The biopharmaceutical sector is poised for a significant increase in merger and acquisition (M&A) activity in 2026, fueled by a revitalized bull market. According to a report released by EY (formerly Ernst & Young) during the 43rd Annual J.P. Morgan Healthcare Conference, the leading 25 biopharmaceutical companies have set aside a staggering $1.6 trillion for dealmaking, up from $1.3 trillion in 2025. This growing financial capacity is expected to translate into both a higher number and greater value of M&A transactions, despite a continuing decline in initial public offerings (IPOs).
The report highlights a 66% year-over-year increase in the value of biopharma M&A deals from January to November 2025, reaching $149 billion compared to $90 billion in 2024. Notably, the total firepower for these transactions rises to $2.1 trillion when including $497 billion from artificial intelligence (AI)-driven applications and other medical technologies.
Market Dynamics and Strategic Shifts
Subin Baral, EY’s global life sciences deals leader, indicated that the M&A surge is indicative of strong industry fundamentals, including rapid innovation across various therapeutic areas. This trend is particularly noticeable in neuroscience, which saw M&A spending soar to $83 billion in 2025, second only to oncology at $146 billion.
Baral stated, “We expect the surge to continue into 2026. The industry fundamentals continue to remain strong.” He emphasized that the focus will be on executing deals that create value and bring new treatments to market swiftly.
Recent M&A announcements have already impacted stock prices. For instance, shares of Ventyx Biosciences surged approximately 37% after Eli Lilly announced its acquisition of the company, which specializes in treatments for autoimmune and neurodegenerative diseases. Similarly, Revolution Medicines saw its stock rise nearly 29% amid reports of potential buyout discussions with AbbVie and Merck & Co., despite denials from AbbVie.
Challenges Ahead for IPO Market
Despite the optimistic outlook for M&A, the IPO market remains sluggish. EY reported that biopharma IPOs totaled $1.755 billion through September 30, 2025, representing a 56% decline from $3.995 billion in 2024. Baral noted that investors are currently favoring more established companies with proven drug candidates, contrasting with the earlier pandemic years when early-stage companies captured significant attention.
Two recent IPOs, including MapLight Therapeutics and Evommune, have shown some potential for revival, but Baral cautioned that a robust comeback is not yet evident. “We think it will be slightly better, but we have not seen enough to suggest that it’s truly rebounding,” he remarked.
The report also highlighted the looming “patent cliff,” whereby numerous blockbuster drugs will lose patent exclusivity, leading to a potential $370 billion sales gap by 2032. This situation is driving biopharma companies to pursue M&A aggressively to mitigate revenue losses.
China’s growing influence in the biopharma landscape is another factor affecting M&A strategies. The country accounted for five of the top ten highest-value M&A deals in 2025, with biopharma firms increasingly attracted to its efficient and cost-effective pathways to commercialization. Baral noted, “We are seeing the bio-bucks that are going into China. It’s almost like 1 in 3 bio-bucks is spent in China.”
Additionally, the integration of AI technology in R&D has surged, with the potential value of AI-related life sciences deals skyrocketing from about $1 billion in 2014 to $49.6 billion by 2025. Despite the enthusiasm for AI, only 32% of analyzed AI-related deals achieved their expected revenue targets.
As the biopharmaceutical industry navigates these complex dynamics, the emphasis remains on executing successful deals and optimizing drug development processes. The coming year will be critical for companies as they strive to leverage their financial resources effectively amidst a challenging IPO market.
