Biotech investment firms are predicting a recovery in 2026 as mergers and acquisitions (M&A) activity increases. Representatives from Sofinnova Investments and Ally Bridge Group told BioSpace that the sector is moving past its recent downturn, often referred to as a “nuclear financial winter.” They noted growing investor interest in therapeutic areas beyond oncology and inflammation and immunology, while also highlighting the influence of competition from Chinese biotech companies.
Maha Katabi, general partner at Sofinnova Investments, and Andrew Lam, managing director and head of Biotech Private Equity at Ally Bridge Group, based in New York and Hong Kong, cited several large M&A deals in late 2025 as evidence of renewed momentum. One example is Pfizer’s $10 billion acquisition of Metsera for its obesity drug pipeline. The volume of M&A activity in 2025 has approached levels seen in late 2023.
At that time, AbbVie acquired ImmunoGen for about $10.1 billion to obtain its ovarian cancer treatment Elahere. In December 2023, Pfizer completed its $43 billion purchase of Seagen—the largest sector deal in three years.
According to Lam, these transactions have helped replenish big pharmaceutical company revenues. He said that 2026 could be a significant year for biopharma M&A as companies look to acquire late-stage assets amid looming patent expirations. “Big Pharma has a fear of missing out on the M&A frenzy,” Lam said.
Lam also stated that the improved market conditions have eased low valuations and discounts within biotech. Katabi added that this uptick has led syndicates to consider fully funding programs through larger private financing rounds. She noted an increased focus on operational execution as more companies remain private longer.
While initial public offerings (IPOs) are still being considered for long-term industry health, Lam emphasized they require broader pools of public capital.
Katabi pointed out that macroeconomic factors such as favorable interest rates continue to support equity investment over other asset classes. She explained: “We’re working closely with management teams to continue to create options around IPOs or M&A.” Katabi also mentioned competition from health technology and artificial intelligence sectors for both financial returns and patient impact.
Company leadership remains an important factor for investors. Katabi stressed the need for nimble management able to adapt clinical trials quickly under changing regulations. Lam added: “A company should also know its value inflection points and engage in solid storytelling.”
The rapid growth of China’s pharmaceutical sector is another consideration for investors. Lam described China as both an opportunity and a threat to U.S innovation, noting record multinational licensing deals in 2025. He said Western venture capitalists have formed new companies around Chinese clinical assets.
Katabi highlighted the efficiency advantages of running clinical trials in China—about three times faster at one-third the cost compared with U.S.-based studies—which is especially appealing for early-stage data collection.
Both Katabi and Lam agreed that popular investment areas include obesity treatments, metabolic diseases, inflammation & immunology (I&I), and oncology. However, they see potential opportunities emerging in ophthalmology, respiratory disease, neuromuscular disorders, neurodegeneration using siRNA technologies, brain shuttles, and lipid nanoparticles.
Lam referenced Merck’s acquisition of Verona Pharma—focusing on Ohtuvayre COPD maintenance therapy—as an example of renewed attention on respiratory treatments. He also noted positive developments in cell and gene therapy such as UniQure’s results for Huntington’s disease research: “Modalities such as T‑regulatory cells, and epigenetic editing are the ‘next chapter’ for investment,” he said.
Both investors agreed there is strong demand for innovation globally; competition from Chinese firms continues to push U.S.-based players toward deeper scientific advances needed to attract capital.
These issues will be explored further during a Denatured podcast episode scheduled for January 8.
