PwC predicts 'flurry' of $5B to $15B biotech deals in 2023
PwC’s pharma industry trends analysis is here — and the audit company is predicting several negatives amid modest expectations for M&A, covering everything from high inflation and rising capital costs to increased FTC scrutiny, just to name a few.
The report recommends leaders focus on four key areas: digitizing the value chain, “getting fit for growth” by rethinking where they allocate funds, finding ways to adapt to pressure on drug pricing and “winning” in M&A.
Notably, PwC predicts a “flurry” of smaller biotech deals.
“We continue to expect that deals in the $5 billion to $15 billion range will be the market sweet spot but see the potential for one or more deals in the $20 billion to $40 billion range before year-end,” the report says. “In transactions, pharmaceutical and life sciences companies may also need to strike the right combination of acquiring in-line/Phase III products to meet near-term portfolio needs with longer-term (Phase I and II) value creating pipeline assets.”
Digitization and artificial intelligence will continue to be a major part of the pharma space as well.
According to PwC, “this is the year” for investing in digital technology: AI in research, tech in production, automation in HR and finance and on-demand financial insights. 53% of finance chiefs are looking into digital transformation in data, AI and the cloud.
“No digital transformation program can deliver its full potential without attention to the core enterprise resource planning (ERP) systems. In today’s fast-paced, competitive environment, business and digital transformation are inextricably linked to ERP capabilities,” the report reads.
AI has been deployed at various levels and with increasing frequency in recent years: AstraZeneca partnered with London’s BenevolentAI to bring new drugs into its portfolio using the biotech’s AI and machine learning capabilities, and BioNTech recently bought out its AI partner, InstaDeep, for an initial cash and stock consideration of about £362 million, or $440 million.
“In 2023, chief information officers (CIOs) and chief data officers (CDOs) will continue to have an essential role in driving the digitization of the value chain in ways that are innovative, cost-effective and secure,” according to PwC’s report.
PwC also predicts ripple effects from the passage of the Inflation Reduction Act passed last year, which allows Medicare drug price negotiations for the first time in 2026, caps seniors’ drug expenses to $2,000 per year and seniors’ insulin costs at $35 per month, and remakes Medicare Part D to provide less-expensive coverage.
The new legislation will be a major part of companies’ 2023 planning.
“With new pricing pressures starting in 2023 through Medicare inflationary rebates, Part D plan redesign coming in 2025 and price negotiation starting in 2026, the way manufacturers begin to adjust in 2023 will potentially provide a critical foundation for the rest of the decade,” PwC predicts.