Deal activity in the life sciences sector is now at its lowest level in 5 years reflecting the buoyant financing environment still available to biotech companies that has driven up company valuations and discouraged pharmaceutical companies from certain types of dealmaking. Indeed, we are in the midst of an unprecedented financing window for biotech companies with both venture capital (VC) funding and the number of IPOs increasing from 2017 to 2018. While a number of big pharma companies made multibillion-dollar acquisitions in 2018, overall M&A activity was constrained. Licensing activity fell slightly in 2018 and the mean upfront payment for licensing deals decreased 27% from 2017 to 2018, in part owing to an increase in the number of deals involving early-stage assets.

Johnson & Johnson (J&J) remained the most prolific dealmaker for the second year running but lost out in terms of deal spend to Takeda Pharmaceutical thanks to the latter’s colossal £46 B (US$62.3 B) buyout of rare disease specialist Shire. Continuing the trend seen in recent years, 2018 saw an abundance of business cast-offs and portfolio disposals, with the two largest divestments being in consumer health – the US$13 B buyout by GlaxoSmithKline (GSK) of Novartis’ stake in the two companies’ joint venture and Procter & Gamble’s purchase of Merck KGaA’s consumer health business for €3.4 B (US$4.2 B).

Oncology continued to be the leading therapeutic area for partnering deals with CNS taking second place despite a fall in the number of deals in this area. The overall number of collaborative R&D deals fell 12% from 2017 to 2018, reflecting the narrowed focus of many large pharmaceutical companies and the ready availability of finance for early-stage biotechnology companies. Average upfront payments for collaborative R&D alliances rose slightly over the same period, however.