Why 2026 will be a blockbuster year for biotech M&A
Big pharma has emerged from its 2025 paralysis with plenty of firepower
Drug companies have caught the dealmaking bug. Big recent transactions in the pharmaceuticals industry include Novartis’s $12bn acquisition of Avidity Biosciences, Pfizer’s $10bn bid for Metsera and on Monday Gilead Sciences’ agreement to buy blood cancer specialist Arcellx for up to $7.8bn. From the way the market is shaping up, that’s only the beginning.
There is lots of pent-up demand. Company bosses spent much of 2025 paralysed by the threat of pharma tariffs and unsure of how far the White House would push them to give US patients the lower prices available elsewhere. Most of the action happened after the fog had cleared: fourth-quarter biopharma mergers and acquisitions nearly hit $95bn, according to Biomedtracker. If that level sticks, 2026 will be the best year in the past decade.
Big pharma has emerged from its stasis with plenty of firepower. If giants in the sector were happy to lift their leverage to twice their annual ebitda, still a fairly conservative level, it would free up $38bn in spending capacity for Merck & Co, $16bn for AbbVie and $56bn for Eli Lilly, on Barclays’ estimates. And they might feel freer to spend, since the financial impact of the pricing agreements President Donald Trump struck with 17 pharma companies is less onerous than the market initially feared.
Deals are likely to get bigger because companies are getting bigger. The XBI Biotech Index has climbed more than two-fifths in the past year, taking it to levels last seen in late 2021. And big drugmakers’ so-called patent cliff is getting closer: Merck’s Keytruda, responsible for roughly half its revenue, loses exclusivity as early as 2028. Patent expiries across the global pharma industry threaten an estimated $61bn in sales a year between now and 2030, on Bernstein estimates. That’s a major incentive to go shopping.
Drugmakers buy promising drugs at all stages of development, in particular sourcing earlier-stage products from Chinese biotechs that run cheaper trials. But to the extent that they are seeking to replace evaporating near-term revenue, they will have to go for more expensive biotechs with drugs almost ready for market.
The companies themselves are not being shy about their renewed appetite. At last month’s JPMorgan Healthcare conference, Merck said it was seeking deals in the “multi tens of billion-dollar” range. Last year was the starter dose of dealmaking; this year may bring the full course of treatment.