With a revived bull market allowing biopharma giants to set aside more capital for merger-and-acquisition (M&A) deals over the past year, 2026 will likely see an increase in the number as well as dollar value of such transactions, according to a report released to coincide with the 43rd Annual J.P. Morgan Healthcare Conference.
But the M&A surge will not significantly lift initial public offerings (IPOs) out of the doldrums.
EY—the professional services firm once known as Ernst & Young—reported a 23% jump in the amount of capital or “firepower” set aside for dealmaking by the top 25 biopharmas, to $1.6 trillion from $1.3 trillion a year ago. The extra firepower fueled a roughly 66% leap year-over-year in the value of biopharma M&A deals during 2025 through November 30, to $149 billion from $90 billion a year earlier, despite a 9% drop in the volume of deals to 76 from 94 in 2024.
The firepower amount balloons to $2.1 trillion when $497 billion in firepower is added from artificial intelligence (AI)-enabled applications, diagnostics, and other “medtech” companies.
For biopharmas, the extra firepower reflects the increased capital available to buyers as their stock prices rise, thereby raising their market capitalization (share price multiplied by the number of outstanding shares). During 2026, the flow of M&A deals will strengthen into a steady stream, if not a flood, despite a still-sluggish market for initial public offerings (IPOs), Subin Baral, EY global life sciences deals leader, told GEN.
“We expect the surge to continue into 2026,” Baral said. “The industry fundamentals continue to remain strong.”
Those strong fundamentals include a brisk and quickening pace of innovation that has seen breakthroughs in clinical modalities, technology platforms, and therapeutic areas beyond oncology—particularly in neuroscience, which surged in dollar value of M&A spending during 2025 to $83 billion, second to oncology ($146 billion) and just above immunology and inflammation ($82 billion).
“We believe the market leaders will seize on those opportunities and translate those into medicines and products quickly for the patient,” Baral added. “What that means is execution is going to be front and center on a lot of this deal-making. Executing deals to create value, to take products to market—to patients—that is going to be a large focus, as companies start executing on deals that were done in ‘25 and continue to do deals in ‘26.”
Driving stock movements
M&A figured promptly in some of this past week’s significant stock movements: A handful of public companies saw their stock prices surge either because they agreed to be acquired by biopharma giants, or because they were the center of takeover talk by investors and other market watchers.
Ventyx Biosciences (NASDAQ: VTYX) stock jumped about 37% Wednesday after Eli Lilly (NYSE: LLY) agreed to acquire the developer of autoimmune, inflammatory, and neurodegenerative disease drugs, from $10.05 to $13.73.
Revolution Medicines (NASDAQ: RVMD) shares ballooned nearly 29% from $79.85 to $102.71 after The Wall Street Journal reported that the developer of RAS-addicted cancer therapies was close to a deal to be bought out by AbbVie (NYSE: ABBV)—a story that the pharma giant flatly denied. Revolution rose another 5% Thursday to $107.39 on a Financial Times report that Merck & Co. (NYSE: MRK) was in talks to buy the company.
Merck shares increased 2% from $108.60 to $110.99, AbbVie shares rose 5% from $223.93 to $233.42, while Lilly inched up 0.5% from the day’s closing price of $1,108.09 to $1,113.09 in trading after hours, when it confirmed the Ventyx deal.
Also M&A-related: Amgen (NASDAQ: AMGN) shares climbed 6.5% over two days, from $320.72 Monday to $341.64 Wednesday, after it announced it was acquiring privately held Dark Blue Therapeutics, which develops small molecule-targeted protein degraders to treat cancer.
In addition to innovation, the current M&A surge is being driven in part by the scramble among biopharma giants to recoup the billions of dollars in sales set to disappear as they lose patent exclusivity on numerous blockbuster drugs, what the industry calls the “patent cliff.” A recent GEN A-List found that the top 20 drugs heading for the patent cliff between 2026 and 2029 accounted for a combined $176.442 billion in 2024 sales—75% of the $236 billion in annual sales set to disappear with the loss of exclusivity.
The patent cliff explains a growing gap between EY’s sales forecasts for the top 25 biopharmas and the forecasts of the companies themselves. That gap is projected to reach $100 billion in sales by 2028, expanding to $370 billion by 2032. The companies’ forecasts also exceed those of analysts studied by EY, more than half of whom expressed neutral to negative sentiment on the top 15 bipopharmas’ pipeline updates, while more than 40% of analysts were negative on the companies’ M&A and partnership prospects.
China, AI driving M&A
Besides the patent cliff, Baral cited two other growing factors in M&A transactions.
One is China’s emergence as a biopharma superpower—“the new hotbed of innovation,” EY declared in the Firepower report—accounting in 2025 for five of last year’s 10 highest-value M&A deals and 34% of total alliance investment from U.S. and European biopharmas, more than eight times the 4% reported in 2020. Those biopharmas are increasingly attracted to China’s faster, lower-cost pathway from research and development (R&D) to global commercialization, representing a significant opportunity for companies seeking to diversify and accelerate pipeline development, according to the report.
“We are seeing the bio-bucks that are going into China. It’s almost like 1 in 3 bio-bucks is spent in China,” Baral said. “Largely, we are seeing OUS [outside the United States] and particularly European companies doing those deals, but nevertheless it is very clear that the role of China in the innovation of new therapies, new modalities, continues to be there, and companies will continue to find ways to do deals in China.”
