SIGNIFICANCE
The healthcare sector remains vibrant for mergers and acquisitions, exemplified by Johnson & Johnson's $13.1 billion acquisition of Shockwave Medical's heart device business announced in April, and KKR's investment in health tech firm Cotiviti in February.
Despite a recent slowdown in global deal activity, 72% of survey participants predict that healthcare M&A will rise in 2025, with approximately 50% of private equity respondents identifying Europe as a promising area for growth.
In its seventh year, the report gathers insights from around 500 senior professionals in the healthcare industry, including institutional and private equity investors, as well as executives from healthcare companies.
MARKET CHALLENGES
Geopolitical risks are now perceived as the foremost concern for healthcare investors, with 40% citing it as the top issue, an increase from 26% last year.
Concerns regarding funding and pricing reductions remain prevalent, with 36% of respondents identifying these as significant issues, up from 33% expressing worries about funding shortages last year.
North America is expected to maintain its position as the leading market for dealmaking, with 74% of respondents viewing it as the most significant opportunity.
Interest in Continental Europe has declined, with 36% of respondents selecting it as a key opportunity compared to 43% last year, while the UK saw a slight decrease in interest, dropping to 18% from 20% in 2023.
China has shown a modest recovery, with 16% of respondents indicating it as the best opportunity, up from 12% in 2023.
STATISTICAL INSIGHTS
There is a strong sense of optimism among companies considering public listings, with 64% of respondents expecting an increase in healthcare IPOs in 2025, signaling a potential resurgence in the equity capital markets.
Among those surveyed, 20% anticipate that equity financing and IPOs will lead transactional activity, marking the highest expectation since Jefferies initiated the survey in 2018.
KEY QUOTE
"This year's findings reflect a significant increase in confidence within the sector as we look forward. This optimism is supported by heightened investment activity in the market towards the year's end, suggesting we have reached a turning point," stated Tommy Erdei, global joint head of healthcare investment banking at Jefferies.
KEY FINDINGS
Weight loss medications are expected to remain influential, with 47% of participants believing that the effects of these treatments will be substantial and sustainable in the long term, an increase from 33% last year.
CONTEXT
In early November, sales of Novo Nordisk's Wegovy weight-loss drug exceeded expectations, in a market for obesity treatments that some analysts predict could reach approximately $150 billion by the early 2030s. Currently, demand surpasses supply.
MARKET OUTLOOK
Survey participants expressed optimism regarding market projections, with two-thirds believing that Britain's blue-chip FTSE 100 index will rise by the end of 2025. This optimism is even stronger in the healthcare sector, with 73% expecting the MSCI World Healthcare Index to also close higher in 2025.