A new report from EY indicates that the merger-and-acquisition (M&A) landscape for biopharmaceutical companies is poised for significant growth in 2026, while initial public offerings (IPOs) are unlikely to see a similar resurgence. This analysis coincides with the 43rd Annual J.P. Morgan Healthcare Conference, highlighting a renewed bullish sentiment in the biopharma sector.
According to EY, the top 25 biopharma companies increased their collective capital reserves for M&A to $1.6 trillion, up from $1.3 trillion the previous year. This increase in financial “firepower” has already resulted in a remarkable 66% rise in the total value of biopharma M&A deals during 2025, reaching $149 billion as of November 30, despite a 9% decline in the number of deals, which dropped from 94 to 76.
The overall financial capacity for biopharma M&A climbs even higher to $2.1 trillion when including $497 billion from companies focused on artificial intelligence (AI)-enabled applications and diagnostics. This trend reflects a robust market environment, with rising stock prices contributing to increased capital availability among major players.
Subin Baral, EY’s global life sciences deals leader, stated, “We expect the surge to continue into 2026. The industry fundamentals continue to remain strong.” These fundamental strengths include rapid advancements in clinical research and technology across various therapeutic areas, particularly in neuroscience, which saw M&A spending soar to $83 billion in 2025, second only to oncology at $146 billion.
Baral emphasized the importance of execution in the coming year. “What that means is execution is going to be front and center on a lot of this deal-making,” he said. “Companies will focus on creating value and bringing products to market.”
M&A activity has already influenced stock movements significantly. For instance, shares of Ventyx Biosciences surged nearly 37% to reach $13.73 after Eli Lilly announced its acquisition of the company. Similarly, Revolution Medicines saw its stock rise almost 29% in response to rumors of a potential buyout by AbbVie, despite the latter denying any such agreement.
In another notable case, Amgen’s stock climbed 6.5% following its announcement to acquire Dark Blue Therapeutics, further illustrating how M&A activities are driving market dynamics.
The ongoing M&A wave is partly fueled by the looming “patent cliff,” where major biopharma companies face substantial revenue losses as patents on blockbuster drugs expire. According to a GEN A-List report, the top 20 drugs nearing patent expiration between 2026 and 2029 accounted for $176.442 billion in sales in 2024, representing 75% of the total sales expected to be at risk.
Baral also highlighted two additional factors propelling M&A activities: China’s growing prominence as a biopharma innovator and the increasing role of AI in optimizing research and development processes. In 2025, China accounted for five of the ten highest-value M&A deals, a substantial rise from just 4% in 2020. This trend reflects a shift towards lower-cost and faster pathways for research and development, making China an attractive market for biopharma companies.
Moreover, the potential value of life sciences deals related to AI technology has surged by 256% since 2014, increasing from approximately $1 billion to $49.6 billion by 2025. While AI is becoming integral to the M&A process, only 32% of AI-related deals have met their expected revenue targets, indicating room for improvement in executing these strategies effectively.
Despite the optimistic outlook for M&A, Baral noted that the IPO market remains sluggish. Up to September 30, 2025, biopharma IPOs totaled $1.755 billion, marking a 56% decline from $3.995 billion in 2024. The trend reflects a preference among investors for established companies with de-risked drug candidates, as opposed to the earlier stage companies that attracted significant attention during the COVID-19 pandemic.
Recent IPO activity has been limited, with only two companies going public since October. MapLight Therapeutics raised $251 million and Evommune secured $150 million, but these figures indicate a continued downturn in the IPO market.
Looking ahead, Baral remains cautious about a potential IPO recovery in 2026, stating, “We think it will be slightly better, but we have not seen enough to suggest that it’s truly rebounding.” Despite this, some companies are preparing for upcoming IPO opportunities, including Aktis Oncology, which plans to raise between $188.4 million and $211.95 million through its offering.
The early-stage venture capital market is also expected to remain challenging as investors continue to favor later-stage opportunities. In the first three quarters of 2025, venture capital funding fell by 35% year-over-year, totaling $16.103 billion.
As the biopharma landscape evolves, the dynamics of M&A and IPOs will continue to shape the industry’s future, with significant implications for innovation, investment, and patient access to new treatments.
