The biopharma sector is poised for a significant increase in merger and acquisition (M&A) activity in 2026, with a projected rise in both the number and total value of deals. This outlook comes from a report released by EY, coinciding with the 43rd Annual J.P. Morgan Healthcare Conference. Despite this anticipated M&A surge, initial public offerings (IPOs) are expected to remain subdued.
According to EY, the top 25 biopharma companies have increased their deal-making capital, or “firepower,” by 23% over the past year, now totaling $1.6 trillion, up from $1.3 trillion. This surge in available capital has already resulted in a substantial increase in the value of biopharma M&A deals, which soared by approximately 66% year-over-year to $149 billion from $90 billion between January and November 2025. Notably, while the volume of deals decreased by 9%, from 94 in 2024 to 76, the dollar value of transactions rose sharply.
The potential for M&A activity expands further when including $497 billion attributed to artificial intelligence (AI)-enabled applications and diagnostics from medtech companies, pushing the total firepower to $2.1 trillion. As stock prices rise, biopharma companies gain increased market capitalization, which in turn boosts their capacity for acquisitions.
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 fundamentals include rapid advancements in innovation across various therapeutic areas, particularly in neuroscience, which saw M&A spending increase to $83 billion in 2025, just behind oncology at $146 billion.
M&A Activity Influences Market Movements
Recent M&A developments have led to notable fluctuations in stock prices among several public companies. For instance, Ventyx Biosciences (NASDAQ: VTYX) experienced a remarkable 37% increase in its stock price, rising from $10.05 to $13.73 after Eli Lilly (NYSE: LLY) announced its intent to acquire the company. Similarly, shares of Revolution Medicines (NASDAQ: RVMD) surged nearly 29% to $102.71 following reports of potential acquisition talks with AbbVie (NYSE: ABBV), although AbbVie later denied these claims.
Merck & Co. (NYSE: MRK) also saw its shares rise by 2% after reports emerged of its interest in Revolution Medicines, while Amgen (NASDAQ: AMGN) announced its acquisition of Dark Blue Therapeutics, leading to a 6.5% increase in its stock over two days.
The ongoing M&A wave is further fueled by the need for biopharma companies to offset the impending loss of revenue from blockbuster drugs as they approach patent expiration, a phenomenon known as the “patent cliff.” EY’s analysis highlights that the top 20 drugs facing patent expiration between 2026 and 2029 accounted for a combined $176.442 billion in sales in 2024, representing a significant portion of the $236 billion in annual sales projected to be lost.
Challenges for IPO Market
Despite the optimistic outlook for M&A, Baral noted that the IPO market remains sluggish. As investors focus on established companies with proven drug candidates, biopharma IPOs totaled $1.755 billion through September 30, 2025, a dramatic 56% decline from the $3.995 billion raised in 2024.
Recent IPOs, including MapLight Therapeutics (NASDAQ: MPLT) and Evommune (NASDAQ: EVMN), raised $251 million and $150 million, respectively, but these figures do not signify a broader recovery in the market. Baral suggested that while conditions may improve slightly, a true rebound is yet to be seen.
In a notable development, AI drug developer Insilico Medicines raised HKD 2.277 billion (approximately $292.3 million) in late December 2025, and its shares have since nearly doubled. Additionally, Aktis Oncology is preparing to go public with plans to sell shares priced between $16 and $18, which could raise between $188.4 million and $211.95 million depending on the final price.
The venture capital market for early-stage companies is also not expected to improve significantly in 2026. Investments in this sector dropped by 35% from $24.701 billion in 2024 to $16.103 billion in the first three quarters of 2025, as investors increasingly prioritize later-stage opportunities.
As the biopharma industry navigates these complex dynamics, the focus on M&A may well shape the landscape for years to come, with companies seeking to leverage their increased capital to foster innovation and address critical market needs.
