Lower interest rates, drug pricing reform clarity are catalysts for biotech M&A market

[Wooden blocks with text M and A on light blue paper, business concept. MA - short for mergers and acquisitions] While the biotech M&A market is down from the juggernaut of deals done in 2019 and their high valuations, that could change later this year, assuming the Federal Reserve lowers interest rates and there is more clarity on the "Most Favored Nation" drug pricing policy being pushed by the Trump administration. So far in 2025, there have been just 12 deals done so far worth $35B in transaction value, according to data from Oppenheimer. In 2019, there were 20 deals worth $251B. While there were 30 deals done in 2024, they were only worth a total of $45B.

Michael Margolis, senior managing director and head of healthcare investment banking at Oppenheimer, said that the "irrational exuberance" in the M&A market has long been over and is now dealing with a "hangover" due to higher interest rates. He added that many thought with former FTC Chair Lina Khan out earlier this year with the new administration, it would lead to more deals but that hasn't happened yet. However, he is hopefully that the Fed will lower its policy rate in September, which would spur M&A activity. On Wednesday, the Fed said it was keeping rates steady [https://seekingalpha.com/news/4459603-federal-reserve-keeps-rate-at-425-450-for-fourth-straight-meeting] for now. Margolis was speaking at a panel discussion on the future of biotech investing at the BIO International Convention in Boston on Thursday.

He sees M&A improving, but there will be "less public and private companies [in transactions]" because investors and acquirers will be more picky but they "will make sure the right companies get the right capital." Margolis added that dealmaking is being hampered because of uncertainty [https://seekingalpha.com/news/4456986-drugmakers-complain-clarity-lacking-administration-lowering-drug-prices] regarding the "Most Favored Nation" policy that would tie drug prices to lower prices around the world. He'd also like to see a return of stability at the FDA, adding there is a lot of "noise" coming from the agency, making it difficult to assess risk "when the bar is changing." He called on Commissioner Makary to "create a set of rules, or at least a set of guardrails." While biotech has gone through a "nuclear winter" in terms of dealmaking, investors and companies are waiting on the sidelines to deploy capital once there is more certainty, according to Andrew Lam, managing director and head of biotech private equity at Ally Bridge Group. "Stronger companies will emerge out of this." Companies will want to deals in a more efficient and cost-effective manner than in the past, added Nandita Shangari, managing director at RA Capital. Dealmaking will eventually pick up because growth at many large pharmaceutical companies is expected to slow dramatically in the coming years as key drugs go off patent, noted Rami Rahal, a partner at MPM BioImpact. "Fundamentally, they will need new revenue-generating products." MORE ON PHARMA COMPANIES * Bristol-Myers Squibb Company (BMY) Presents at Goldman Sachs 46th Annual Global Healthcare Conference (Transcript) [https://seekingalpha.com/article/4794155-bristol-myers-squibb-company-bmy-presents-at-goldman-sachs-46th-annual-global-healthcare] * Merck: Best Case For Option Collars We'll Ever See [https://seekingalpha.com/article/4793848-merck-best-case-for-option-collars-well-ever-see] * Merck & Co., Inc.

(MRK) Presents at Goldman Sachs 46th Annual Global Healthcare Conference Transcript [https://seekingalpha.com/article/4793797-merck-and-co-inc-mrk-presents-at-goldman-sachs-46th-annual-global-healthcare-conference] * FDA's Prasad becoming agency's chief medical and scientific officer [https://seekingalpha.com/news/4459862-fda-prasad-becoming-agency-chief-medical-and-scientific-officer] * Biotech M&A market expected to rebound, but not IPO market [https://seekingalpha.com/news/4459639-biotech-m-and-a-market-expected-rebound-but-not-ipo-market]