For much of 2025, biotech stocks have lagged behind the broader market, as was the case in 2023 and 2024. Economic, regulatory, and policy uncertainty, combined with stubbornly high borrowing costs, have made it tough for companies to raise capital. This has rendered the sector nearly uninvestable at times and driven valuations to extreme lows. At mid-year, nearly half of publicly traded U.S. biotech companies were trading below the level of cash on their balance sheets.
However, a major turnaround is underway, thanks largely to a resurgence in biotech M&A activity. The rise in dealmaking is a much-needed lifeline for the sector, spurring optimism among experts and revitalizing some beaten-down stocks.
Below, we leverage Tegus Expert Insights, M&A deal screeners, and other material from the AlphaSense platform to explore M&A trends in biotech, key drivers, and the market implications.
Related Reading: Biotech and Pharma M&A: 2025 Outlook
An Improving Deal Landscape in Biotech
Johnson & Johnson kicked off 2025 M&A activity with its high-profile $14.6 billion acquisition of neuro company Intra-Cellular Therapies in January. Yet in the subsequent four months, M&A activity slowed as U.S. tariffs, FDA leadership changes, HHS priority shifts, and President Trump’s executive order calling for most-favored-nation (MFN) pricing created market uncertainty.
The biotech M&A market started to pick up steam mid-year and has been full-speed ahead since. As a result, the cumulative year-to-date value of biotech deals ($49 billion) has already surpassed the total from all of 2024 ($44 billion). At the same time, compared with 2024, dealmaking in 2025 has expanded in breadth in terms of therapeutic areas. Average deal size has also risen. In 2024, there was not a single biotech deal over $5 billion. But 2025 has seen several such megadeals — including the JNJ deal, Merck’s $10 billion acquisition of Verona Pharma, and Sanofi’s $9.5 billion deal for Blueprint Medicines.
Source: Data from Biopharma Dive
Key Drivers of M&A
Why the surge in activity? Big Pharma faces a looming patent cliff: Over 200 drugs are set to lose their patent protection in coming years, including at least 69 blockbuster drugs with annual sales exceeding $1 billion each. The cumulative loss in sales is projected to eclipse $300 billion.
This has prompted an industrywide search to refill drug pipelines. Meanwhile, leadership changes at the FTC have created a less-stringent regulatory environment, reducing antitrust barriers and enabling larger-scale merger activity. Lower borrowing costs following the Federal Reserve’s September policy rate cut have further fueled M&A activity.
Source: Drug Times
Pharma companies appear willing to buy, rather than build, innovation.
"The primary path forward in my view for these larger companies is not through discovery and internal development. It's through searching for the latest and greatest and best forms of innovation and bringing those things in house through M&A or through in-licensing.”
– Former Director at Johnson & Johnson, June 2025 Call
To quickly counter patent losses, Big Pharma this year has been eagerly pursuing biotechs with commercial or near-commercial products.
"Any biotech with late-stage assets or [that] has clean IP and regulatory clarity [is] highly-valued and are targets. I do expect to see continued interest in this type of M&A.”
– Former VP at argenx, April 2025 Call
Meanwhile, biotechs are keen to make deals, particularly those that are pre-revenue and feeling the pressure of high interest rates on cash reserves. Fund managers expect these stocks to re-rate as interest rates ease and M&A accelerates, creating a sense of urgency in dealmaking.
"I think M&A would certainly keep increasing. …[T]here's a lot of pressure on biotechs to stay afloat. A lot of them are trading below cash. I think there's a lot of opportunity there for folks to find creative deal structures, and shop for their favorite asset and get it for a relatively cheap price.”
– Former Director at Bristol-Myers Squibb, July 2025 Call
At the same time, several potential challenges require close observation. The growing interest of Big Pharma in licensing agreements with Chinese biotechs poses a competitive threat to biotech mergers and acquisitions in the U.S. and Europe. Simultaneously, the U.S. regulatory backbone is under strain due to recent workforce reductions at the FDA, leading to missed deadlines and less predictable feedback on drug development programs.
2025 Deal Roundup
Among target areas, oncology has accounted for 39% of total transaction volume so far in 2025, with a focus on precision oncology. Additionally, the GLP-1 drug market continues to be a strategic M&A hotspot. Broker estimates show that the market opportunity for GLP-1s is expected to surge to $100 billion by 2030. At the same time, 2025 dealmaking has expanded to encompass a broader range of therapeutic areas than in 2024 — another healthy sign for the market.
The M&A screener tool in AlphaSense helps identify, categorize, and contextualize dealmaking activity. Key biotech M&A transactions in 2025 include:
- Johnson & Johnson and Intra-Cellular Therapies: On April 2, 2025, JNJ closed its $14.1 billion acquisition of Intra-Cellular. JNJ gained Caplyta, an approved drug for schizophrenia and bipolar depression, and ITI-1284, a phase 2 asset targeting generalized anxiety disorder and Alzheimer’s psychosis.
- Merck & Co. and Verona Pharma: On July 8, Merck entered into a definitive agreement to acquire UK firm Verona for nearly $10 billion. Merck gained Ohtuvayre, a recently approved drug for chronic obstructive pulmonary disease.
- Sanofi and Blueprint Medicines: On July 17, Sanofi closed its $9.1 billion acquisition of Blueprint to expand its rare immunological disease portfolio.
- AbbVie and Gilgamesh Pharmaceuticals: On August 25, AbbVie entered a definitive agreement to acquire Gilgamesh’s Bretisilocin, a novel investigational therapy for major depressive disorder, for up to $1.2 billion (including milestones). This marks the first major psychedelic acquisition by a drug company and helps validate psychedelics as a mainstream treatment.
- Pfizer + Metsera: On September 22, Pfizer announced it had entered into a definitive agreement to acquire Metsera for up to $7.4 billion. The deal positions Pfizer to get back into the obesity market by securing a pipeline of GLP-1 and amylin therapies.
Biotech M&A Outlook
This perfect storm of acquirer need and asset availability has created a powerful virtuous circle. When a small biotech is acquired, the investors who were backing it are able to funnel freed-up cash back into the sector, financing the next generation of biotech innovation.
Where do we go from here? Steady deal flow is broadly expected to persist in the near term. With significant sales at risk from exclusivity losses, M&A is a necessity for sustaining growth. Furthermore, pharma and large cap biotech have significant capital on hand for M&A — a combined $1 trillion in cash reserves, by some measures.
Macro factors are also supporting M&A momentum. Namely, the falling interest rate environment is likely to encourage companies to continue to put their dry powder to use on new biotech assets. Meanwhile, Pfizer’s Sept. 30 agreement with the U.S. government on MFN pricing has provided some clarity on how pharma companies can respond to the Trump administration's pricing and tariff pressures.
M&A serves the crucial purpose of taking scientific breakthroughs from the lab to the field, creating a powerful tailwind for the entire sector. If the current environment persists, we can anticipate a continued strong cadence of deals that will translate that innovation into tangible, life-changing therapies for patients around the world.
Related Reading: AI in Drug Discovery & Development: Hype, Reality, and What Comes Next
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