Donald Trump's economic policies stall Big Pharma deals

UPDATED: Mar 26, 2025 19:55 IST

Large deals involving pharmaceutical and biotech companies are stalling as executives grapple with mercurial White House economic policies that have roiled markets and set off a global trade war, according to four top healthcare investment bankers.

The excitement late last year over US President Donald Trump's election victory and prospects for a subsequent flurry of mergers and acquisition deals have quickly faded, they say.

The political uncertainty is pushing some deals out by a few months or even quarters, said the four bankers, who lead healthcare deals at some of the most active US M&A banks.

C-suite meetings scheduled to talk about company valuations and price negotiations are now spent guiding bewildered executives through Trump's shifting policy moods, whether they directly impact their companies or not.

"They say 'Gosh, I didn't see that coming.' Or, 'We're having tariffs, we're not having tariffs. We're having tariffs, we're not having tariffs,'" said one of the top healthcare dealmakers.

"It's a massive distraction factor for CEOs," he said. "I try to get off the topic, because what do I have to add to it? It doesn't get us anywhere."

He and the other bankers interviewed by Reuters asked not to be identified so they can freely criticize the government without fear of retribution. The White House did not respond to a request for comment.

It's not tariffs and stock market volatility that have bankers most worried, they said. Trump's decision to install a vaccine skeptic as health secretary, dismiss thousands of employees of the US Food and Drug Administration and other agencies, push for cuts to drug prices and slash federal research grants all have the potential to erode revenue and reduce the future pipeline for new drugs.

A slowdown in healthcare deals is particularly noteworthy for Wall Street since the companies provide essential consumer goods, making them "defensive" or reliable stocks to invest in during economic downturns.

Smaller healthcare deals should still drive M&A growth this year, bankers say. But fewer or smaller deals can indicate economic uncertainty, lack of capital to finance businesses, or less confidence in future growth prospects, the bankers and analysts said.

"The uncertainty with the changeover in Washington has resulted in a lot of risk-off behavior from the investment community," said Dan Cocks, managing director for biotech equity capital markets business at Barclays.

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TARIFFS AND PATENTS

US tariffs, foreign retaliation, Trump's unconventional picks for top posts and geopolitical tension have pharma investors on edge, TD Cowen analyst Steve Scala said this month.

For some healthcare subsectors, tariffs can have a bigger impact.

Medical equipment producers such as GE Healthcare. Intuitive Surgical, and iRhythm, which depend on imported parts from China or Mexico, said in recent earnings calls that tariffs will cost them revenue.

Then there are the possibilities that Health Secretary Robert F. Kennedy Jr. could undermine the use of vaccines in the US, or of significant cuts to Medicaid health insurance for low-income Americans that could hurt not just public health but the drugmakers that supply those programs with medicines, Morgan Stanley analyst Monica Guerra said in a note this month.

"Many people anticipated that there was a 'Trump put' in the stock market," Bernstein analyst William Pickering said of the assumption the Republican president would do whatever is necessary to keep the stock market happy.

"It is clear now that there is not," he said in an interview.

A 2% drop in the S&P 500 for the year is seen so far as manageable, with the selloff only affecting imminent deals when companies are trying to lock in a stock price. However, if recession whispers grow louder, the situation could change, bankers and analysts say.

The hope that smaller deals will still drive M&A growth this year is fed by the need of large drugmakers to rebuild their development pipelines and product offerings through acquisitions as top-selling drugs face patent cliffs.

Merck & Co, Pfizer, Bristol Myers Squibb, and AbbVie are among the companies that stand to lose billions of dollars in revenue by the end of the decade as some of their biggest drugs go off patent.

The companies did not immediately reply to requests for comment.

They are more likely to be on the hunt for smaller, private biotech firms that have drugs and therapies under development, instead of merging with a larger rival, bankers and analysts say.

Pfizer and AbbVie are still digesting expensive acquisitions from a couple of years ago that have yet to deliver the expected revenue, analysts said.

They are likely looking to buy companies at $1 billion to $2 billion with additional milestone payments tied to FDA approvals and clinical data readouts, Barclays' Cocks said, rather than spend $14 billion on a company early in its commercial launch stage.

Should Trump urge the Federal Reserve to reduce interest rates, the capital-intensive biotech industry could reap lower borrowing costs, Bernstein's Pickering said.

"We have all learned in the past month ... to never become overconfident about what you think someone will do."