By Emma-Victoria Farr
FRANKFURT (Reuters) – Healthcare executives and investors expect a surge in initial public offerings and corporate dealmaking in 2025, with geopolitical tensions set to overtake financing challenges as the biggest risk to the sector, the company’s annual healthcare report shows. Jefferies Tuesday.
WHY IT’S IMPORTANT
Healthcare is an active sector for mergers and acquisitions, with deals such as the acquisition of cardiac equipment by Johnson & Johnson (NYSE:) Shockwave Medical (NASDAQ:) for $13.1 billion announced in April, and KKR’s acquisition of a stake in health technology company Cotiviti in February.
With deal activity declining globally in recent months, 72% of survey respondents expect healthcare M&A levels to be higher by 2025, with around 50% of private equity respondents seeing Europe as a region with opportunities for the sector.
The report, now in its seventh year, surveys approximately 500 healthcare industry seniors, including institutional and private equity investors, as well as executives at healthcare companies.
MARKET RISKS
Geopolitical risks are seen as the biggest risk for healthcare investors, with 40% highlighting it as the biggest concern, up from 26% last year.
Financing and price reductions remain a concern, and were a narrow second choice by respondents as the biggest problem facing the sector – or 36%, compared to 33% who were concerned about a lack of financing last year.
North America will continue to dominate the dealmaking landscape and is seen as the biggest market opportunity by 74% of respondents.
Continental Europe fell, selected by 36% of respondents, down from 43% last year, while those who saw Britain as most likely fell slightly from 20% in 2023 to 18%.
China has recovered slightly compared to last year, offering the best opportunities according to 16% of respondents, compared to 12% in 2023.
BY THE NUMBERS
Companies looking to go public are feeling confident, with 64% of respondents expecting more healthcare IPOs by 2025, in a strong signal that equity capital markets will make a comeback.
Of those surveyed, 20% expect equity financings and IPOs to dominate transaction activity – the highest since Jefferies began surveying in 2018.
IMPORTANT QUOTE
“This year’s report shows a noticeable increase in confidence in the sector as we look ahead. This confidence is reaffirmed by increased investment activity in the market towards the end of this year, indicating that we have turned a corner” , said Tommy Erdei, global joint head of Healthcare Investment Banking at Jefferies.
KEY FINDINGS
Weight loss medications are here to stay, with 47% of respondents saying the long-term impact of these treatments will be significant and sustainable, compared to just 33% last year.
CONTEXT
Earlier in November, sales of Wegovy weight loss drugs from Novo Nordisk (NYSE:) exceeded expectations in an obesity drug market that some analysts say could be worth as much as $150 billion by the early 2030s. Demand is currently greater than supply.
MARKET OUTLOOK
Respondents were optimistic about market forecasts, with two-thirds of respondents believing the UK blue chip will be higher by the end of 2025. This confidence is even more pronounced for healthcare, with 73% expecting the Healthcare Index to close higher in 2025 as well.
