Lazard survey: Large caps could consolidate as biopharmas face variety of pressures

Almost 400 executives and investors weigh in on drug pricing, innovation in China, valuations and more

Executives and investors surveyed by Lazard increasingly believe consolidation among large-cap biopharmas is likely, while industry leaders see U.S. administration policy as a threat to drug pricing across all channels, according to a report published Monday.

In a conversation with BioCentury, Lazard’s David Gluckman acknowledged that the report painted a less optimistic picture than the firm’s 2024 survey of the industry, although its roughly 400 respondents did predict an increase in bolt-on M&A activity and strategic alliances, among other positive signs. The respondents also showed enthusiasm for a variety of disruptive technologies, reflecting the breadth of innovation across the industry, although they had doubts about the financing environment for companies in both private and public equity markets.

Gluckman is Lazard’s vice chairman of investment banking and global head of healthcare.

“These leaders say the most significant risks are macroeconomic, drug pricing, FDA and the ability to fund innovation,” Gluckman said. “What we need as an industry is a supportive, consistent and predictable environment. Government plays a key role in that, and is in a prime position to help provide a framework to supercharge innovation and continue our leadership in biotech.”

Gluckman said expectations around large-cap consolidation have undergone a “quite striking” change. The proportion of large and mid-cap executives who said the likelihood that such consolidation will increase has risen to 30% in 2025, from 5% in 2023 and 21% in 2024.

He pointed to the unprecedented series of patent cliffs — totaling about $250 billion in the 2025-30 period — as a potential driver, along with pressures from “most favored nation” drug policy, R&D challenges, competition from China, artificial intelligence, trade and tariff policy, fewer available scaled biotech opportunities and an evolving antitrust environment.

A majority of those surveyed expected to see Medicare and Medicaid drug prices decline over the next five years as a consequence of current U.S. administration policy, with 60% anticipating prices to drop. In U.S. commercial channels, 40% saw price reductions in the future. Just 12% expected prices go up through Medicare and Medicaid, and 10% in U.S. commercial channels; the balance expected little to no change in each category. 

Echoing last year’s results, the survey showed an ongoing disconnect between executives at large- and mid-cap biopharmas — more likely to be buyers in M&A deals — and those at private and small-cap companies, who are more likely be sellers. Those at larger companies tended to believe biotech equities were appropriately valued, or overvalued, while those at smaller organizations believed they were undervalued.

Gluckman said the “buyer-seller mismatch can be an impediment to getting transactions done” in a “volatile environment” for deals. Most saw the disconnect as a complicating factor, with 56% of respondents citing value expectations as a challenge to dealmaking; 57% also believed the U.S. policy environment was thwarting deal activity.

Regulatory uncertainty has become an emerging factor for dealmaking as well. This year, 32% of respondents said regulatory uncertainty is now a challenge to executing deals; the figure was 12% in 2024.

Still, bolt-on M&A activity has ticked up a notch thus far in 2025 — Lazard has counted 30 deals above $250 million, for a total of $2.5 billion, compared with 29 deals and $1.9 billion last year — despite policy headwinds and differing perceptions of valuations. The 2024 survey had predicted a rise in dealmaking. Most respondents in 2025 believed the frequency of bolt-on deals will continue to rise over the next year, with 74% predicting an increase.

For smaller biotechs, finding funding has been difficult. Lazard’s survey found that respondents attributed the difficulty to macroeconomic factors and the regulatory environment. Many in the group also believed too many companies are publicly traded, and expected biotech bankruptcies to be on the rise in the next 12 months.

Those surveyed expected the recent uptick in deals sourcing assets from China to continue. The perception has been that development in China has been faster and less expensive than in the West, opening up opportunities for licensing deals; prices have begun to rise but have not caught up with those for programs originating in the West. Lazard’s survey found a greater anticipation for increased licensing activity (77%) than for a bump in M&A activity (35%).

The group also largely believed that NewCo formation — the creation of standalone companies around assets sourced from China, backed by VCs — will rise in the next year, with 56% believing such activity will be significantly or somewhat higher.

Asked to select their top three therapeutic areas of interest, 60% chose the autoimmune, inflammatory and fibrosis category. Others garnering at least 30% were solid tumors (41%), rare diseases (37%), neurology (32%) and metabolic disorders (30%).

Among modalities and technological innovations, 46% said next-generation antibodies such as bispecifics and multispecifics were a top priority. Other areas of interest included data analytics, AI and machine learning (35%), precision medicine (35%), RNA approaches (34%) and antibody-drug conjugates (32%).