Large U.S. Pharmaceuticals: Is M&A the Remedy for Looming Risks Ahead?

In 2023, despite high interest rates, M&A activity in healthcare continued. This was due to large pharmaceutical companies facing the loss of patents and needing to replenish their drug portfolios. The Inflation Reduction Act (IRA) was a key development in 2023 and is a risk to the sector's revenue. The loss of patents and uncertainty around the IRA are weighing on the sector. M&A can help recover lost revenue, but anti-trust risk is high. Our top picks are Eli Lilly (LLY) and Merck (MRK), with solid growth prospects, innovation, and deal-making capabilities.