Insight

The COVID-19 catalyst

How 2020 shaped M&A in diagnostics

Kristin C. Pothier

Kristin C. Pothier

Global and National Healthcare and Life Sciences Strategy Leader, and Global Deal Advisory Leader, Healthcare and Life Sciences, KPMG LLP

+1 617 549 2779

Brian Tam

Brian Tam

Director Advisory, Strategy, KPMG US

+1 617-988-1000

Jeff Scafaria

Jeff Scafaria

Director Advisory, Strategy, KPMG US

+1 213-430-2174

2020 was a year of unprecedented challenge for health systems, the economy, and people worldwide, thanks to COVID-19. The M&A market was also affected. As the world locked down in March, new deals dried up, including in life sciences (pharmaceuticals, diagnostics, reference labs, devices, and life sciences tools and services). For months, companies refocused on finishing deals that were in process, executing integration or separation of completed deals, and refreshing pipelines. There was also increased interest in partnerships and collaborations across the ecosystem as companies teamed up to tackle COVID-19 together.

Mid-year, life sciences companies rebounded and deal making resumed. Deal volume in life sciences rose 40 percent from Q2 to Q3. Some of these deals have been COVID-19 related, but more transactions are based on pre-pandemic rationales in cell and gene therapies, biopharma and lab services, and precision medicine-based therapeutics and diagnostics. For the year, M&A deal value in life sciences is expected to come in 30 percent below 2019 levels, but this is largely due to a lack of megadeals in 2020. In 2019, transactions such as BMS-Celgene, AbbVie-Allergan, and Takeda-Shire inflated total deal value.

So, what will the pattern of M&A look like in 2021? We plotted subsectors horizontally based on economic recovery and resilience--how quickly the business can bounce back from COVID-19. How strong are the fundamentals and how resilient is the sector to future shocks? Vertically, we look at innovation and transformation--the degree to which the subsector has had to transform during COVID-19. How sustainable is the transformation post-COVID-19?