Mergers and Acquisitions in the Pharmaceutical Industry

Welcome to a discussion on mergers and acquisitions, M&A, within the pharmaceutical industry. It is important to note that M&A activities also exist between hospitals and health systems, but this article focuses on M&A activities between pharmaceutical companies. The United States Department of Health and Human Services defines mergers as, “…two companies joining together by mutual agreement to form a new, third company.”¹ The US Department of Health and Human Services defines acquisitions as, “…direct purchases of another company, either through stock acquisition, bankruptcy auction, partnership buyouts, or other mechanisms.”¹

Mergers and acquisitions are important strategies within the pharmaceutical industry to increase company growth, competitiveness, and development of new products. In other words, companies aim to expand market share, generate increased profits, and foster innovation.² As the industry continues to deliver new therapies, streamline operations, and respond to regulatory changes, companies must adapt to the changing healthcare environment. 

Mergers and acquisitions provide companies with opportunities to gain access to advanced technologies, proprietary research, and diversified product portfolios. Large pharmaceutical companies tend to engage in acquisitions to enhance their pipelines with promising drugs. In addition, large companies may integrate with smaller biotech firms that have innovative treatments nearing market readiness. With the utility of more data and resources, the resulting effect is bolstered research and development efforts to bring better treatments to market. 

The driving forces behind mergers and acquisitions in the pharmaceutical industry depend on many factors. One key motivation is the need for companies to adapt to changing market dynamics such as patent expirations on branded products, research and development (R&D) costs, and the extensive regulatory approval process. When product patents expire, generic versions of the product enter the market. The arrival of generics results in varying degrees of reduction in the previously patented product’s revenue generation. To mitigate a risk of loss of revenue, pharmaceutical companies may acquire firms with next-generation treatments. Examples of next-generation treatments include biologics, therapies that treat rare diseases, and therapies that address unmet medical needs. Acquiring therapies helps reduce R&D costs had the product been developed internally. This also helps reduce regulatory approval timelines and/or contribute to an already initiated FDA approval process.

The top three M&A deals of 2024 include:³

• Novo Holdings, the holding company for Novo Nordisk, acquired Catalent, a CDMO or Contract Development and Manufacturing Organization, for $16.5 billion. Novo Holdings Press Release
• Clayton, Dubilier & Rice, a private equity firm, purchased a 50% controlling stake in Sanofi’s consumer health business Opella for $8.3 billion. Sanofi Press Release
• Vertex Pharmaceuticals acquired Alpine Immune Sciences for $4.9 billion. Vertex Press Release

For additional context, the largest pharma acquisition to date is Pfizer’s $90 billion acquisition of Warner-Lambert Company in 2000.⁴ The second largest pharma acquisition to date is Bristol Myers Squibb’s $74 billion acquisition of Celgene in 2019.⁵

A key advantage of mergers and acquisitions is the ability for a company to expand their product portfolios and pipelines. Companies can rapidly diversify their list of approved products and treatment markets by acquiring new medicines and therapies that may have taken years to develop internally. 

With a pharmaceutical company integrating newly acquired products into their respective portfolio, it has the ability to strengthen its position in existing markets via increased market share of a specific indication or therapeutic area. In addition, the company may enter new treatment markets or therapeutic areas in a shorter amount of time, which can lead to increased market share and revenue. Increasing the number of products in a portfolio or pipeline is important to counteract extremely large research and development costs and lengthy approval timelines. 

In addition, mergers and acquisitions lead to a larger entity that may result in a more financially robust company. An enhanced financial outlook may allow companies to entertain more M&A opportunities and subsequent business growth. By pursuing M&A activities with biotech firms or pharmaceutical companies with advanced research platforms, companies can rapidly access cutting-edge technologies and R&D capabilities. Access to innovative science can greatly improve the likelihood of developing successful therapies especially in evolving therapeutic areas such as oncology and immunology. Overall, mergers and acquisitions can provide immediate access to a portfolio of pipeline products, patents, and scientific data that may be costly and time consuming had it been developed internally. 

Mergers and acquisitions also help combat economic shifts and dynamic market trends. Imagine a time of economic uncertainty. Pharmaceutical companies that pursue M&A opportunities may be able to diversify their business, diversify their portfolio, and reduce risk. Drug development is inherently risky due to long product development cycles, expensive research operations, strict regulatory approval processes, and constant threat of market competition. By acquiring companies that focus on different therapeutic areas or potentially competitive pipeline products, pharmaceutical companies can enhance their exposure within different disease areas and treatment markets.

Mergers and acquisitions in the pharmaceutical industry can also come with challenges. Integrating different corporate teams, aligning research and development strategies, and navigating initiated or planned regulatory approval processes can be difficult to complete efficiently. Mergers and acquisitions can also coincide with layoffs. For example, a recently acquired company has overlapping departments with the acquiring company. To avoid an overlap of teams, a layoff may occur. Depending on the timeline of the layoff, this can create downstream urgencies for the respective job seekers. Regulatory authorities closely follow M&A deals in the pharmaceutical industry to ensure that the resulting entities do not hinder competition or prove detrimental to patients through medication prices or limited access to products.

Overall, mergers and acquisitions can strengthen a pharmaceutical company's global footprint and market reach. As the healthcare landscape becomes increasingly globalized, larger firms may look to expand their presence in emerging markets or territories where their products are not yet widely available. Acquiring a company with a strong distribution network or local market knowledge can offer instant access to different global regions, patient populations, and therapeutic areas. Mergers and acquisitions allow for quicker involvement in new markets and patient populations. In addition, M&A deals between companies based in regions with different regulatory environments can result in deeper insights for effectively navigating various regulatory landscapes and international growth efforts.

The pharmaceutical industry will continue to see the completion of M&A deals, which may support company growth, global healthcare markets, and research and development efforts. As the industry continues to evolve, companies may seek strategic partnerships or acquisitions to enhance their capabilities in various therapeutic areas. With the growing development of healthcare technology, I look forward to seeing the evolution of digital health solutions and how this will impact M&A activity. To meet the demands and growth of modern medicine, mergers and acquisitions will continue to bring companies together to produce new therapies and health care products. For further reading, Biospace has a page dedicated to discussing M&A news and activity.

Resources:

1. U.S. Department of Health and Human Services. Mergers and Acquisitions in Pharmaceutical Markets: Associations With Market Concentration, Prices, Drug Quantity Sold, and Shortages. 2025.
2. McKinsey & Company. What’s Behind the Pharmaceutical Sector’s M&A Push. 2018.
3. Kansteiner F, Becker Z, Liu A, Dunleavy K, Sagonowsky E. The Top 10 Biopharma M&A Deals of 2024. Fierce Pharma. 2025.
4. Federal Trade Commission. FTC Order Clears Way for $90 Billion Merger of Pfizer Inc. and Warner-Lambert Company. 2000.
5. Bristol Myers Squibb. Bristol Myers Squibb to Acquire Celgene to Create a Premier Innovative Biopharma Company. 2019.

*Information presented on RxTeach does not represent the opinion of any specific company, organization, or team other than the authors themselves. No patient-provider relationship is created.