Biotech dealmaking is experiencing a significant surge, with total M&A value in the first quarter reaching $84 billion, a substantial increase from $44.4 billion a year prior. This marks the strongest start to a year since 2019, when deals hit $147.7 billion, according to Dealogic data. Experts project that if this pace continues, the total biopharma M&A value for 2026 could exceed $250 billion, potentially making it the second-highest year on record, just behind 2019's $328 billion driven by mega-mergers like Bristol Myers Squibb's acquisition of Celgene.
While the impending "patent cliff" for major drugs such as Merck's Keytruda, which alone accounts for over half of the company's revenue and loses exclusivity in 2028, is a significant driver, it's not the sole factor. Other major pharmaceutical companies like Eli Lilly, Gilead, Bristol Myers Squibb, and Pfizer are also facing patent expirations on blockbuster drugs. Over the next five years, more than $300 billion in sector revenue is at risk due to loss of exclusivity.
Contributing to the acquisition spree are several other key factors. Biotech valuations have become more attractive after a period of depression. Large drugmakers possess deep cash reserves, with Eli Lilly, for instance, holding over $7.27 billion in cash and equivalents at the end of 2025, enabling them to make substantial acquisitions. Furthermore, there's increasing confidence in navigating regulatory scrutiny, and a wave of newly approved drugs is bolstering pipelines. Oncology remains a primary focus for dealmaking, alongside growing interest in immunology, neurology, cardiovascular disease, and obesity. Companies leveraging artificial intelligence and machine learning for drug discovery and development are also emerging as preferred acquisition targets.
