Healthcare Industry Insights: M&A Activity and Digital Health Trends
As the healthcare industry kicks off 2025, key takeaways from the JPMorgan Health Care Conference and recent reports shed light on the sector’s M&A activity and digital health trends.
M&A Activity: A Promising Start
The year has begun on a positive note, with several deals announced during the conference, including Johnson & Johnson’s proposed $14.6 billion buyout of Intra-Cellular Therapies. This marks the largest transaction in the pharmaceutical industry since 2023. Other notable deals came from GSK, Eli Lilly, and radiopharmaceutical companies. According to Stifel analyst Tim Opler, “This is going to be a very different year for M&A than 2024.”
Challenges Ahead
Despite the promising start, potential restraints on M&A in 2025 include ongoing margin pressure on biopharma companies, high premiums for prized acquisition targets, and the need for larger pharma companies to offset losses from upcoming drug patent expirations. For instance, Pfizer faces a wave of patent losses that could threaten $17 billion to $18 billion in annual sales.
Digital Health Trends: A Year of Haves and Have-Nots
A new report from Rock Health reveals that digital health startups in the U.S. raised $10.1 billion across 497 deals in 2024, a decrease from 2023. Digital health M&A hit a decade low, with only 118 deals. The report highlights an increase in early-stage fundraising activity and smaller late-stage deals, which could spell trouble for later-stage startups that raised money at sky-high valuations during Covid.
Influence of Large Players
Large megafunds, health-systems, and tech companies held significant influence over digital health in 2024. Venture firms like Andreessen Horowitz and General Catalyst were top investors, while tech companies like Microsoft and organizations like Epic dominated healthcare AI.
Room for Smaller AI Startups
While it’s becoming harder for startups to compete with large incumbents, there’s still room for smaller AI startups to find a niche within healthcare. They’ll need to think carefully about their positioning to succeed.
As the healthcare industry navigates 2025, it’s clear that M&A activity and digital health trends will continue to shape the sector. Stay tuned for more insights and updates from the world of healthcare.
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