This week our colleague Sriram Prakash, Deloitte’s global lead for mergers and acquisitions (M&A) insight, published the cross industry M&A Index Outlook for 2017.1 This week’s blog draws on the report to explore the outlook for, and key drivers of, M&A in the Life Sciences industry in 2017.

The headline figures and trends from the M&A Index 2017 report include a specific reference to the Life Sciences and Healthcare (LSHC) industry. The insights identified include the following:

  • in 2016, the LSHC sector announced around $215 billion worth of deals - about half the level of the previous two years
  • the value of deals in the pharmaceutical industry in 2016 totalled $75 billion - down from $200 billion in 2015
  • while LSHC volumes remained strong, values declined sharply, driven by the fall in mega-deals
  • only three so called ‘mega deals’ were announced in 2016, compared to eight in 2015
  • $168 billion worth of announced deals were withdrawn in 2016 compared to $97 billion in 2015
  • the average price to earnings multiple on the 2016 deals still remained relatively high, at 32.6 compared to 35.8 in 2015
  • the US was the most active market and contributed to nearly 60 per cent of the announced deals
  • Europe was the only region that saw an uptick in deals, with France being the most active target country
  • cross-border deals in 2016 stood at $60 billion - down from $154 billion in 2015.

While 2016 failed to reach the levels of deal-making we have become accustomed to, a key contributory factor was the heightened political and economic uncertainty experienced throughout the past year. However, as we look ahead to 2017, there are a number of drivers that point to a year of increased M&A activity within the Life Sciences sector which I explore below.

Last year’s political uncertainty, particularly surrounding Brexit and the US presidential elections certainly dampened the appetite for deals, with the associated uncertainty from the pricing and tax environments among the primary drivers of stalled activity. However, Deloitte now expects the new environment in the US to be more favourable for M&A than before. The new US administration is expected to relax corporate tax rates and US-based pharmaceutical companies are now likely to see this as an opportunity to replenish their pipelines with acquisitions of promising smaller peers, rather than re-invest in internal R&D.

The Centre’s recent report, Measuring the return from pharmaceutical innovation 2016 further supports the notion that pharmaceutical companies are increasingly likely to pursue external innovation, rather than invest in internal asset development.2 Our analysis found that a growing proportion of the 12 original cohort companies’ late-stage pipeline value has become internally-generated (57 per cent in 2016 compared to 39 percent in 2013), but that this correlates with a continued decline in forecast late-stage pipeline value ($833 billion in 2016 compared to $913 billion in 2013). Hence, we predicted in our report that an increase in M&A activity is on the horizon as companies attempt to boost the forecast value of their late-stage pipelines through the purchase of externally-innovated assets.

The Centre’s research also found that unprecedented pressure from industry payers has increased the importance of value demonstration, and this will spur collaborations, including M&A, as companies look to better protect against the cost of attrition and provide some risk sharing. Consolidation, particularly within specialist areas will be prevalent, where unmet medical needs create the scope to command high margins. Related to this, the theme of de-diversification is emerging as companies are increasingly focussing on priority areas and exiting non-core areas in order to build positions of leadership within one or two key therapeutic areas (TAs). Our analysis for the R&D report found that companies with less volatility in their late-stage pipeline portfolios tend to achieve higher forecast peak sales per asset, implicating TA focus as strategy for maximum value creation.3

In a broader context, life sciences companies are expected to use M&A as a way to gain access to new markets and new technologies in order to expand their pipelines and sales channels. Deals and partnerships with established and upcoming local firms in emerging markets are likely to continue due to the clear advantage offered by having a local presence. Emerging markets can be very political with a high degree of protectionism towards locally produced products, meaning that deal-making with local producers is often necessary to gain a foothold in these growing markets. Furthermore, life sciences companies are anticipated to continue pursing deals of smaller innovative companies that aid larger life sciences companies increase operational efficiencies and reduce costs across their business functions. Additionally, deals at the convergence between the healthcare and technology sectors are also likely to see an uptick as life sciences companies respond to the need to expand their technical capabilities to enable the management and analysis of increasing amounts of data to drive more informed decision making.4

Ultimately, the environment in 2017 is likely to be more favourable for life sciences companies to pursue M&A activities. Increased deal-making will also be necessary for many companies to both adapt to the changing healthcare landscape and to achieve their strategic objectives.

Matthew Thaxter

Matthew Thaxter - Research Analyst, UK Centre for Health Solutions

Matthew is a Research Analyst at Deloitte’s UK Centre for Health Solutions, the independent research arm of Deloitte LLP’s healthcare and life sciences practice. He supports the Healthcare and Life Sciences practice by producing independent and objective business research and analysis into key industry challenges and associated solutions. Matthew’s previous experience is in market research and he has authored a number of reports on the current and future landscape of healthcare and pharmaceutical markets. Matthew holds an MSc in Immunology from King’s College London.

Email | LinkedIn


1 Deloitte M&A Index 2017. See also:
2 Deloitte (2016). Measuring the return from pharmaceutical innovation 2016. See also: 
3 Ibid
4 Deloitte M&A Index 2017. See also:


Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.


Post a comment

Comments are moderated, and will not appear until the author has approved them.