Guest Column | January 1, 2024

Life Sciences M&A Outlook: Challenges And Opportunities In 2024

By David Stuart

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The life sciences industry is one of the most dynamic and innovative sectors of the economy, and M&A plays a vital role in driving growth and innovation. In recent years, there has been a surge in M&A activity in the life sciences industry, as large pharmaceutical companies seek to acquire smaller biotech companies with promising drug pipelines and technologies.

However, the life sciences M&A landscape is constantly evolving and there are several challenges that companies and advisors to the industry need to be aware of in the coming months.


  • Increased antitrust scrutiny
    • Antitrust regulators are closely monitoring M&A in the life sciences sector, focusing on large pharmaceutical firms buying smaller biotech companies. Concerns center around potential hikes in drug prices and a dip in innovation. Although some argue that these deals foster innovation and lower costs through economies of scale, evidence, including a 2019 Federal Trade Commission study showing a 78% average increase in drug prices post-acquisition, challenges this view. However, certain types of acquisitions, like a brand-name drug company purchasing a generic drugmaker, sometimes lead to cost reductions, as brand-name companies might produce generics more efficiently.
  • Inflation uncertainty and cost of capital
    • Inflation uncertainty and the rising cost of capital is making it more expensive for companies to finance M&A deals. This is likely to lead to a decrease in the number of M&A deals, particularly smaller deals. Large pharmaceutical companies may still be able to pursue larger deals, but they are likely to be more selective. Companies will focus on assets that require minimal investment, offer a higher rate of return and shorter payback period.
  • Geopolitical tensions
    • Over the last couple of decades, the industry has broadened global research and development and manufacturing processes. A 2018 report from the Public-Private Analytic Exchange Program highlighted many threats to our pharmaceutical supply chain, including our significant reliance on global manufacturing and friendly trade policies.  Geopolitical tensions threaten to disrupt the global supply chain and make it more difficult for companies to conduct M&A deals. Uncertainty is the primary driver and until geopolitical tensions are deflated, appetite for global acquisitions will remain suppressed.


Despite these challenges, there are several opportunities that will drive M&A activity, including the following:

  • The rise of new technologies
    • The advent of cutting-edge technologies, including gene editing and artificial intelligence, is forging new paths for innovation within the life sciences sector. This surge in technological advancements has captured the attention of investors and acquirers alike, who are eager to support companies at the forefront of these developments. These technologies are revolutionizing drug discovery by accelerating the pace of research, and they have the potential to introduce therapies capable of curing genetic diseases that were once considered incurable.
  • Growing demand for personalized medicine
    • The growing demand for personalized medicine is also driving M&A activity in the life sciences sector. Firms are seeking to acquire companies with expertise in fields like genomics and proteomics to develop innovative personalized treatments. Many of these drugs target rare diseases for which there was previously insufficient technology or investment to develop treatments or cures. Advancements in technology are enabling faster drug development, and the economics have become more viable, allowing numerous pharmaceutical companies to expand their drug portfolios.
  • Emerging markets expansion
    • The growth of emerging markets offers significant opportunities for the life sciences industry. Companies are increasingly acquiring firms with a strong presence in these areas to extend their global reach. Demand in many of these regions is expected to outpace growth in the U.S., both in volume and through greater adoption of novel medicines. The ongoing development of these markets is expected to boost economic conditions and improve the quality of life in these regions.

The life sciences industry is a broad sector that encompasses a variety of subsectors, such as pharmaceuticals, biotechnology, medical devices, and diagnostics. M&A activity varies across these subsectors, with some sectors performing better than others. The above challenges and opportunities will be faced by all sectors but short and long-term outlooks by sector will vary significantly. Factors that will impact each sector uniquely include the following.

Outlook by sector


In the biopharma sector, M&A is predominantly driven by large pharmaceutical companies acquiring smaller biotechs with promising drug pipelines and technologies. This trend, fueled by the desire to enhance portfolios and pipelines, is expected to persist. In a recent article, RSM’s senior analyst Justin Culbertson highlighted a significant slowdown in funding for early-stage biotechs, increasing their challenges in competing with larger organizations. Despite these funding issues, large biotechs continue to invest in research and development amid rising demand for new drugs and therapies. This scenario is likely to result in an increasing number of smaller biotechs being acquired by larger entities in the next year.


M&A activity in the medtech sector, though not as robust as in biopharma, remains active. Medtech companies aim to acquire firms with complementary products and technologies to enhance their portfolios. This trend is likely to continue into the next year but will be moderated by the current high cost of capital. Consequently, deal activity will primarily involve companies with highly promising technology or those offering immediate synergistic benefits, at least until there is a decrease in the cost of capital.

Life sciences services

In the life sciences services sector, M&A activity is growing, driven by the trend toward outsourcing clinical trials and R&D. This sector distinguishes itself with a faster return on invested capital, which fuels robust market demand. This financial efficiency, along with the surging demand for outsourced services, is spurring both investor interest and M&A activity. Despite higher capital costs, the sector's compelling return on investment is attracting life science investors, demonstrating its resilience, and signaling strong growth potential.

Key takeaway

Looking ahead, despite inflation and rising capital costs, we anticipate robust life sciences M&A activity. This optimism stems from solid industry fundamentals, an aging population and escalating demand for novel treatments. However, a more competitive M&A environment is expected, necessitating greater selectivity and discipline in target selection and pricing strategies. We foresee a continued emphasis on larger transactions, particularly as Big Pharma seeks to enhance portfolios and pipelines.

Additionally, the life science services sector will likely see heightened interest, reflecting the trend of outsourcing clinical trials and R&D activities. This shift indicates a strategic pivot toward external partnerships and collaborative innovations, potentially leading to unique alignments between technology, research and development. These trends underscore the importance of adaptability and strategic foresight in navigating the evolving landscape.

Overall, the life sciences M&A scene is poised for strength and dynamism, but it will require a more nuanced, strategic approach from companies to capitalize on emerging opportunities.

David Stuart is a director with RSM US LLP’s management consulting practice, responsible for leading Life Sciences M&A & Strategy advisory services. He leads transformation initiatives associated with key business events such as commercial launches, IPOs/SPACs, mergers, acquisitions, and separations. His focus areas include the design and execution of target operating models, business process and organizational design, implementation, and the management of complex programs and projects.