The realm of global healthcare private equity has long recognized the inherent value within pharma services, a sector consistently bolstered by the pharmaceutical industry’s reliance on specialized contract research organizations (CROs), contract development and manufacturing organizations (CDMOs/CMOs), and outsourced commercialization partners. These essential services offer efficiency, adaptability, and specialized expertise, forming a robust foundation that has historically underpinned private equity (PE) deal activity and sustained performance, even amidst turbulent market conditions. The resilience of this sector was particularly evident during 2022 and 2023; while overall healthcare PE activity experienced a downturn, the transaction value and deal volume within pharma services notably held steady. This stability underscores the critical role these services play in the broader global healthcare ecosystem, attracting consistent interest from investors seeking reliable growth avenues, often linked to the expanding needs of international patients and evolving healthcare destination dynamics.
Pharma Services Investment Growth Faces New Headwinds
Despite the robust performance observed in 2022 and 2023, the growth trajectory for pharma services investments has since moderated. From its peak in 2023, the volume of pharma services deals has seen an approximate 11% compound annual growth rate decline. This contrasts sharply with the broader healthcare PE landscape, where deal volume has actually increased by an 11% CAGR over the same period. This deceleration, in our expert opinion, reflects a confluence of significant challenges impacting the sector, including reduced funding for biotech initiatives, a decrease in new clinical trial initiations, evolving policy and trade landscapes that introduce uncertainty, mounting pricing pressures on pharmaceutical companies, and persistent valuation disparities between prospective buyers and sellers.
One primary driver of this moderation is the adjustment in venture capital flows for biotech and pharma enterprises within the US, which have reverted to levels seen prior to 2021. This normalization follows the exceptional highs experienced during 2020 and 2021. Concurrently, global clinical trial starts, particularly those in early-stage development and drug discovery, have mirrored this trend, gradually returning to pre-pandemic volumes and consequently dampening the demand for comprehensive pharma services. This shift impacts the entire spectrum of international patient care and the infrastructure supporting cross-border healthcare research.
Furthermore, an array of policy and trade developments has amplified uncertainty surrounding global pharmaceutical supply chains and pricing structures. These include US tariffs, legislative initiatives such as the One Big Beautiful Bill Act and the BIOSECURE Act, shifts in vaccine policy, and proposed most-favored-nation drug pricing reforms. Such policy volatility, in our analytical view, compels pharma services transactions to gravitate towards segments more insulated from potential policy shocks. This often translates to investments in CRO/site networks, manufacturing capabilities, and businesses with limited exposure to the US market, which can be particularly vulnerable to regulatory shifts. This strategic pivot may also influence the attractiveness of certain healthcare destination regions for future investment.
Large pharmaceutical companies are also contending with constrained budgets, as broader macroeconomic uncertainty, exacerbated by relentless pricing pressures, impending cycles of loss of exclusivity for key drugs, and the financial implications of the Inflation Reduction Act in the US, has negatively impacted their financial performance. These budgetary limitations, in turn, have restricted investment in non-essential outsourced services, broadly affecting the growth performance of pharma services vendors. From a strategic perspective, this forces a re-evaluation of what constitutes core versus outsourced services, potentially impacting patient travel and the outsourcing decisions that support quality of care globally.
Finally, a notable gap persists between the valuation expectations of sellers and buyers. Many assets acquired during the peak valuation years of 2021 and 2022 remain within fund portfolios. While average transaction multiples have since declined, they still hover above pre-pandemic benchmarks. This, combined with a general softening of end-markets, contributed to a distinct decline in sponsor-to-sponsor transactions, particularly evident in 2023, though this activity has shown signs of rebounding in 2024 and 2025. This valuation disconnect highlights the intricate dance between market realities and investor expectations in the global healthcare investment space.
Landmark Transactions and Strategic Exits in a Dynamic Market
Notably, 2025 emerged as a record-setting year for pharma services in terms of value. A significant portion of this was driven by the substantial investment by Bain Capital, Kohlberg, Mubadala, and Partners Group in PCI Pharma Services, a leading CDMO deal that alone accounted for over one-third of the year’s total value. This transaction underscores the continued appetite for robust manufacturing and development capabilities that are crucial for delivering quality of care in pharmaceutical production.
