of small-cap M&A deals could rise in the next 6–12 months—particularly as SMID-cap cash runways steadily decrease," Jefferies analysts wrote. The firm noted that biotech follow-on financings totaled just $3 billion in the first quarter, the lowest level in three to four years, compared to $11 billion raised in Q1 2024.
Recent acquisitions of smaller biotechs include Sanofi's purchase of Vigil Neuroscience, Novartis's acquisition of Regulus Therapeutics, and BioMarin's buyout of Inozyme Pharma. Eli Lilly's $1 billion acquisition of pain biotech SiteOne Therapeutics exemplified the trend toward diversifying tuck-in deals.
Pharma Giants Signal Aggressive Deal-Making
Major pharmaceutical companies have explicitly identified business development as a top capital allocation priority. Pfizer CEO Albert Bourla emphasized the strategic opportunity presented by current market conditions, stating, "Never let a good crisis go to waste. You need to be strategic. You need to be smart, you need to be disciplined. But you need to sell when prices are high and buy when prices are low."
Pfizer has detailed plans to spend $10-15 billion on acquisitions to replace a discontinued obesity asset and rebuild its cardiometabolic pipeline. Bristol Myers Squibb CEO Chris Boerner declared business development as the company's "top capital allocation priority," noting that a $1.5 billion cost savings program has positioned the company to pursue external opportunities.
"What's important is that we like the science, and we feel we're the rightful owners," Boerner said, highlighting the company's focus on programs that fit within core therapeutic areas and can drive near-term growth.
Market Dynamics and Strategic Focus
The current environment represents a convergence of factors favoring increased M&A activity. Pharmaceutical companies are sitting on substantial cash reserves while biotech valuations have fallen precipitously—down 143% over 12 months according to Pitchbook, though showing a 107% recovery in the last three months.
Merck CEO Robert Davis called business development a "top priority," while GSK CEO Emma Walmsley noted opportunities in China, where the company recently struck a $1 billion ADC deal with Shanghai-based DualityBio. The trend toward partnerships with Chinese biotechs has accelerated, with Regeneron's $80 million upfront deal with Hansoh Pharma potentially worth $1.93 billion in milestones, and Pfizer's $4 billion licensing agreement with 3SBio.
Challenges and Outlook
Despite the renewed optimism, companies acknowledge that tariff uncertainties and trade policy changes create complexity in deal execution. Roche CEO Thomas Schinecker admitted that tariffs could impact business development activities, while other executives noted the need for disciplined approaches in the current environment.
Jefferies has identified 10 biotechs as potential near-term targets, including Kalvista Pharmaceuticals, Rezolute, Ventyx Biosciences, and aTyr Pharma, all with advanced assets in areas where pharmaceutical companies are actively seeking opportunities.
The return of M&A activity represents a welcome development for the biopharma ecosystem, which has been challenged by macro headwinds and limited access to capital. As pharmaceutical companies leverage their financial strength to acquire undervalued assets, the sector appears positioned for continued consolidation throughout 2025.
