March 5, 2024

Transaction Trends 2023: Things Are Starting to Look Up

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Author: John Vandermosten

Following the excesses of 2020 and 2021, which produced some of the most exuberant life sciences activity in decades, activity was anemic for both merger and acquisitions (M&A) and initial public offerings (IPOs). Rising interest rates, prompted by inflationary pressures, rose from a low in spring of 2021 to a recent peak in October 2023. The 10-year yield moved from just over 0.5% to almost 5% over that time period. It is no surprise that an increase in financing cost negatively impacted cash-consuming research and development companies which dominate the small cap life sciences universe.   

Against the backdrop of a difficult geopolitical, health and financial environment, science has progressed. We saw drug approvals in the neurodegenerative space with Biogen’s Leqembi and Qalsody given the nod by the FDA along with Amylyx’ Relyvrio. In the gene therapy space, there were approvals for two sickle cell treatments: Vertex’ Casgevy and bluebird bio’s Lyfgenia.   

Overall, the FDA approved 55 novel therapeutics in 2023, which is the second highest count in 30 years.  

30 Years of FDA Approvals 1 


Countless companies have advanced their products to a more advanced state. Medicines have progressed along the continuum of preclinical work, phased trials, regulatory submission and approval against a tumultuous backdrop. For example, Sarepta Therapeutics’ gene therapy Elevidys for Duchenne muscular dystrophy went from generating proof of concept data in 2019 to FDA approval in 2023. BioMarin Pharmaceutical also made great strides over the same period developing its hemophilia A gene therapy Roctavian after stumbling over a Complete Response Letter in 2020 to approval in 2023. BioMarin overcame the challenges and is now generating revenues with almost $1 billion in sales expected in 2024. 

American Gene Technologies and its HIV-focused division, Addimmune, have also made impressive strides. From preclinical work during the COVID-19 pandemic to completing Phase Ia and its analytic treatment interruption study in 2022, the stage of the company’s lead candidate has materially advanced.  

The progress of industry’s drug development may not have been apparent by looking at life sciences equity indices or by looking at transactions. At the end of October, the XBI was down 23% on the year. And in the IPO sphere, weak 2022 volumes were followed by a feeble increase in 2023. But around the end of the year, sentiment began to change as investors realized the attractive valuations and opportunities in the space. From the end of October until New Year’s, the XBI surged 40%. For the year, M&A activity increased over 70% in dollar terms. The recent increase bodes well for the space, attracting investor attention to an industry with captivating valuations.  

Equity Performance 

Broader markets such as the NASDAQ and S&P 500 were up 45% and 24% respectively in 2023. This contrasts with the NASDAQ biotechnology index (NBI) which rose 3.5%, moving into positive territory in only the last few days of the year. The so-called Magnificent Seven (AAPL, AMZN, GOOG, META, MSFT, NVDA and TSLA) drove the majority of large index gains for 2023. Without these contributors, the S&P 500 would have only been up 8%. By sector, information technology and communication services both climbed more than 50%, while energy and utilities were negative for the year. Health care was essentially flat, as measured by the related S&P 500 sector, rising a meager 0.3%.  

S&P 500 Performance, 20232 


The XBI Index, which includes companies in the S&P’s biotechnology industry, saw a modest 7.6% rise in 2023 with a dramatic two month run in November and December which lifted the index 37% over that period.  

S&P Biotech SPDR (XBI) Performance, 20233 


Macroeconomic Factors  

Inflation eased last year, coming down from a peak of 9.1% in June 2022, to a more reasonable 3.4% by December 2023. 10-year interest rates moved up for the second year in a row from 3.5% in January to almost 5% by late October as investors felt that inflation would be around longer than expected. However, this reversed late in the year concomitant with the rise in equity markets and as the inflation temperature cooled. One of the big drivers behind market optimism was artificial intelligence. While AI has been around for a while, it was not until November 2022 when the everyday person could access it with the launch of ChatGPT. Not only did the technology expand into all major economic sectors but workers began to leverage the tool personally and professionally. Some forecast that AI applications, in addition to bringing about the end of the world, could dramatically improve productivity at a rate not seen since the 1990s. Perhaps in anticipation, the Bureau of Labor Statistics reported a 3.2% improvement in productivity in 4Q:23, dramatically higher than the rate over the last decade. Along with less employee turnover,4 new technology may have contributed to the improvement in economic output per unit of work.  

