Getting to Yes: How Deal-Making Fuels Biotech Growth – 2025 Updates

In 2025, the number of completed biotech deals is lower, but average deal sizes and total transaction values are at record highs. Fewer but larger, higher-conviction investments are dominating the landscape, with $120 billion in licensing deals and $42–48 billion in M&A in the first half of 2025 alone2.

Large upfront payments are becoming more common:
21 licensing deals in 2025 featured over $100 million upfront, compared to 34 such deals in all of 20242.

Major drivers behind these trends include big pharma racing to offset upcoming patent expirations (nearly 190 drugs, including 70 blockbusters, to lose exclusivity by 2030), scientific breakthroughs in fields like gene therapy and RNA platforms, and a renewed focus on capital discipline and selectivity among investors21.

Valuations for biologic assets have outpaced those of small molecules due to U.S. drug pricing reforms (Inflation Reduction Act – IRA), which grant biologics a longer period of pricing protection, altering discounted cash flow models and pushing both acquirers and licensors toward larger, more favorable deals1.

Beyond the science, a company's reputation, credibility, and storytelling ability are seen as critical strategic assets that help secure deals. Companies that consistently deliver and communicate well attract higher valuations and better partners2.

Pharma companies are increasingly using sophisticated licensing strategies, including 'strategic dis-integration' (out-licensing non-core assets), to manage pipeline gaps and adapt to mounting revenue pressures1.

Higher interest rates and regulatory uncertainty, especially around U.S. drug pricing, have made the financing environment more complex, leading to adaptations in deal structures and increased scrutiny in both M&A and licensing3.

Alternative financing options, like royalty-based deals and private equity involvement, are growing in attractiveness as traditional venture capital eases after the highs of 2021–202223.

Sources:

1. https://www.drugpatentwatch.com/blog/pharmaceutical-negotiations-decoded-lessons-from-the-trenches/

2. https://www.fiercebiotech.com/sponsored/getting-yes-how-deal-making-fuels-biotech-growth

3. https://azapharm.com/en/the-deal-landscape-for-life-science-companies-a-comprehensive-analysis-of-2023-and-outlook-to-2024/