Big Pharma's M&A Firepower: Trillions Available for Strategic Acquisitions

In a recent analysis by Stifel, the top 18 pharmaceutical companies have been revealed to possess a combined $1.2 trillion in "stretch firepower" for potential mergers and acquisitions (M&A). This substantial sum underscores the industry's capacity for transformative deals and strategic growth. Johnson & Johnson and Roche lead the pack, each boasting $119 billion in stretch firepower, while Novo Nordisk tops the list for "comfortable firepower" with $63 billion at its disposal.

Industry Giants' M&A Strategies

Johnson & Johnson: Growth Without Large M&A

Despite having significant financial resources, J&J CEO Joaquin Duato has indicated a preference for organic growth over large-scale acquisitions. At the Morgan Stanley Global Healthcare Conference, Duato stated, "Unlike other companies, we don't need to do large M&A in pharma because we are delivering the growth." However, the company remains open to early-stage opportunities that align with its scale and capabilities across clinical development, manufacturing, and commercialization.

J&J's most notable recent transaction was the $14.6 billion acquisition of Intra-Cellular, securing the schizophrenia medication Caplyta and bolstering its neuroscience pipeline. This deal, the largest in the pharmaceutical industry for 2025, suggests that while J&J may not be pursuing mega-mergers, it is still actively engaged in strategic acquisitions.

Roche: Focused on Metabolic Disorders

Roche, matching J&J's stretch firepower, has recently made moves in the metabolic disorders space. The company offered $2.4 billion for 89bio, a biotech firm specializing in metabolic dysfunction-associated steatohepatitis (MASH). This acquisition follows a $5.3 billion licensing deal with Zealand Pharma for an obesity asset, highlighting Roche's growing interest in metabolic diseases.

Roche Pharma CEO Teresa Graham has been cautious about revealing specific M&A plans but confirmed that oncology remains a focus area for potential deals. The company's last major acquisition before 89bio was a set of CDK inhibitors from Regor Pharmaceuticals for $850 million upfront in 2024.

Merck and Novo Nordisk: Contrasting Approaches

Merck: Active Deal-Making to Offset Patent Cliff

Merck has been particularly active in M&A, having invested over $50 billion in business development under CEO Rob Davis's leadership. Recent acquisitions include Verona Pharma for $10 billion and EyeBio for $3 billion, both described as "multibillion-dollar opportunity" deals. The company is strategically preparing for the patent expiration of its blockbuster drug Keytruda.

Davis emphasized Merck's focus on "first, best, next" when considering acquisitions, looking for new mechanisms of action, first-in-class or best-in-class potential, or assets that address unmet needs. While preferring deals in the $1 billion to $15 billion range, Davis hasn't ruled out larger transactions if they align with Merck's value and scientific criteria.

Novo Nordisk: New Leadership, Potential Strategy Shift

Novo Nordisk, under new CEO Maziar Mike Doustdar, is undergoing significant changes, including a major cost-cutting initiative that may affect up to 9,000 employees. While the company has not made substantial M&A moves recently, focusing instead on licensing and research partnerships, hints of future announcements have emerged. Martin Holste Lange, the new executive vice president of R&D and chief scientific officer, suggested upcoming developments in the company's research pipeline and portfolio strategy.