All was not roses. Global war continued and expanded with Ukraine and Russia now in their third year of combat and the Israel-Hamas conflict expanding last October. Signs of bellicose contagion over the wider geographies of Eastern Europe and the Middle East have led to volatility in energy prices and suppression of international trade along the Red Sea. In the consumer sphere, total consumer debt rose by $604 billion year over year to $17.5 trillion in December 2023 signaling shoppers thriftier tendencies in 2024.  

Despite the Fed’s continued interest rate increases through July 2023, the unemployment rate held fairly steady.  The unemployment rate started at 3.5% in January 2023 and increased to 3.7% by year end.  Labor force participation rose ever so slightly from 62.4% to 62.5% from January to December.   

US Unemployment Rate (Percent)5 


Private Markets 

After a relatively stable 2022, private equity markets took a cue from their public counterparts and experienced a decline in deal activity in 2023. According to S&P Global, transaction value declined by 35% to $474 billion and deal count fell 32% to just over 12,000 transactions.6 Geographically, the US and Canada were the most active, followed by Asia and then Europe. Top sectors and industries include technology, with the software as a service (SAAS), biotech, heathtech and fintech subsectors doing best. Artificial intelligence, semiconductors and battery technology attracted increased investment while consumer related deals represented another dominant destination for private equity. 

Global Private Equity and Venture Capital Value and Deal Count7 


Downrounds were a feature in 2023 as capital became more difficult to access in 2023. Early-stage valuations were down 40%, while late stage fell 37%.8 Venture capital volume generally declined quarter over quarter in 2023 ending on a weak note.  

Mergers & Acquisitions 

M&A produces an outsized impact on valuations for and optimism about the life sciences space. In many cases, M&A is the exit strategy for research and development companies and the payoff for investors. In 2023, life sciences M&A activity materially increased. Based on updated definitions by Evaluate Pharma, their M&A tracker identified transactions in 2022 valued at $119 billion growing to $203 billion in 2023. 

The biggest deals of the year included Pfizer’s buy of oncology stalwart SeaGen for $43 billion, and Bristol Myers’ bid for schizophrenia drug developer Karuna for $14 billion. Other acquisitions of note, all done for about $10 billion each are Merck tying up Prometheus Biosciences, CVS Health buying Oak Street Health and AbbVie snagging ImmunoGen.  

Acquisitions took on a variety of flavors in 2023. Oncology has been a perennial dominant category for buyers with at least 25 listed and private transactions. The central nervous system (CNS) and neurodegenerative disease space takes second place in terms of number of deals. Gene and cell therapy grabbed the third spot with notable deals between Novartis + Cystinosis Gene Therapy, Kyowa Kriin + Orchard Therapeutics, and Astellas Pharma + Poseida Therapeutics. Other areas of M&A interest include cardiovascular, infectious disease and wound care.  

The size of the average deal was up in 2023, increasing to $1.5 billion from 2022’s $825 million. Total deal value rose from $119 billion to $203 billion year over year. See our summary of the top 10 life sciences M&A deals announced in 2023. 

Top 10 Life Science M&A Deals Announced in 2023 

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Leading Transactions 

Antibody Drug Conjugates (ADCs) represented the most dominant technology attracting acquisition activity over the last year. There have been at least four major acquisitions in this space since the beginning of 2023. ADCs are drugs designed as a targeted therapy for cancer. They consist of a monoclonal antibody (mAb), a cytotoxic drug and a linker. The mAb is designed to specifically bind to antigens found on the surface of cancer cells. This targets the ADC to the cancer cells and minimizes binding to healthy cells. The top ADC deals were Pfizer laying out $43 billion to acquire Seagen and AbbVie spending $10.1 billion on ImmunoGen, both of which were focused on development of ADCs. Companies centered on neurology reprised another dominant theme in 2023 as Bristol Myers picked up Karuna Therapeutics for $14 billion and AbbVie reached out to Cerevel Therapeutics with an $8.7 billion bid, with both targets’ offering advanced programs in schizophrenia. Inflammatory bowel disease was a prominent therapeutic area as Merck laid out $10.8 billion for Prometheus Biosciences and Roche acquired Televant for $7.25 billion, with each of these targets developing therapies for ulcerative colitis. 

