The American life sciences ecosystem operates in one of the most complex and high-risk investment environments. With more than 80% of life sciences companies operating without a profit, external investment—including from venture capital (VC)—is often critical to bringing a new treatment or cure to market. As macroeconomic headwinds have made investors increasingly cautious about investing in early-stage companies, mergers and acquisitions (M&A) play a crucial role in sustaining innovation across the American life sciences ecosystem.
On average, it takes $2.6 billion and ten years to bring a new therapy to market—a process with a nearly 90% failure rate. In the face of these pressures, M&A often represents a clear exit strategy for investors, helping to attract much-needed funding for new breakthroughs.
Take Ottimo Pharma, an oncology startup that structured its business strategy around the promise of an eventual acquisition, for example. With a clear exit opportunity in mind, Ottimo was able to raise $140 million in initial funding to support the development of a first-in-class cancer therapy—even as total investment in early-stage life sciences companies slowed in 2024.
It is often time and cost prohibitive, and inefficient, for early-stage companies to build from scratch the in-house capabilities and infrastructure needed to conduct late-stage clinical trials, secure regulatory approval and, ultimately, manufacture and distribute a new medicine at scale.
Histogen was one such company. Despite promising signs for the company’s lead therapy for skin infections, the company did not have the resources needed to complete late-stage research and development (R&D) and ultimately ceased operations in September 2023.
Life sciences M&A is fundamentally about helping companies to bridge this gap. By allowing life sciences companies of all sizes to combine their complementary resources, expertise and capital, M&A increases the odds that they will successfully traverse the high-risk journey to bring a new therapy from the lab to the patient.
Despite this unique and fundamental role which M&A plays in America’s life sciences industry, policies from the Federal Trade Commission and Department of Justice have introduced substantial hurdles that deter investment and stifle innovation. By making it harder for life sciences companies of all sizes to access these pro-competitive partnerships, the Agencies risk discouraging investors from providing the funding needed to support the next generation of treatments and cures.
At a time when scientific breakthroughs are poised to improve the health of Americans, policymakers must recognize and support life sciences M&A as a vial pathway for advancing innovation.