The biopharmaceutical sector is poised for a significant increase in merger-and-acquisition (M&A) activity in 2026, fueled by a revitalized bull market. A report released by EY (Ernst & Young) during the 43rd Annual J.P. Morgan Healthcare Conference indicates that the top 25 biopharma companies have set aside an impressive $1.6 trillion for potential deals, up from $1.3 trillion last year. Despite this surge in M&A optimism, the market for initial public offerings (IPOs) is expected to remain stagnant.
According to EY, the value of biopharma M&A deals soared by approximately 66% year-over-year, reaching $149 billion as of November 30, 2025, compared to $90 billion in the previous year. Interestingly, the volume of deals dropped from 94 to 76, reflecting a growing trend toward larger, more strategic transactions rather than an increase in the number of deals.
Key Drivers of M&A Activity
The report highlights several key factors contributing to this anticipated M&A surge. The increased capital available to biopharmaceutical companies, driven by rising stock prices, enhances their market capitalization, creating a favorable environment for deal-making. Subin Baral, EY’s global life sciences deals leader, emphasized that “the industry fundamentals continue to remain strong.”
One critical factor is the ongoing innovation within the sector, particularly in areas such as neuroscience, which saw M&A spending reach $83 billion in 2025. Baral noted that the industry is not just focused on oncology, which accounted for $146 billion in M&A spending, but is also exploring breakthroughs in other therapeutic areas.
Baral further explained, “Execution is going to be front and center on a lot of this deal-making.” Companies are eager to translate these innovations into market-ready products quickly.
M&A activity has already influenced stock movements significantly. For instance, shares of Ventyx Biosciences surged by about 37% following an announcement that Eli Lilly would acquire the firm for $13.73 per share. Similarly, Revolution Medicines saw its stock climb nearly 29% amid speculation regarding a potential acquisition by AbbVie, a claim the pharmaceutical giant later denied.
Challenges Ahead for IPOs
Despite the optimism surrounding M&A transactions, the IPO market remains challenged. Baral noted that investors are currently favoring established companies with de-risked drug candidates, particularly in therapeutic areas such as cancer. Through September 30, 2025, biopharmas completed IPOs valued at $1.755 billion, a 56% decline from the $3.995 billion recorded in 2024.
Notable IPO activity has occurred, with MapLight Therapeutics raising $251 million and Evommune securing $150 million, yet there are concerns that these figures do not signal a true market rebound. Baral remarked, “We think it will be slightly better, but we have not seen enough to suggest that it’s truly rebounding.”
The report also highlighted the impact of the “patent cliff,” as many blockbuster drugs approach the end of their patent exclusivity. This trend poses a risk of losing $176.442 billion in annual sales between 2026 and 2029, further motivating biopharma companies to pursue acquisitions.
The growing role of China as a biopharma powerhouse is also influencing M&A strategies. The country accounted for five of the ten highest-value M&A deals in 2025 and is increasingly attracting investment due to its streamlined R&D processes. Baral stated, “We are seeing the bio-bucks that are going into China.”
Additionally, the integration of artificial intelligence (AI) within the sector is transforming the deal-making landscape. The potential value of life sciences deals involving AI technology platforms spiked by 256% from $1 billion to $49.6 billion between 2014 and 2025, indicating a robust interest in leveraging AI to optimize research and development efforts.
As the biopharmaceutical industry navigates these dynamics, the outlook for M&A remains strong, while the IPO market faces a more uncertain future. The ability of companies to adapt and execute effectively on emerging opportunities will be pivotal in shaping the landscape for the coming years.