Initial Public Offerings 

IPO dollars were up in 2023 vs. 2022, but still below levels between 2017 to 2021. Access to capital via the IPO route was restricted with only the most compelling candidates moving forward. Examining domestic performance, the Renaissance IPO ETF rose 53% in 2024 versus a >50% decline in 2022. 

IPO Amount Raised, All Sectors (2010 – 2023)9 


According to a report by Ernst & Young, high interest rates, geopolitical instability and recessionary concerns weighed on IPO activity in 2023, despite the improvement over 2022. The number of IPOs market wide was up by 42% and IPO proceeds grew by over 160%. According to E&Y’s account, we saw 128 IPOs overall worth $22.6 billion last year, increasing from 90 public offerings worth $8.6 billion in 2022.10 Another recognized purveyor of IPO-related data, Renaissance Capital identified 108 IPOs raising $19 billion last year, over twice prior year levels representing larger deal sizes. In life sciences and according to our accounting, there was an increase from the 27 IPOs in 2022 to 28 in 2023.  

2023 IPO Proceeds by Sector11 


Leading Therapeutic Areas for Life Sciences IPOs 

Top therapeutic areas for new public companies again centered on oncology, with 11 of 28 or almost 40% oriented towards cancer. CNS, rare disease and obesity were other categories with multiple entries. The largest amount raised in an IPO was from JNJ’s spin of Kenvue, a consumer healthcare product company which raised $4.9 billion. RayzeBio, a radiopharmaceutical company in oncology, only spent three months trading freely in the public universe as it was bought out by BristolMyers. Acelyrin (SLRN) is another large IPO, focused on immunology and inflammatory disease, which secured $621 million in equity financing. Indian generics company Mankind Pharma brought in $528 million while Apogee Therapeutics, which is targeting atopic dermatitis and COPD, raised $345 million. Gene therapy was not left out as Lexeo Therapeutics offered its gene therapy for cardiac Friedreich’s ataxia to the public markets. The value raised in 2023 IPO life sciences transactions was $8.58 billion.12  

2023 Initial Public Offerings13 


What’s in Store for 2024? 

The pickup in M&A transactions, the late 2023 run off of lows combined with attractive valuations may be leading indicators of a better 2024 in life sciences. There have been a number of announcements for new IPOs so far this year including Addimmune’s anticipated IPO in partnership with 10X Capital. Other economic indicators appear to be stable and interest rates have pulled back from their highs, loosening the tight rein on capital. In terms of Ernst & Young’s perennial report on biopharma firepower, this M&A arsenal has remained relatively steady with prior year levels at $1.4 trillion.14 Buyers continue to hold cash stockpiles but need to address an increasingly competitive environment, patent cliffs and loss of exclusivity through either internal or inorganic avenues. The pharma and biotech industry as a whole is facing declining growth rates and needs to offset this with investment in innovative technologies including cell and gene therapies, mRNA, immunotherapy, new geographies and other venues.  Valuations are attractive and many programs have developed stronger safety and efficacy profiles for their candidates, which means the market is as compelling as ever. A further pickup in deal activity could help all areas of investment, driving up valuations and providing the support needed to elevate new IPOs onto the exchanges and stimulate private equity infusions. Add to this an increased number of FDA approvals and more certainty in the regulatory process and we have a recipe for optimism across the board in life sciences.   

1 Mullard, A. 2023 FDA Approvals. Nature Reviews Drug Discovery. January 2024.

2 Price history provided courtesy of

3 Price history provided courtesy of

4 In contrast to the Great Resignation which dominated labor markets in 2021 and 2022.

5 Bureau of Labor Statistics. Employment Situation – January 2024.

6 Global Private Equity Deal Activity Plunges in 2023. January 16, 2024.

7 Global Private Equity Deal Activity Plunges in 2023. January 16, 2024.

8 Global Startup Funding In 2023 Clocks In At Lowest Level In 5 Years.

9 Renaissance Capital website, accessed February 19, 2024.

10 Gerring, R., Schwartz, M. Bull or Bear? Key Factors That Will Shape the US IPO Market in 2024. January 18, 2024.

11 Global IPO Watch 2023 and Outlook for 2024. PriceWaterhouseCoopers, January 2024.

12 We sourced values from Pitchbook and Evaluate Pharma and have converted the amounts into US dollars for comparability. Note that this total varies from other sources cited which were calculated by using alternate criteria for IPO inclusion.

13 Complied from various sources.

14 Ernst & Young Biopharma Firepower, 2023.