Healthcare executives and investors are expecting a significant increase in initial public offerings (IPOs) and corporate transactions in 2025, according to Jefferies" annual healthcare report.
The positive outlook for the healthcare sector comes despite recent slowdowns in deal activity, with geopolitical tensions now seen as the main risk factor for the industry. The report, based on a survey of around 500 senior healthcare executives, institutional investors, and private equity leaders, indicates a strong confidence in the market"s recovery and growth potential.
The healthcare sector has been characterized by active mergers and acquisitions (M&A), with notable transactions such as Johnson & Johnson"s $13.1 billion acquisition of Shockwave Medical and KKR"s investment in Cotiviti. Although the pace of deals has slowed down in recent months, a significant 72% of survey participants expect an increase in M&A activity in the coming year.
Additionally, nearly half of the private investors surveyed view Europe as a promising region for healthcare investments, despite a slight decline in its perceived attractiveness compared to previous years.
Geopolitical risks have emerged as the primary concern for healthcare investors, with 40% of respondents identifying it as the most critical issue, up from 26% the previous year. Funding challenges and potential price cuts also remain pressing issues, with 36% of participants ranking them as the second most important concern.
North America continues to dominate the healthcare transaction landscape, with 74% of respondents identifying it as the most significant market opportunity. In contrast, interest in continental Europe has decreased, with only 36% of executives seeing it as a prime investment region, down from 43% in the prior year. The UK has also seen a slight decrease in its appeal, with 18% of respondents considering it the biggest opportunity, compared to 20% in 2023. Meanwhile, China has shown signs of recovery, with 16% of executives now viewing it as a promising market, up from 12% last year.
The sentiment surrounding IPOs is positive, with 64% of survey participants expecting an increase in healthcare IPOs in 2025. This indicates a shift in confidence, suggesting that capital markets are regaining momentum. Among those surveyed, 20% anticipate that equity financing and IPOs will dominate transactional activity, representing the highest expectation since Jefferies initiated the survey in 2018.
The report also highlights the growing significance of weight-loss drugs in the healthcare landscape. A notable 47% of respondents believe that the impact of these treatments will be substantial and enduring, a marked increase from 33% the previous year. Analysts project that the anti-obesity drug market could reach a valuation of approximately $150 billion by the early 2030s, driven by demand that currently outstrips supply.
Overall, the anticipated surge in IPOs and M&A activity reflects a broader recovery narrative in the healthcare sector. Investors and executives are positioning themselves to capitalize on emerging opportunities, while keeping a close watch on geopolitical developments and market trends that could shape the future of healthcare investments.