After a quiet period for biotech M&A, dealmakers started 2025 with renewed optimism.
Many expected a rebound in billion-dollar transactions, bolstered by early momentum like Johnson & Johnson’s $14.6 billion acquisition of neuroscience biotech Intra-Cellular Therapies, announced in January.
Enthusiasm has since faded, with political instability and market swings cooling appetites and deepening the divide between buyers and sellers.
Legal and financial advisors report a surge in early-stage discussions that rarely make it to the finish line. “There’s always uncertainty,” said Andrew Merken, shareholder at law firm Polsinelli. “This is uncertainty on steroids.”
Deals are taking longer — if they happen at all
Global M&A head Stuart Cable said deals that used to wrap in a few weeks are now stretching over three to four months, if not falling apart altogether. His team has been working on four billion-dollar-plus transactions since January; none, he notes, had closed by mid-April.
Cable described the buyer pool as unusually cautious, with companies running simultaneous deal processes, over-analyzing every aspect, and often walking away late in negotiations. “In the absence of competitive tension, why should anybody move fast?” he asked.
Valuation disconnects are the core issue
In a volatile market, stock prices can swing by 5% to 10% in a single week, making it nearly impossible to agree on a price. What looks like a reasonable premium on Monday could become untenable by Friday if the target’s stock drops.
This pricing friction is halting many deals in their tracks. “We’ve seen deals fall apart, term sheets not get signed because they’re so far apart on valuation,” Merken said.
Merck & Co. CEO Rob Davis echoed this during a recent earnings call: “There’s a disconnect between the market realities sellers face and the value expectations they hold.”
Biotechs are losing leverage
A few years ago, small and mid-sized drug developers had ample access to venture capital and strong IPO markets. Today, with capital harder to come by and more dilutive than ever, large pharmaceutical firms hold the upper hand.
Some are using that leverage to wait out cash-strapped biotechs, hoping desperation will push sellers to accept lower bids.
“If I’m the head of business development for a company,” said Merken, “I would rather kill a deal than take significant risk that could damage my career.”
Activity behind the scenes remains strong
Despite these headwinds, the pipeline for dealmaking isn’t empty. Experts say the behind-the-scenes activity remains heathy, particularly in research collaborations and asset licensing.
“There’s still lots of activity happening underneath the surface,” Kingston noted. Lower-risk, partnership-based deals are now taking center stage — and Cable said his team handling collaborations is “busier than ever.”
Pharma buyers are also focused on “derisked” assets: therapies supported by solid clinical data with clear commercial upside. Unfortunately, such opportunities remain limited, which makes them fiercely competitive.
Mid-sized deals are most likely to close
Deals in the $1 billion to $5 billion range appear to be the sweet spot for 2025, according to Davidson and others. That view gained credibility with Merck KGaA’s $3.9 billion acquisition of cancer-focused SpringWorks Therapeutics in May, a deal carrying a 26% premium to its trailing average.
Deals exceeding $10 billion, however, are increasingly rare. “They’re not impossible,” said Davidson, “but they’re certainly harder to justify in this environment.”
Unless political and economic clarity returns, many dealmakers will likely stay cautious. As BMO Capital’s Evan Seigerman put it: “If I do it now or three months from now, nothing’s really going to change.”
That delay could have long-term consequences for biotech investing. Much of the sector’s appeal rests on the possibility of a lucrative pharma buyout. If that “takeout thesis” weakens, investor enthusiasm may follow.
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