A look at the Healthcare and Life Sciences Investment Outlook for 2025

In KPMG’s 2025 Healthcare and Life Sciences Investment Outlook, we found that most leading hospital and health systems across different countries were in good positions in 2024 compared to 2023, thanks to reimbursement increases, lower interest rates, and more staffing stability. Larger institutions pursued acquisitions and partnerships, expanded offerings, and invested in efficiencies; financial investors remained mostly on the sidelines, given the industry’s margin challenges and capital requirements. We expect more deals as struggling institutions reach for lifelines, and regulators look more favorably on large acquirers growing scale and share across regions and service lines.

Healthcare services continued to attract strategic and financial buyers in 2024, but deal volume was low, partly in response to changing reimbursement schedules. We expect plenty of smaller to medium-sized transactions in 2025 in this broad category, which includes physicians’ practices and other non-hospital providers. Financial and strategic investors will continue to seek assets in the space to gain capabilities or expertise, such as in value-based payments; expand networks or services in networks; or merge with other providers to gain scale advantages.

In the shifting payer marketplace, companies and investors must constantly adjust strategies to drive profitable growth. After acquiring provider and pharmacy assets to influence the total cost of care, for example, many players are now selling health plans that attract patients but lose money or require capital. Given the complexity of the space, we expect plenty of deals in 2025, mostly as strategic buyers divest lower-performing assets, enter new markets, and acquire new offerings and capabilities.

Headwinds across healthcare — such as rising costs, shrinking margins, and staffing shortages — are tailwinds in healthcare IT (HCIT), which can boost efficiencies and help staff accomplish more. We expect a steady flow of deals as strategic and financial buyers alike continue to look for companies harnessing AI and other technologies to improve revenue cycle management, handle process-heavy workflows, streamline data exchange, free caregivers to spend more time with patients, and provide predictive insights.

The pharmaceutical industry is on the clock to refill pipelines with innovative therapies as a patent cliff for many blockbusters approaches. That search, potentially aided by AI’s increasing role in drug discovery and development, has been complicated by economic headwinds for smaller biotechs, which could find firmer footing if interest rates continue to drop. Advanced therapeutics for precision medicine, particularly in oncology, remain a primary focus, leading to many of the largest recent acquisitions and partnerships. The success of GLP-1s for diabetes and weight loss is also having a broad impact, spurring clinical trials for additional indications and reviving interest in drugs that might be used by broad populations.

Despite some headwinds, broad outsourcing of clinical trials, drug development, manufacturing, and commercialization to biopharma services companies continued in 2024, and transactions by both strategic and financial investors remained above pre-pandemic levels. Chinese companies subject to a potential ban from US markets have shown an interest in selling assets in the US and Europe. AI tools for clinical trials are an increasing focus, and there were several acquisitions of key eClinical assets. Questions about the priorities of the new Trump Administration regarding vaccines and other pharmaceutical products, including GLP-1s, could cloud the outlook, but if improved capital market conditions benefit the biotechs that outsource to Biopharma services, higher levels of M&A activity seem likely in 2025 and beyond.

A PHILIPPINE PERSPECTIVE
Healthcare continues to be a national priority in the Philippines, with government and private sector efforts focused on expanding infrastructure and accelerating digital transformation. Investments in regional health hubs and digital tools — such as AI-powered diagnostics and telemedicine — are helping improve access and efficiency.

While the drivers of investment activity globally — digital transformation and operational efficiency — are consistent with what we’re seeing in the Philippine market, we also note a growing interest in public-private partnerships. As hospitals modernize and digital health adoption grows, we see more local and regional investors entering the space, especially in diagnostics and telemedicine.

With strong government support and rising demand for innovative care, the Philippines offers growing opportunities for strategic partnerships and investment across the healthcare ecosystem.

Michael Arcatomy “Mike” H. Guarin is a member of the MAP Energy Committee, the Governance Committee, and the Health Committee. He is partner for Advisory of R.G. Manabat & Co. (KPMG in the Philippines). This column was lifted from the KPMG Thought Leadership publication 2025 Healthcare and Life Sciences Investment Outlook.

map@map.org.ph

mguarin@kpmg.com