Pharma M&A Set to Surge in 2026: What to Expect

2025 turned out to be a good year for biotech M&A: after a slow start, the final four months of the year accounted for nearly half of the total deal value. This made 2025 a significantly better deal-making year than 2024. We forecast that this will continue in 2026, with companies such as Merck, Johnson & Johnson, Novartis, Sanofi and Bristol Myers Squibb likely candidates to actively pursue deals. We believe this will amount to 15% growth in both total deal value and the total number of deals, which would amount to nearly 520 deals and a little over $230 billion in deal value. This expectation is based on three factors: first, companies need to replenish their pipelines as branded medicines that bring in $200-250bn in sales will come off patent by 2032. Second, the uncertainty facing the sector in its most profitable market (the US) has eased after deals were struck with many branded pharma companies, giving them clarity on pricing and tariff impact. Third, the Federal Reserve will likely cut rates in 2026, meaning a lower cost of capital and an increased appetite for deals in the year to come. Two other potential factors driving deals could be a growing appetite for weight-loss drugs among consumers and pharma companies not wanting to miss out on a growing and lucrative market. Another factor is AI-driven innovation: AI could be fruitful for both the discovery of new medications and accelerating discovery timelines, which may provide more new and promising biotech startups in 2026 and the years to come. Given the looming patent cliff, the overwhelming majority of deals in 2026 are expected to focus on growth and late-stage assets (drugs nearing the end of clinical trials). In the past fifteen years, the percentage of deals focused on growth has more than doubled: from 37% between 2011 and 2024 to 80% between 2020 and 2024. This trend indicates that most pharma companies are comfortable at their current scale and do not need to realise additional synergies, but acquire to replenish pipelines. M&A is an important part of pharmaceutical innovation, as 40% to 50% of industry innovation comes from acquired assets (Evaluate Pharma). We therefore expect growth acquisitions (versus technology acquisitions) to hold steady around 80% in 2026 and beyond. From 2011 to 2024, we saw four deals that exceeded a total deal value of $70bn. Deals of that value do not come around often, but if there are pharma companies with a desire to pursue such a deal, then 2026 and 2027 could be a good time to do so, given the Trump Administration’s favourable view of mega deals in other sectors. The US will remain the most important deal-making market in 2026. In the past decade, the US has seen roughly twice as many deals as Europe at 3.5 to 4.5 times the average deal value (Preqin). We expect similar numbers in 2026. Meanwhile, outlicencing to China will continue to increase as well, despite looming US restrictions, as discussed in another article in this outlook, Hello, Goodbye. Although we do not believe US deal values will decrease, we think investors are not pricing in potential policy headwinds. This often happens as political risk is generally only priced in when laws are implemented. Yet, we think it is worthwhile to discuss three notable risks for the sector. First, price negotiations under the Inflation Reduction Act (IRA) are set to continue, which could limit future profitability. Second, if a recent draft guidance from the FDA is implemented, biosimilars will become easier to launch. If this happens, policymakers gain credible alternatives that justify faster and deeper price intervention in the sector. Third, we have seen Secretary of Health and Human Services Robert F. Kennedy Jr. intervene twice in vaccine recommendations in recent months. If anti-scientific views on health become increasingly commonplace, this is bad for public health, and it could progressively deteriorate the outlook for pockets of the pharmaceutical sector. Despite these risks, 2026 promises to be a good deal-making year in biotech and pharma. There are two big questions regarding M&A in 2026. A potential headwind comes from US policy, as much more is certain than in 2025. Still, price pressures in the US could persist outside most favoured nations, which could dampen profitability. Furthermore, other healthcare policies could increase uncertainty in areas such as vaccines. Will these risks materialise and are they adequately priced in or are investors overly optimistic? AI, on the other hand, is a potential tailwind. We have seen several AI biotech deals in the first weeks of 2026. If 2026 is the year that AI for drug development really takes flight, deal volumes could be much higher than we anticipate.