A new report from EY indicates that the merger-and-acquisition (M&A) landscape in the biopharma sector is set for significant growth in 2026, while initial public offerings (IPOs) are expected to remain sluggish. This assessment was unveiled during the 43rd Annual J.P. Morgan Healthcare Conference. With a revitalized bull market enabling major biopharma companies to allocate more capital towards M&A activities, the value of these transactions is projected to rise substantially.
According to EY, the top 25 biopharmaceutical companies have increased their available capital for deal-making, known as “firepower,” by 23% over the past year, amounting to $1.6 trillion. This increase is up from $1.3 trillion in 2025. The report highlights that M&A activity surged in 2025, with a remarkable 66% increase in total deal value, reaching $149 billion compared to $90 billion in 2024, despite a 9% decline in the number of deals, which fell from 94 to 76.
Factors Driving the Surge in M&A
The report attributes the growth in M&A activity to several factors, including higher stock prices that bolster market capitalizations. Subin Baral, EY’s global life sciences deals leader, noted that the flow of M&A transactions is expected to become a steady stream throughout 2026. “We expect the surge to continue into 2026. The industry fundamentals continue to remain strong,” Baral stated.
The report emphasizes the rapid pace of innovation within the biopharma sector, particularly in neuroscience and oncology. Notably, M&A spending in neuroscience reached $83 billion in 2025, trailing only oncology, which accounted for $146 billion. Baral added, “Market leaders will seize on those opportunities and translate those into medicines and products quickly for the patient.”
Stock Market Reactions
Recent M&A announcements have led to notable stock price movements among various biopharma companies. For instance, shares of Ventyx Biosciences (NASDAQ: VTYX) surged by approximately 37% following Eli Lilly’s (NYSE: LLY) decision to acquire the company. Ventyx shares rose from $10.05 to $13.73. Similarly, Revolution Medicines (NASDAQ: RVMD) saw its stock climb nearly 29% after speculation about a potential acquisition by AbbVie (NYSE: ABBV), despite AbbVie denying the rumors.
Amgen (NASDAQ: AMGN) also experienced a 6.5% increase in its share price after announcing the acquisition of Dark Blue Therapeutics. This trend underscores the direct impact that M&A activity has on the stock market.
The report from EY suggests that the current M&A wave is being fueled by the impending patent cliff, where biopharma giants face significant revenue losses due to the expiration of patents on blockbuster drugs. According to a recent analysis, the top 20 drugs approaching the patent cliff are projected to account for $176.442 billion in sales by 2024, which represents 75% of the $236 billion in annual sales that will be lost.
AI and Global Market Influence
In addition to the patent cliff, the rise of artificial intelligence (AI) is reshaping the M&A landscape. The EY report identified a staggering 256% increase in the potential value of life sciences deals involving AI technology platforms, from approximately $1 billion in 2014 to $49.6 billion in 2025. Companies are leveraging AI to streamline R&D efforts and enhance the deal-making process.
Baral noted that “increasingly, AI platforms are now rewriting the rules of deal-making itself,” providing companies with tools to identify and execute deals more efficiently.
Despite the positive outlook for M&A activity, Baral expressed skepticism regarding a recovery in the IPO market. Biopharma companies raised a total of $1.755 billion through IPOs by September 30, 2025, marking a 56% decline from $3.995 billion in 2024. Recent IPOs, including those by MapLight Therapeutics (NASDAQ: MPLT) and Evommune (NASDAQ: EVMN), have not generated sufficient momentum to indicate a broader resurgence.
While some companies are preparing for potential IPOs, the overall sentiment remains cautious. The current investment climate is favoring more established companies with lower-risk drug candidates, contrasting sharply with the surge in interest seen during the COVID-19 pandemic.
Overall, the EY report paints a picture of a dynamic biopharma sector poised for substantial M&A activity, while the IPO market continues to face challenges. As innovation and strategic acquisitions shape the landscape, industry leaders are likely to capitalize on emerging opportunities, further enhancing their market positions.
