M&A outlook for pharma in 2025

M&A dealmaking in 2025 is expected to witness continued growth, however companies need a robust partnering approach to secure future expansion.¹ 

The year began with this forecast holding true, as the pharmaceutical industry declared major M&A deals including Johnson & Johnson’s acquisition of Intra-Cellular Therapies, Inc. Totalling a value of approximately $14.6 billion, the agreement “is the biggest biotech M&A transaction since 2023”.² It will support development of treatments for key conditions such as schizophrenia, bipolar depression, anxiety and Alzheimer’s disease-related psychosis and agitation.

Another major deal in early 2025 was GSK’s announcement that it will acquire the biopharmaceutical company IDRx Inc; an agreement valued potentially up to $1.15 billion. As part of this transaction, a small molecule tyrosine kinase inhibitor (TKI) candidate will be advanced as a treatment for gastrointestinal stromal tumours (GIST).³

More broadly, revenue challenges in pharma still loom. For instance, patent expiries are “set to wipe out $300 billion in revenues by 2028”. Additionally, over half (65 percent) of all revenue in big pharma “now come from dealmaking, confirming a need for robust inorganic growth and value creation strategies”, the report stated.⁴

A shift in innovation

Worldwide, the life sciences industry has transitioned from major dealmaking to “earlier-stage opportunities with lower price tags”. For example, 2024 saw companies “trying to tap innovation at an earlier point in the development cycle”, and the industry “turned away from the big deals for de-risked assets that characterised 2023”.⁴

Looking ahead, “China is becoming an increasingly important research and development (R&D) target for companies seeking to license-in antibody-drug conjugates (ADCs) and other novel oncology treatments”. However, the US BIOSECURE Act, set to come into force in 2032, poses a challenge to China’s life sciences innovation economy, EY advised.⁴

Overall, novel opportunities such as innovation in non-traditional technological and geographical areas “such as AI startups and China biotech – offer an accelerated route to growth”.⁴

How will AI shape pharma in 2025?

With growing emergence of AI into 2025, the first part of the year saw the US Food and Drug Administration (FDA) issue draft recommendations on AI, which are set to address the safety, effectiveness or quality of drugs or biological products.⁵

EY’s report highlighted the largest life sciences AI M&A deal to date was Recursion Pharmaceuticals’ acquisition of Exscientia, agreed in August 2024 for $712 million.⁴

However, the authors raised three challenges that the pharma industry must navigate to achieve success when partnering with these technology companies: “finding the right data strategy, learning to use AI end-to-end, and getting education and integration strategies in place across the firm”.⁴

In the UK market, the UK Government’s AI Opportunities Action Plan “recognises that AI safety, proportionate regulation and professional oversight can set the UK apart as a world-leader, rather than hinder our innovators,” echoed Adam Leon Smith, a Fellow of BCS, The Chartered Institute for IT and international AI expert.⁶

What will 2025 bring for pharma M&A dealmaking?

“For large pharmaceutical companies, 2024 may have been a ‘digestion year,’ as they integrate the acquisitions made the previous year. At the same time, the appetite for M&A remains strong, with biopharma companies signing more deals in 2024 than the previous year,” Subin Baral, EY Global Life Sciences Deals Leader remarked.⁴

In 2025, the pharmaceutical industry should “expect a return to dealmaking”, considering the “growing optimism around the business environment in [2025], which could see the industry unleash more of its $1.3 trillion Firepower. With nearly two-thirds of all major pharma company revenues set to come from dealmaking in the next five years, deals will remain at the centre of life sciences strategy,” Baral added.⁴

References

1. EY Firepower Report: Life Sciences Dealmaking – Trends in 2025. [Internet] EY (Ernst & Young). 2025. [cited 2025Jan]. Available from: https://www.ey.com/en_gl/firepower-report
2. Intra-Cellular Therapies Acquisition Will Expand Johnson & Johnson’s Presence In Neurology Space, Says GlobalData. [Internet] GlobalData. 2025. [cited 2025Jan]. Available from: https://www.globaldata.com/media/pharma/intra-cellular-therapies-acquisition-will-expand-johnson-johnsons-presence-neurology-space-says-globaldata
3. GSK Acquisition To Advance Potential Best-In-Class GI Tumour Treatment. [Internet] European Pharmaceutical Review. 2025. [cited 2025Jan]. Available from:
https://www.europeanpharmaceuticalreview.com/news/243346/gsk-acquisition-to-advance-potential-best-in-class-gi-tumour-treatment/
4. Smaller, Smarter Deals: Dealmaking Volume Stable But Value Is Down As Life Sciences Companies Turn To Innovative Early-Stage Assets With China And AI Becoming Major Sources Of Innovation. EY (Ernst & Young). 2025. [cited 2025Jan]. Available from: https://www.ey.com/en_gl/newsroom/2025/01/smaller-smarter-deals-dealmaking-volume-stable-but-value-is-down-as-life-sciences-companies-turn-to-innovative-early-stage-assets-with-china-and-ai-becoming-major-sources-of-innovation#:~:text=%E2%80%9CCompanies%20have%20focused%20on%20smart,its%20US%241.3%20trillion%20Firepower.
5. FDA Issues First Recommendations On AI For Drug Development. [Internet] European Pharmaceutical Review. 2025. [cited 2025Jan]. Available from: https://www.europeanpharmaceuticalreview.com/news/242364/fda-issues-first-recommendations-on-ai-for-drug-development/
6. Expert Reaction To The Government’s AI Opportunities Action Plan. [Internet] Science Media Centre. 2025. [cited 2025Jan]. Available from https://www.sciencemediacentre.org/expert-reaction-to-the-governments-ai-opportunities-action-plan/