The biopharmaceutical sector is poised for a significant increase in merger and acquisition (M&A) activity in 2026, driven by a revitalized bull market. According to a recent report from EY, the professional services firm formerly known as Ernst & Young, the total value of M&A transactions in the biopharma industry is expected to rise sharply, while the initial public offering (IPO) market is likely to remain sluggish.
The report, released to coincide with the 43rd Annual J.P. Morgan Healthcare Conference, highlights a 23% increase in capital allocated for M&A by the top 25 biopharmaceutical companies. This figure has risen to $1.6 trillion, up from $1.3 trillion the previous year. Despite a 9% decline in the number of deals from 94 in 2024 to 76 in 2025, the total value of biopharma M&A transactions surged by nearly 66%, reaching $149 billion from $90 billion.
The influx of capital is not limited to traditional biopharma. When including the $497 billion in firepower from artificial intelligence (AI)-enabled applications and diagnostics, the total for the sector expands to approximately $2.1 trillion. This uptick reflects rising stock prices and market capitalizations, creating an environment ripe for deal-making.
Market Trends and Future Outlook
Subin Baral, the global life sciences deals leader at EY, indicated that the M&A landscape will transform into a steady stream of deals in 2026. “We expect the surge to continue into 2026,” said Baral. “The industry fundamentals continue to remain strong.” Key drivers of this momentum include rapid advancements in innovation across various therapeutic areas, particularly in neuroscience, which saw M&A spending reach $83 billion in 2025, trailing only oncology at $146 billion.
Baral noted that the rapid execution of deals will be crucial. “Execution is going to be front and center on a lot of this deal-making,” he explained, emphasizing the need for companies to deliver new medicines to patients efficiently.
The stock market has already reacted to recent M&A announcements. For instance, Ventyx Biosciences (NASDAQ: VTYX) experienced a 37% increase in stock price following Eli Lilly’s (NYSE: LLY) agreement to acquire the company for $13.73 per share. Similarly, Revolution Medicines (NASDAQ: RVMD) shares soared nearly 29% amid speculation of its acquisition by AbbVie (NYSE: ABBV), despite AbbVie’s denial of the reports.
Challenges in the IPO Market
Despite the surge in M&A activity, the IPO market remains stagnant. According to EY, biopharmaceutical companies completed IPOs worth a total of $1.755 billion through September 30, representing a 56% drop from $3.995 billion in 2024. Baral noted, “We think it will be slightly better, but we have not seen enough to suggest that it’s truly rebounding.”
Two companies recently attempted to capitalize on the IPO market. Insilico Medicines raised approximately $292.3 million on the Hong Kong Exchange in December 2025, while Aktis Oncology is planning an IPO that could yield between $188.4 million and $211.95 million for its cancer treatment initiatives.
The ongoing challenges in the IPO market are partly attributed to investor preferences shifting towards more established companies with less risk. Investors are increasingly cautious, focusing on biopharmas with de-risked drug candidates in well-established therapeutic areas such as oncology.
In summary, while the biopharmaceutical sector anticipates a vibrant M&A landscape in 2026, the IPO market is likely to continue facing headwinds. The combination of rising capital reserves and strategic innovations positions the industry for substantial growth, but potential investors may remain hesitant as they await signs of recovery in the public offerings space.
