How is the broader macroeconomic environment impacting life sciences, MedTech and equity financing?
Jason: From an investor standpoint, policy and regulation have made things challenging. The macro backdrop is having an impact on investor receptivity, access to capital and cost of capital. Financing is down considerably across the board. After a challenging start to the year, the volatility in April had an even bigger impact. Biotech IPOs, which tend to be a good bellwether for investor risk appetite, have performed poorly. The good news is that companies in the space that have good clinical data have been able to secure financing.
New issue activity outside of biotech has been relatively quiet. MedTech and Digital Health have seen a modest pocket of strength. We've seen some successful IPOs in that sector, and it feels like there's a building backlog.
David: There’s been a lot of uncertainty in the regulatory environment. Despite this, M&A has been holding steadily in terms of volume. Last year wasn’t particularly active for large deals; most of the activity has been in the $1-5bn range as buyers want to acquire innovative companies to grow, so the need for M&A remains.
The main challenge in the market is value alignment. Buyers see lower valuations, while sellers are holding out for better prices. On the whole, deals have become less competitive this year, with often just one buyer stepping up.
"There’s been a lot of uncertainty in the regulatory environment. Despite this, M&A has been holding steadily in terms of volume."
David Levin, Interim Global Head of Healthcare Investment Banking and Co-Head of U.S. M&A
How are strategic acquirers and private equity approaching healthcare assets in 2025?
Ahmed: At the beginning of the year there were high expectations around M&A momentum. Buyers and sellers looking at the political regime anticipated a pro-business environment, and less scrutiny from an antitrust perspective, that would spur M&A. Financing trends were moving in the right direction. More recently, especially regarding the tariff noises, services businesses and MedTech businesses have struggled to put parameters in place to guard against market disruption.
However now that some resolutions with certain countries have been put in place, businesses are better able to quantify and qualify the tariff impact – and we’re seeing a little pick-up in M&A activity as a result.
Most large companies are still focused on long-term growth and profitability through strategic acquisitions, while a minority waits to see how the macro environment plays out. The pillars that drive M&A remain the same: growing revenue, building scale, filling product gaps, leveraging innovation and expanding geographically.
We would like to see more activity, but there are very specific pockets that are very active – including, healthcare IT, tech-enabled services and RCM.
"We would like to see more activity, but there are very specific pockets that are very active – including, healthcare IT, tech-enabled services and RCM."
Ahmed Atiia, Managing Director of Healthcare M&A
When will healthcare deals take off?
Ahmed: Sponsors continue to drive a lot of activity in the healthcare ecosystem. While the monetization of assets was limited due to the macro dynamics through the course of 2024, there’s renewed pressure from LPs to sell off older investments and deploy much of the large capital investment they’ve received.
However, many well-capitalized, well-run businesses are waiting for the market to improve. They’re asking, “Do I really want to sell with the environment as it is today, or do I want to wait for a quarter or two before I contemplate transactions?”
In the coming quarters the expectation is the financing environment will continue to get better. We've seen positive signs of life, on both the equity capital market side and leverage finance side. Sponsors are poised to monetize assets in the back half of 2025 into early ‘26, and then on the buy side to deploy capital. They have big funds to invest and are looking for larger healthcare companies (in the $250 million to $2 billion range) to buy and build up.
Jason: We’ve seen some progress in the public markets, with a handful of private equity-backed IPOs in 2024, largely in healthcare services. There’s a healthy backlog of potential transactions in the second half of this year and into 2026, with numerous high-quality businesses that could go public and generate real investor interest.
Selling a company through an IPO takes longer to fully cash out, as the monetization and disposition of the residual position in the public market usually takes several years to realize. Banks like RBC are happy to help facilitate those sell downs, but they do take time. The flip side is hopefully those incremental sales happen as multiples expand and stock prices increase. There is a nice blueprint available, and we've seen a number of sponsors execute on that strategy.
David: On the life sciences side, we've seen a real pickup in the level of dialog we've had with sponsors around commercial biopharma, late-stage biopharma and generics. For instance, last year, we facilitated a successful transaction selling the largest oral liquid player, PAI Pharma.
"There’s a healthy backlog of potential transactions in the second half of this year and into 2026, with numerous high-quality business that could go public and generate real investor interest."
Jason Levitz, Head of Healthcare Equity Capital Markets
How is RBC advising its clients from a financing perspective? What are the main tactics today?
Jason: As an investor, RBC can help clients find best execution in a volatile market. De-risking the transaction is key. For instance, this year 20% of private placements from biotech companies have included a contemporaneous data release, building confidence among investors.
Companies are seeking creative and alternative financing sources, such as combining a public equity issuance with a private strategic investment, which raises additional capital while further de-risking the transaction.
We've seen companies, if able, look to private credit providers, royalty providers, other ways to find access to capital and monetize existing assets in order to diversify funding sources and create financing flexibility and, most importantly, runway. If you look at the best performing companies in the sector over the course of the first five months of the year, the majority of them have a comfortable cash cushion, which is typically two years plus.
So the companies that face the biggest challenges are those that are lacking near-term catalyst and have tighter cash balances. And I think those companies have to get creative.
Ahmed: The million dollar question we often get asked is around valuation. On the one hand, high-quality businesses continue to command premium values when they show diversification and strong top-line growth and profitability. On the other hand, businesses encountering excess competition or execution risks are selling at a little bit of a discount – relative to prior data and mean / median multiples where the sector has traded. So, on average, the multiples blend downward.
David: The reality of M&A in the biotech space is fundamentally driven by the science and the data. Companies with a compelling data result are still going to command premium values and be most attractive to the consolidators – because they see the differentiated commercial opportunity.
