For many years, pressure has been mounting on healthcare systems across the world due to ageing populations and shortages of healthcare workers and pharmaceuticals.  

A number of key developments have emerged in response. For example, AI (unsurprisingly) has weaved its way into a myriad of applications including treatments, medical devices and patient recovery, not to mention playing a pivotal role in quickening the process of drug development by improving workflows, optimising processes, aiding drug discovery and analysing clinical trials.

Another example is the push for more efficient clinical trials and subsequently cheaper pharmaceutical drugs. Global spending on drugs in 2020 was an extraordinary $1.3 trillion with spending rates expected to increase by 3-6% each year. Unsurprisingly, the largest contributor to high prices is the time and cost it takes to develop a drug, with the average being 12 years and $3 billion, not to mention the 10-20% chance of failure.

Such industry trends are being reflected in M&A activity with many private equity houses and larger corporations targeting AI and pharmaceutical companies in order to strengthen their market position. For example, a one-year-old healthcare start up leveraging the use of generative artificial intelligence to build applications has been given a valuation of $500m based on its first funding round.

There has also been a surge in M&A activity within the wider healthcare and life sciences industry. Johnson & Johnson recently completed a $13.1bn deal with a medical device maker, Shockwave Medical which specialises in manufacturing catheter-based treatments for patients with calcified arteries.

So what does this mean for the average healthcare and life sciences business? If you are the owner of a healthcare and life sciences business, and are thinking towards an exit, here are some of the current industry trends that could impact your decision to sell or your attractiveness to a potential buyer:

• Data: Venture capital and private equity houses are selective, favouring companies with a strong base of data and analytics proving potential for success.

• Balance: What is the company’s balance between affordability, research and development and patient access? Due to rising issues with drug affordability, particularly in the US, companies that are able to strike the perfect balance between low price and healthy profit are amongst the favoured.

• Adaptability: How fast can a company adapt to changes in the market, new customer types and changing customer preferences? The greater the level of adaptability the more attractive and competitive the business becomes.

Keeping these factors in mind can enhance your company's attractiveness in a competitive market. By staying aligned with industry trends and demonstrating value creation, your healthcare and life sciences business can effectively navigate the competitive landscape and appeal to potential buyers.

Oliver Roper is an Assistant Manager - M&A at Shaw & Co

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If you'd like to discuss how Shaw & Co can help you sell, buy or fund the growth of a business, please book a meeting here

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