Biopharma M&A Activity Set to Surge in 2026, IPOs Remain Weak

The biopharmaceutical sector is poised for a significant uptick in merger-and-acquisition (M&A) activity in 2026, driven by a robust bull market that allows major companies to allocate more resources for these transactions. According to a report released during the 43rd Annual J.P. Morgan Healthcare Conference, while M&A deals are expected to flourish, initial public offerings (IPOs) will likely continue to struggle.

The findings from EY, formerly known as Ernst & Young, reveal that the top 25 biopharma companies have set aside an impressive $1.6 trillion for potential deals, up from $1.3 trillion the previous year. This surge in “firepower” has led to a remarkable 66% increase in the total value of biopharma M&A transactions, which reached $149 billion from January to November 2025. Interestingly, this occurred alongside a 9% decline in the number of deals, which fell from 94 in 2024 to 76 last year.

Increasing Deal Value Amid Sluggish IPO Market

The total amount of available capital for biopharma M&A is projected to rise further to $2.1 trillion when factoring in an additional $497 billion from artificial intelligence (AI)-enabled applications, diagnostics, and other medical technology companies. The increased capital availability is largely attributed to rising stock prices, which enhance market capitalization for these firms.

Subin Baral, global life sciences deals leader at EY, indicated that the M&A environment is expected to transition into a steady stream of transactions in 2026, even as the IPO market remains stagnant. “We expect the surge to continue into 2026,” Baral stated, emphasizing that the fundamentals of the industry remain strong.

The report highlights a rapid pace of innovation in clinical modalities and therapeutic areas, particularly in neuroscience, which saw M&A spending soar to $83 billion in 2025. This is second only to oncology, which accounted for $146 billion in M&A activity.

Market Movements Driven by M&A Activity

Recent stock movements reflect the significant impact of M&A announcements. For instance, shares of Ventyx Biosciences (NASDAQ: VTYX) surged by approximately 37% after Eli Lilly (NYSE: LLY) announced its intention to acquire the company. Similarly, Revolution Medicines (NASDAQ: RVMD) experienced a nearly 29% increase in its stock price amid speculation of a potential buyout by AbbVie (NYSE: ABBV), despite AbbVie’s denial of such talks.

Merck & Co. (NYSE: MRK) shares rose by 2% following reports of its interest in Revolution Medicines, while Amgen (NASDAQ: AMGN) saw its stock climb 6.5% after announcing the acquisition of Dark Blue Therapeutics.

The ongoing M&A surge is also fueled by biopharma companies aiming to recover losses from expiring patents on blockbuster drugs, commonly referred to as the “patent cliff.” Recent analysis indicates that the top 20 drugs facing patent expiration between 2026 and 2029 accounted for $176.442 billion in 2024 sales, representing a staggering 75% of the annual sales set to disappear due to loss of exclusivity.

Baral points out that this patent cliff, combined with the emergence of China as a biopharma powerhouse, is reshaping the M&A landscape. In 2025, China accounted for five of the ten highest-value M&A deals and approximately 34% of total alliance investments from U.S. and European biopharmas, a dramatic increase from just 4% in 2020.

Despite these bullish trends in M&A, the IPO market remains a different story. According to EY, biopharma IPOs totaled $1.755 billion through September 30, 2025, marking a 56% decrease from the $3.995 billion raised throughout 2024.

While there are signs of potential recovery, with recent IPOs from companies like MapLight Therapeutics and Evommune, Baral remains cautious. “We think it will be slightly better, but we have not seen enough to suggest that it’s truly rebounding,” he said.

In conclusion, while M&A activity in the biopharma sector is set to surge in 2026, the IPO market is unlikely to experience a significant resurgence, as investor preferences continue to lean towards more mature companies with established products.