“Valuations have pulled back quite a bit of late,” said Davis. “Whether or not that drives sellers to being willing to see the restatement of value that will allow us to do deals at different levels, we’ll have to see.”

Joseph Wolk, Johnson & Johnson’s chief financial officer, took a similar view in late January, noting that biotechs aren’t necessarily “on sale.”

The slide in biotech stocks has unfolded over the past year, but declines have accelerated since November. The XBI stock index, a widely followed barometer of the industry, is down 48% since hitting an all-time high last February. Almost half of that drop in value has come since Nov. 1.

There are some signs of stepped-up dealmaking, with notable acquisitions by Merck, Novo Nordisk, Pfizer and, most recently, UCB announced since September. Deals announced over that time frame accounted for just over 60% of the total value of acquisitions tracked by BioPharma Dive last year.

Yet pharma executives don’t have much of an incentive to acknowledge that biotechs are cheaper. And to Roche CEO Severin Schwan, the drop in valuations has only offset the dramatic run-up in prices previously.

“Valuations went through the roof,” he said on a Feb. 3 conference call. “So even though valuations did indeed come down, they’re still at a high level.”

Still, expectations from analysts and investors are again high that M&A activity will be strong in 2022. Notably, more than a dozen large pharmaceutical companies each will have at least $20 billion in cash available to them by the end of this year, according to analysts at SVB Leerink. Pfizer, in particular, is benefiting hugely from the tens of billions of dollars in revenue generated by its COVID-19 vaccine, while Novartis recently sold a stake in Roche for $21 billion.

A good number of those firms, including Merck, Bristol Myers Squibb, Amgen and AbbVie, face loss of patent exclusivity in the coming years for top-selling drugs like Keytruda, Opdivo, Enbrel and Humira, respectively.

Those factors together should motivate buying as executives hunt for ways to replace expected declines in revenue.

But they may not prompt large-scale takeovers like past deals for Shire, Celgene and Allergan. “We do not have plans to do larger M&A,” said Novartis CEO Vas Narasimhan, adding that “it’s harder to make the numbers work to create value for shareholders.”

Instead, many CEOs have expressed greater interest in “bolt-on” deals that can be welded to existing strategies.

“We have the financial strength to be size-agnostic, but we are particularly interested in early science and mid-sized bolt-on deals,” said David Elkins, chief financial officer at Bristol Myers Squibb, on the company’s Feb. 4 conference call.

“I don’t want financial engineering and I don’t want cost-cutting,” said Pfizer’s CEO Albert Bourla at the J.P. Morgan Healthcare Conference last month, describing his disinterest in doing a deal that would require consolidation and integration to work.

But even bolt-on deals can come with a big sticker price, depending on the size of the acquirer. Merck, which CEO Rob Davis has said will be “appropriately aggressive,” bought Acceleron last year for $11.5 billion. Novartis previously spent about $10 billion on The Medicines Company and its one main drug, the now approved cholesterol treatment Leqvio. And in December 2020 AstraZeneca folded Alexion into its rare disease research with a nearly $40 billion acquisition.