Amid lasting changes wrought by the pandemic, healthcare and life sciences investors expect fierce competition for limited targets

After another strong year for transactions in 2021, healthcare and life-sciences deal volume is expected to sustain a steady pace in 2022, according to investment professionals. Despite industry challenges with labor shortages, supply-chain bottlenecks, and inflation, investors are still actively competing for high-value targets, albeit limited in number, according to key news findings from the KPMG 2022 Healthcare and Life Sciences Investment Outlook Survey. Full report findings available here.

“While economic headwinds could always change the course of investor sentiment, it still looks like the strong momentum for deal activity we saw in 2021 will continue throughout all or most of 2022,” said Ash Shehata, KPMG national sector leader for healthcare and life sciences. “With the emergence of breakthrough innovations in COVID-19 anti-viral therapies, vaccines, and diagnostic tests, interest in life sciences and pharmaceuticals continue to remain high.”

The 2022 KPMG Healthcare and Life Sciences Investment Outlook features insights from a survey of more than 300 industry executives who provide their perspectives on how COVID-19, evolving market factors, and the policy environment may impact investment decisions in 2022.

Key survey findings include:

  • 70% of healthcare and life sciences survey respondents say they expect to increase their M&A activity in 2022, with more than half of healthcare and life sciences PE investors saying they plan to do at least 10% more deals than in 2021.
  • Four in ten life sciences investors and 30% of healthcare investors say their firms plan to increase deal activity by 10% or more in 2022 compared to 2021.
  • Asked if rising inflation and the rising cost of capital could impact their companies’ ability to do M&A in 2022, 50% of investors said they expect it will have a modest effect while another 28% said it will be a major headwind.
  • Valuation growth is expected in biopharma (65%), medical devices (75%), pharma services (75%), and healthcare IT (70%)

Areas of Capital-Deployment Focus in 2022

When it comes to deploying capital in 2022, healthcare investors said their key priorities would be improving operational efficiency and investing in joint ventures and creative stuctures.  Life sciences investors expressed a strong desire to invest in innovative products and services.

“The pandemic forged a new paradigm, whereby pharmaceutical and diagnostics companies streamlined speed to market for critical drugs, vaccines, and diagnostics,” said Steve Sapletal, KPMG U.S. Healthcare and Life Sciences Deal Advisory Leader. “Whether organizations are investing externally to enhance their product or service offerings, or investing in technological capabilities to improve internal operational efficiencies, we expect that deals will be focused on supporting the new industry reality, one that is more digital and much more consumer-focused.” 

Select subsector highlights:

  • Seventy percent of biopharma investors said competition over a limited number of high-value or highly innovative assets would have the greatest impact on valuations in the subsector in 2022.
  • Biopharma services and diagnostic lab investors expect valuations to rise across all segments of the subsector in 2022, with potential increases of 10 to 20 percent overall, and of more than 20 percent for commercialization services and technologies.
  • In the robust healthcare IT subsector, telehealth targets were the top choice cited by investors for 2022 deals.
  • Medical device investors indicate a preference for small tuck-ins over strategic partnerships, and expect a resurgence of hospital system spending on devices used in elective procedures. 

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Media Contact

Matt Weiss

Matt Weiss

Director, Industry Communications, KPMG US

+1 201-307-8138

 

 

Ash Shehata

Ash Shehata

Principal, National Sector Leader for HCLS, KPMG US

+1 513-763-2428

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