The investment surge is expected to continue despite occasional signals from Washington and Brussels about enacting potential limits on Chinese biopharmas’ activity, Baral said.
The other factor driving M&A is the growth and increasing reach of AI as biopharmas scramble to optimize their R&D and commercialization efforts. The EY report highlighted a 256% increase, from about $1 billion to $49.6 billion, between 2014 and 2025 in the potential value of life sciences deals aimed at accessing AI technology platforms.
While AI is increasingly central to accelerating and optimizing the entire M&A deal cycle, from identifying targets to integrating new assets, only 32% or 71 of 225 AI-related deals analyzed by EY achieved at least 100% of their expected revenue targets, with higher success rates for acquisitions in therapeutic areas where the acquiring company was already active.
Predominantly, the biopharma industry has directed its attention toward the potential for AI to reduce the time and cost of developing new drugs. Yet greater near-term opportunities may lie in the use of AI to improve the dealmaking process itself, EY observed. “Increasingly, AI platforms are now rewriting the rules of dealmaking itself, giving companies the tools to identify and execute deals rapidly and efficiently.”
No IPO comeback likely
The M&A surge is unlikely to spark a resurgence in the IPO market, Baral said, as investors continue gravitating to more mature companies with de-risked drug candidates in established therapeutic areas like cancer—compared with the COVID-19 years when investors flocked to earlier stage companies in a variety of disease specialties.
Biopharmas carried out IPOs valued at a total of $1.755 billion through September 30, according to EY—a 56% plunge from the $3.995 billion in offerings completed in all of 2024. Since October, two other companies have gone public: MapLight Therapeutics (NASDAQ: MPLT) raised $251 million with its stock trading around the $17 per share IPO price, while Evommune (NASDAQ: EVMN) raised $150 million and traded mostly above its IPO share price of $16.
“We think it will be slightly better, but we have not seen enough to suggest that it’s truly rebounding,” Baral said, despite knowing of companies—which he would not identify—that are preparing for the IPO market to open up.
So far this year, two companies have fueled talk about a possible comeback for IPOs. AI drug developer Insilico Medicines (Hong Kong: 3696) raised HKD 2.277 billion (about $292.3 million) on the Hong Kong Exchange on December 30 by offering 94.69 million shares at HKD 24.05 ($3.08) each. Insilico’s shares since then have nearly doubled, catapulting 95% to an even HKD $47 ($6.02) at the close of trading Friday.
And on January 5, news reports revealed Aktis Oncology’s plan to go public by selling 11.775 million shares priced between $16-$18, according to an amended Form S-1 filed that day. Depending on the price, proceeds from the IPO would range from $188.4 million to $211.95 million for the developer of targeted radiopharmaceuticals to treat cancer.
At the $17 midpoint of the price range, the IPO is expected to generate between approximately $181.7 million and $209.6 million in net proceeds, most of which ($140 million-$150 million) is intended for advancing Aktis’ ongoing Phase Ib trial (NCT07020117) of [225Ac]Ac-AKY-1189 for Nectin-4 expressing tumors, while about $70 million to $80 million is committed toward advancing [225Ac]Ac-AKY-2519 into a Phase Ib clinical trial for B7-H3 expressing tumors. The rest will fund working capital and other general corporate purposes, Aktis added.
Also unlikely to improve in 2026 is the early-stage venture capital (VC) market, as investors remain focused on later-stage companies seeking larger amounts of capital. Between Q1–Q3 2025, venture investors awarded a total of $16.103 billion in VC, down 35% from $24.701 billion in all of 2024.
Leaders and laggards
- Alumis (NASDAQ: ALMS) shares nearly doubled, rocketing 95% from $8.31 to $16.23 Tuesday after the company announced that it plans to submit a New Drug Application to the FDA in the second half of 2026 for its lead candidate envudeucitinib after reading out positive topline data from its Phase III ONWARD1 (NCT06586112) and ONWARD2 (NCT06588738) trials assessing, the next-generation, highly selective oral tyrosine kinase 2 (TYK2) inhibitor in moderate-to-severe plaque psoriasis. Alumis said approximately 65% of patients in the two trials achieved 90% improvement in their Psoriasis Area and Severity Index (PASI) score, and more than 40% achieved PASI 100 at Week 24, on average. Shares rose a combined 12% on Wednesday and Thursday, when the stock closed at $18.18.
- Zenas BioPharma (NASDAQ: ZBIO) shares nosedived 52% from $34.50 to $16.51 on January 5 after the company announced positive results from the Phase III INDIGO trial (NCT05662241) of obexelimab in Immunoglobulin G4-Related Disease (IgG4-RD)—results that disappointed investors. Zenas said obexelimab met the trial’s primary endpoint by showing a highly statistically significant and clinically meaningful 56% reduction in the risk of IgG4-RD flare compared to placebo during the 52-week randomized placebo-controlled period. The result fell short of the 65% reduction that Jefferies analyst Roger Song, MD, wrote was needed for obexelimab to be “commercially viable,” let alone the 87% reduction achieved by Amgen’s marketed IgG4-RD drug Uplizna® (inebilizumab-cdon), which won FDA approval in April 2025.
