The COVID-19 pandemic has triggered one of the most volatile periods on record for every sector including life sciences. In fact, according to an EY report, 89% of life sciences companies say profits declined in 2020 and two-thirds said they cancelled or failed to fulfil a planned acquisition during the same period.
The pandemic created multiple barriers to deals from challenges including due diligence and closing deals virtually, as well as high valuations creating a sellers’ market.
Still, despite these unfavourable market conditions, the industry has adapted at pace and the deal pipeline is growing. The life sciences sector has rebounded to record its highest growth in terms of the number of M&A deals in Q1 2021, marked by a surge of initial public offerings (IPOs) and strong deal flow. Mega deals are also re-emerging.
In May, two British healthcare companies agreed takeover deals worth a combined £2bn as the mid-cap M&A rush accelerates. So far this year, new life sciences projects on Datasite’s platform have increased 56% in the first half of this year compared to the same period last year.
As we head into the second half of 2021, this increased market activity is expected to continue as life sciences companies evaluate their long-term business plans and strategic priorities and invest in assets and capabilities that will fuel growth. The quickest way to do that is through M&A or via strategic alliances across core therapeutic areas where the potential for value creation is significant.
The environment for deals could warm further when the COVID-19 vaccine becomes more widely available around the world. Following are some of the key trends that are set to drive deals through 2021.
