By Christy Santhosh and Sriparna Roy
May 1 (Reuters) - Biotech dealmaking is on pace for a bumper year in 2026, with large drugmakers on an acquisition spree to boost their pipelines ahead of upcoming patent losses.
The surge appears broader and more durable than just a rebound to pre-COVID years, at least three analysts, four investors and a banker told Reuters.
The total biotech M&A deal value in the first quarter has already hit $84 billion, up from $44.4 billion a year earlier, the strongest start
to a year since 2019, when the deals reached $147.7 billion, Dealogic data showed.
While the patent cliff is adding urgency, experts said deep cash reserves, attractive biotech valuations, a wave of newly approved drugs, and growing confidence in navigating regulatory scrutiny were also fueling dealmaking.
If the current pace holds, the total 2026 biopharma M&A value could exceed $250 billion, which would rank second only to 2019 numbers, when mega-mergers such as Bristol Myers Squibb's purchase of Celgene pushed the total to $328 billion, according to a Stifel note last month.
"The combination of strategic urgency, tighter private funding, and an uncertain IPO market has created the perfect environment for accelerated dealmaking," said Patrice Mesnier, founding partner at investment firm Oldenburg Capital Partners.
PATENT CLIFF
Drugmakers are nearing patent cliffs on several top‑selling medicines, including Merck's cancer blockbuster, Keytruda, which generates more than half of the company's revenue and is set to lose exclusivity in 2028.
Peers such as Eli Lilly, Gilead, Bristol Myers Squibb and Pfizer are also set to lose exclusivity on some of their blockbuster drugs.
Over $300 billion of revenue in the sector faces LOEs in the next five years, estimates Eason Hahm, director, biopharma investment banking at William Blair.
Bill Holodnak, founder of advisory firm Occam Global, said buyers were acting out of "anxiety" over their diminishing portfolio. "The pharmaceutical industry is always going to have to come to terms with drugs going generic ... and if they can't invent the drugs themselves, they're going to have to acquire drug candidates on the outside."
Strong balance sheets are giving buyers room to act. GLP-1 sales leader Eli Lilly ended 2025 with more than $7.27 billion in cash and equivalents, making acquisitions easier to justify at board level. The company spent more than $35 billion through April 29 this year, according to Dealogic data.
So far, Eli Lilly, Gilead Sciences and Merck have shelled out the most on acquisitions this year.
"Big pharma ... do not have the luxury of waiting eight, nine, 10 years to build internal pipelines," said Oldenburg's Mesnier. "They are no longer buying optionality. They are buying time."
MID-SIZE DEALS DOMINATE
Recent CEO transitions at GSK and Novo Nordisk have coincided with the companies' more aggressive M&A approach.
Changes in senior development and strategy roles at groups including Bristol Myers Squibb, Gilead and AbbVie have also influenced which deal negotiations should advance and how risk is priced.
Bernstein analysts noted that future global revenue exposed to patent expiry over the next seven years is roughly 2.5 times higher than that in the last 16 years, creating an urgency that will sustain dealmaking activity.
"Especially in the sub-$10 billion size range, we are seeing companies risk-on for M&A," said Ropes & Gray law firm partner Emily Oldshue, who advised Eli Lilly on its purchase of Ajax Therapeutics that was announced on Monday.
"Companies are placing multiple bets and deploying a variety of structures to hedge and spread risks," added Oldshue, who also advised Pfizer, Gilead and Novo Nordisk on recent deals.
AI, BIG DISEASES DRAW BUYERS
Oncology remains a top dealmaking focus for big pharma, with strong interest in immunology, neurology, cardiovascular disease and obesity, as successful drugs in these categories can generate large sales to offset looming patent losses.
Companies using artificial intelligence and machine learning to accelerate drug discovery and improve clinical development are also emerging as preferred targets.
"Because of AI, you're going to be able to develop these things much more quickly," said Mark Kvamme, CEO of the O.H.I.O. Fund, a private fund investment adviser.
(Reporting by Christy Santhosh and Sriparna Roy in Bengaluru, additional reporting by Sabrina Valle in New York; Editing by Shinjini Ganguli)