North America also saw two other important transactions reflecting a sustained interest in large-scale, high-quality service platforms: THL Partners’ acquisition of Headlands Research, a clinical trial site network previously owned by KKR, and BayPine’s acquisition of CenExel Clinical Research, another prominent clinical trial site network, from Webster Equity Partners. These deals emphasize the enduring strategic importance of clinical research infrastructure for international patients and drug development.
In Europe, investors strategically targeted players strong in niche categories. Renaissance Partners and Aurora Growth Capital acquired Genetic, a dossier developer, from CVC Capital Partners, while EQT acquired Adalvo, another dossier developer, from Aztiq. These acquisitions highlight a trend towards specialized services that can optimize market access and regulatory navigation within diverse healthcare destination markets. Meanwhile, in the Asia-Pacific region, a significant highlight in an otherwise quieter year for pharma services activity was the investment by Temasek and GIC in Novotech, a CRO, alongside existing investor TPG. This regional activity points to the growing significance of Asia-Pacific as a hub for clinical research and international patient care.
Furthermore, several large-scale exits underscore the persistent strategic interest in high-quality pharma services businesses. A prime example is Thermo Fisher Scientific’s acquisition of Clario Holdings from a shareholder group led by Nordic Capital and Astorg. Such exits demonstrate the successful realization of value from well-positioned assets within the global healthcare sector, reinforcing confidence in the long-term prospects of these service providers.
Evolving Investment Strategies for a Shifting Environment
In response to the current market headwinds, pharma services investors are deploying several sophisticated approaches to adapt and thrive:
- A Barbell Approach Targeting Scale and Potential: Investors are adopting a dual strategy. First, they are prioritizing premium assets that offer significant scale and clear differentiation in the market, recognizing their inherent stability and growth potential. Second, they are actively seeking out under-optimized or subscale platforms where strategic operational improvements can unlock substantial growth and create significant value. This balanced approach allows for both foundational stability and opportunistic gains.
- Focus on Business Models and Markets Insulated from Volatility: A notable shift from the late 2010s trend, investors are now actively seeking companies with greater customer exposure to large pharmaceutical sponsors rather than early-stage biotech firms, which are more susceptible to funding fluctuations. Other highly desirable traits include strong revenue visibility, often found in long-duration programs. From a cross-border healthcare perspective, US-based infrastructure deals that are resistant to policy changes or possess limited international exposure are also becoming increasingly attractive. Additionally, buyers are keenly observing carve-outs and public-to-private transactions, targeting assets that could benefit immensely from enhanced operational execution and strategic realignment, thereby improving quality of care and efficiency.
- A Structured Playbook for Deal Assumptions and Value Creation: Leading investors are developing methodical scenarios to rigorously test risk limits and build strong conviction in various value-creation levers. These levers span top-line growth initiatives, the implementation of AI-driven operational efficiencies, and strategic mergers and acquisitions. This disciplined approach is crucial for securing investment committee approval, even amidst fluctuating macroeconomic conditions and evolving policy landscapes that impact health tourism and wellness tourism sectors.
Bottom Line
Despite the recent underlying challenges and shifts in the investment landscape, the pharma services sector continues to be exposed to powerful secular tailwinds that maintain its attractiveness over the long term. Astute and leading investors are consistently identifying robust opportunities, demonstrating that strategic foresight and adaptability are paramount. As market conditions inevitably evolve, a persistent and disciplined approach to investment will remain the cornerstone for driving sustained returns in this vital segment of global healthcare.
- Resilience Amidst Headwinds: Pharma services demonstrated remarkable stability in 2022-2023, though growth moderated post-2023 due to biotech funding shifts, policy uncertainty, and valuation gaps.
- Strategic Re-evaluation: Policy changes (e.g., BIOSECURE Act, Inflation Reduction Act) are driving investors towards insulated assets and away from early-stage biotech exposure, impacting cross-border healthcare and healthcare destination strategies.
- Significant Capital Deployed: 2025 marked a record year for value in pharma services, with major deals in CDMOs and clinical trial networks across North America, Europe, and Asia-Pacific, highlighting continued confidence in quality of care and infrastructure.
- Evolving Investment Playbooks: Investors are adopting