Life Sciences Tools & Diagnostics Industry Update Q1 2025

Despite strong revenue growth of nearly 61% over the past five years (compared to 38% for the broader market), healthcare stocks have underperformed the S&P 500, which has declined 1.7% over the 6 months ended Mar 31, 2025, versus the Healthcare Sector S&P 500 declining 4.8%. The Life Sciences Tools and Diagnostics (LSTDx) sector has lagged further behind, with the large-cap, mid-cap, and small/emerging-cap groups falling by 12.4%, 21.4%, and 40.6%, respectively. Concerns over US tariffs, NIH funding, and other factors have contributed to this volatility.

However, the biopharma sector, a major customer segment for LSTDx companies, has seen an increase in funding and, in particular, IPOs in Q1 of 2025. Further, biopharma companies have approximately $1.3 trillion in potential capital available for M&A, supported by strong balance sheets and debt-raising capacity. PE investors also remain active in healthcare, and U.S. private equity deal value grew 19% year-over-year.

LSTDx companies continue to command robust valuations. The large-cap companies within this sector are currently trading at an average of 17.9x LTM EBITDA, while the mid-cap companies are trading at an average of 15.1x LTM EBITDA.