Biotech IPO window will ‘gradually reopen’ in 2024 as M&A remains ‘healthy’: PwC

After a year when most biotechs had given up on going public in the near term, the IPO window will “gradually reopen” next year—at least that’s what analysts at PwC are betting on.

“IPO markets are critical for biopharma and we expect the window to gradually reopen in 2024, likely skewing toward companies with strong clinical data,” the authors of PwC’s latest analysis of the U.S. pharma and life sciences sectors said.

There should be less change on the M&A front, with the “reasonably strong” levels of deal value and volume seen across the sectors continuing into 2024, the analysts predicted. The combined deal value of $222.4 billion across the U.S. pharma and life sciences sectors for the 12 months to Nov. 15 was a 37% boost on the previous year period, despite the total number of deals dropping 8% to 255, according to PwC's analysis.

Pfizer’s $43 billion buyout of Seagen—which closed today—has maintained its spot as the largest deal across U.S. pharma and life sciences in 2023. It was followed by Merck & Co.’s almost $11 billion acquisition of Prometheus Biosciences for its late-phase bowel disease drug candidate. AbbVie held the third and fourth spots, paying over $9 billion each for antibody-drug conjugate developer Immunogen and neuroscience-focused Cerevel.

“We expect dealmakers to increasingly focus on margin accretion in M&A, rather than relying prominently on growth-driven dealmaking,” the report’s authors wrote. “As regulators' perspectives on key deal factors become better understood, there may be a return of larger deals, along with continued interest in the $5 billion to $15 billion deals to fill targeted strategic gaps.”

The “renaissance” in weight loss and cardiovascular drugs that saw Novo Nordisk’s Wegovy become a household name is likely to feed through to a “heightened focus” on these areas when it comes to pharma and biotech dealmaking next year, according to PwC. Aside from that, precision medicines directed at areas like oncology and immunology will continue to be a focus.

“Differentiated science and clinical advances continue to come in waves and we expect to see dealmaking in areas with meaningful incremental innovation in 2024,” the report’s authors said.

Drilling into biotechs specifically, the authors said that M&A levels were likely to remain “healthy” into 2024.

“Our expectation is the challenging macro-environment and uncertainty that persists will push dealmakers into more creative options to deliver growth,” they added. “Licensing and collaboration agreements, JVs, structured transactions, R&D funding structures, ecosystem building as well as spinoffs and divestitures will all be considered by dealmakers as they blaze new trails to deliver growth in 2024.”

Echoing comments made by VC firms to Fierce Biotech in recent months, PwC said in the report that “the sector will also seek out increasingly creative structures that allow for greater R&D funding while still maintaining control over the development of critical compounds.” This will “leave the door open for an increased role for private equity and structured solutions such as private credit.”

The U.S. looks set to remain the center for global innovation in pharma, PwC predicted, with foreign buyers “continu[ing] to lean in actively to take advantage of opportunities.”

“With the implications of the Inflation Reduction Act now better understood, we expect that companies will direct innovation dollars increasingly towards biologics at the expense of small molecules,” they added.