I remember thinking last year that although the science behind the healthcare sector was accelerating like never before, capital markets and M&A trends weren’t yet growing in the same dynamic manner.
Now, as we approach the 17th annual Jefferies Global Healthcare Conference, the gap is rapidly closing. I wanted to share five thoughts on why that’s happening.
Biopharma is in the early stages of something big, not the late innings.
The most important headline: deal value in the first half of 2026 already equaled the total deal value for 2025.
This isn’t just a temporary spike. It suggests that large-cap pharma is investing heavily in pipeline-driven biotech companies. Part of this trend is driven by big companies’ constant pursuit of growth. But another factor is that the science funded during the COVID years, when ample capital flowed into biotech through a wave of IPOs, has now reached clinical maturity. Many companies faced setbacks along the way, but those that survived are now at a stage that genuinely excites large-cap acquirers. This is reflected in the numbers.
We are not at the end of the cycle. We are still in the early innings, with a lot more M&A and IPOs to come.
Specialty pharma in the U.S. is waking up again, and this time the deals look nothing like those that defined the industry years ago.
The U.S. specialty pharma market spent most of the last eight years in the penalty box. Companies like Valeant and Endo built growth through leverage and price increases. This model collapsed when political scrutiny and competition caught up. The European specialty pharma market fared better because its companies pursued a different strategic direction during that stretch and therefore remained very active in M&A, while the U.S. was relatively quiet.
The U.S. is now reemerging with deals that look completely different in character. For example, Jefferies advised Sun Pharmaceuticals – an Indian company focused on dermatology, oncology, ophthalmology, and a wide range of other disease areas – on its $11.75 billion acquisition of Organon. Organon has concentrated its efforts on women’s health and biosimilars. It was the largest overseas transaction an Indian pharma company has ever done and fit strongly with Sun’s ambitions to shift increasingly into specialty pharma.
Jefferies advised MannKind in 2025 on the acquisition of a smaller specialty pharma company, scPharmaceuticals, which fit with MannKind’s deep expertise in drug-device combinations. MannKind was well positioned to evaluate scPharmaceuticals’ lead pipeline asset, which has since been approved and launched. More recently, we advised on the combination of Indivior and Supernus to create the leading CNS-focused specialty pharma company in the U.S.
A pattern is emerging: deals are being done for strategic, long-term reasons, not as a result of short-term financial engineering. This healthy, strategic M&A will drive increased investor appreciation and help further accelerate such transactions.
On AI: We are not at the iPhone moment yet, but some bottom-line wins are real and not where you’d expect.
Drug discovery gets most of the AI headlines, but measurable gains are showing up in pharma services, manufacturing, and commercialization.
At a CDMO summit we hosted recently, one CEO described feeding routine pharmaceutical production monitoring videos into an AI system that hadn’t been told what to look for. The system identified a piston beginning to overheat well before it failed. This prevented days of lost drug production because the piston was replaced before a failure could cause significant damage. Nobody programmed that specific insight. The AI found it on its own in the company’s data.
That’s the kind of unglamorous, high-value application we expect to hear more about. On the commercialization side, similar gains are emerging in how companies structure communications and process data. Companies are still scratching the surface, but their efforts are already producing real profits.
China’s scientific rise is reshaping how Western biotechs think about competition.
Consider this statistic: $92 billion in licensing deals involved Chinese-originated assets in just the first six months of this year. Despite political headwinds, the science emerging from China is compelling enough that global partners are lining up. In part, this is because Chinese biotechs cannot commercialize everything themselves and need partners.
Antibody-drug conjugates (ADCs) are the clearest example. Development activity there is off the charts.
I recently spoke with a venture investor about a promising European ADC opportunity, and his hesitation wasn’t about the science. He was concerned about competing against something like 20 Chinese biotechs that are moving faster in the same space, backed by heavy state funding or financial markets flush with growth capital. That is certainly a new dynamic for Western biotechs to reckon with.
Where is the M&A money going?
I am often asked whether M&A money recycles back into early-stage science or pools at the top. In the first half of 2026, roughly two-thirds of all venture investment rounds went to companies that already had a drug in human clinical testing — a real skew toward more mature, later-stage biotechs.
Yet this doesn’t tell the full story. Most of the capital behind these biotech targets is held by specialist investors who invest only in biotech. When one of their portfolio companies gets acquired by a larger-cap pharma company, they get paid out on their ownership. That money goes back into the sector, into new biotech opportunities, not into consumer goods or industrials.
Because it typically takes nine to twelve months between a deal’s announcement and its completion, most of the capital from this extraordinary M&A activity has not yet re-entered the system. The first dollars naturally go to the most proven, advanced companies. The second and third tiers follow once those leaders are funded, and we are already seeing that capital trickle down into stronger IPOs and spread to a broader set of biotech pipeline companies.
None of these trends are slowing down. Together, they make this one of the most exciting times I’ve ever seen in the healthcare industry. Science is advancing rapidly, deal sizes are growing, and the capital markets infrastructure is maturing. I look forward to digging into it all at our Global Healthcare Conference in London this November.
