‘Economic and geopolitical pressures continued throughout 2023, making the global business landscape a volatile one. It might even be asked whether disruption is simply the new business norm.’
Global themes in 2023 and outlook
The disruption felt globally at the end of 2022 continued to impact life sciences companies and investors in 2023.
On M&A and investment activity, deal volumes and values remained relatively flat at the start of the year, but there were signs of a recovery from the third quarter and a flourish of significant transactions announced at the end of the year, including AbbVie’s acquisitions of Cerevel and ImmunoGen, Bristol Myers Squibb’s acquisitions of Karuna and RayzeBio and Roche’s acquisition of Carmot.
Whilst there continues to be some uncertainty in the geo-political and macro-economic landscape going into 2024, big pharma and biotech companies are sitting on large amounts of dry powder and so long as looming patent cliffs and pipeline diversification remain strategic priorities, it seems likely that M&A and investment activity will bounce back during 2024, with particular focus on later stage assets and ‘hot’ areas and modalities such as obesity and cell and gene therapies. There is also considerable pent-up demand amongst financial sponsors which will support this trend, particularly if there is an easing of interest rates and credit markets during the course of the year.
IPO markets remained stagnant throughout the year and look to remain this way until Q3 2024 at the earliest.
Tech and AI remain hot topics for the industry, particularly in terms of AI’s potential impact on drug discovery and development and also the convergence of tech with healthcare across the life sciences value chain more generally. We expect investment in technology, pharma/tech collaborations and the evolution of regulation around AI to continue to be big themes in 2024. As innovation in this space accelerates, global regulators are faced with the challenge of balancing the facilitation of progress on the one hand and the protection of the public on the other. Different approaches are already emerging, ranging from the pro-innovation, sectoral stance being taken in the UK to the more consumer protection-focussed, horizontal risk-based approach of the EU.
Following on from the Inflation Reduction Act, 2023 also saw a number of important regulatory reforms that companies will be bracing themselves for in 2024, including the proposed overhaul of the EU pharmaceutical regulatory regime. Innovators in particular are concerned about the impact these reforms will have on R&D in the sector and they are further examples of the increasingly complex regulatory environment companies are having to navigate, and the pricing pressures that they continue to face, across the globe.
ESG and sustainability will continue to be major board room themes, as the volume and pace of ESG regulation intensifies all over the world. As well as continuing efforts to reduce the sector’s environmental impact, attention on other issues are coming into focus, such as the need to improve the affordability of, and access to, healthcare and the sustainability of supply chains.
As a closing reflection, 2024 looks set to be another pivotal one for the industry, with significant transformation and more disruption expected to come – including further potential policy changes following the elections that are due to take place in the US, the UK and numerous other countries during the course of this year. That said, the pandemic demonstrated the ingenuity and resilience of the life sciences industry with its ability to rapidly react, evolve and collaborate with great success. As these turbulent times remain, we are positive that the sector will utilise those strengths to embrace the challenge and are excited to see what 2024 will bring.
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