The biopharmaceutical sector is poised for a significant rise in merger and acquisition (M&A) activity in 2026, driven by a revitalized bull market that has allowed major companies to allocate more capital for deals. According to a report by EY, released during the 43rd Annual J.P. Morgan Healthcare Conference, the total value of biopharma M&A transactions is projected to increase substantially, while initial public offerings (IPOs) will remain sluggish.
EY’s analysis highlights a remarkable 23% surge in the capital earmarked for M&A by the top 25 biopharmaceutical companies, with total “firepower” rising to $1.6 trillion from $1.3 trillion in the previous year. This increase has fueled a near 66% year-over-year growth in the value of M&A deals within the sector, reaching $149 billion by November 30, 2025. Interestingly, the number of deals decreased, with 76 transactions reported in 2025 compared to 94 in 2024.
Adding to this momentum, the total firepower expands to $2.1 trillion when including $497 billion from artificial intelligence (AI) applications and medtech companies. This financial strength reflects the increasing market capitalizations of biopharma firms as their stock prices rise.
Strong Fundamentals Driving M&A
Subin Baral, EY’s global life sciences deals leader, emphasized that the underlying fundamentals of the industry remain robust, fostering an environment conducive to M&A activity. Baral noted, “We expect the surge to continue into 2026. The industry fundamentals continue to remain strong.”
The report points to rapid advancements in clinical modalities and technology platforms as key factors driving this growth. For example, spending on M&A in the neuroscience sector soared to $83 billion in 2025, second only to oncology at $146 billion. Baral mentioned that market leaders are expected to leverage these opportunities to swiftly translate innovations into patient treatments.
M&A activity has already influenced stock movements for several public companies. For instance, shares of Ventyx Biosciences (NASDAQ: VTYX) surged approximately 37% after Eli Lilly (NYSE: LLY) announced its acquisition of the company. Similarly, Revolution Medicines (NASDAQ: RVMD) saw its stock rise nearly 29% amid speculation of a buyout, although AbbVie (NYSE: ABBV) later denied such reports.
Challenges for IPOs Amid M&A Growth
Despite the anticipated M&A boom, the IPO market shows little sign of recovery. EY reported that biopharmaceutical IPOs totaled $1.755 billion through September 30, 2025, marking a 56% decrease from the $3.995 billion recorded in 2024. Baral stated, “We think it will be slightly better, but we have not seen enough to suggest that it’s truly rebounding.”
Recent IPO activity includes MapLight Therapeutics (NASDAQ: MPLT) raising $251 million and Evommune (NASDAQ: EVMN) securing $150 million. Yet, the overall sentiment remains cautious, with investors gravitating towards established companies with de-risked drug candidates.
The trend of declining IPOs correlates with a broader market focus on later-stage biopharma entities, particularly as companies face what is termed the “patent cliff.” This phenomenon refers to the loss of exclusivity on blockbuster drugs, projected to affect sales of $176.442 billion between 2026 and 2029.
Baral highlighted China’s growing role in the biopharma landscape, which has emerged as a “new hotbed of innovation.” In 2025, five of the top ten highest-value M&A deals originated from China, contributing to 34% of total alliance investment from U.S. and European biopharmas.
Moreover, the increasing integration of AI technology into R&D is reshaping the M&A landscape. EY reported a staggering 256% increase in the potential value of life sciences deals focused on AI, from approximately $1 billion to $49.6 billion between 2014 and 2025. Despite this growth, only 32% of AI-related acquisitions achieved their expected revenue targets.
As the biopharma industry continues to navigate these complex dynamics, M&A activity is expected to flourish, while IPOs may struggle to regain their former momentum. The interplay of innovation, financial resources, and evolving market demands will be critical in shaping the sector’s future.
