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Healthcare executives gather for their big annual conference in San Francisco on Monday as the sector is flush with cash and set for a deals spree as patents on drugs worth almost 12 per cent of the industry’s revenues expire in the years ahead.
The JPMorgan healthcare conference takes place as uncertainty recedes over President Donald Trump’s trade wars, drug pricing policy and the leadership of key regulators such as the US Food and Drug Administration. In response, the S&P biotech index, known as the XBI, has surged to a four-year high, outperforming the wider index.
In addition, drugs that contribute about $180bn of revenue a year are set to go off patent in 2027 and 2028, representing almost 12 per cent of the global market, according to research firm Evaluate Pharma. More than $40bn of sales are expected to lose patent protection this year, Evaluate has estimated.
“The need to take big swings becomes more pressing,” said Jeremy Meilman, head of healthcare investment banking at JPMorgan. “Several of the large-cap pharmaceutical companies are shopping around for strong assets and a number have taken action but still have more firepower. This contributes to our optimism for 2026.”
Several large drugmakers have performed well, and weight-loss drug giant Eli Lilly in recent months became the first pharmaceutical group to pass a $1tn market capitalisation, joining a gilded rank historically reserved only for Big Tech.
Merck, which is facing loss of patent exclusivity on its $30bn-a-year mega-blockbuster Keytruda, is in talks to buy early-stage cancer drugmaker Revolution Medicines, the FT revealed this week. If a deal materialises, Revolution Medicines could come with a price tag of at least $28bn, making it the biggest pre-commercial biotech deal ever and largest healthcare deal in at least two years.
Earlier this week, Eli Lilly struck a $1.2bn deal to buy autoimmune disease-focused biotech Ventyx Biosciences.
Patent expirations are catching up with pharma groups across the board. A popular blood-thinner made by Pfizer and Bristol Myers Squibb is losing patent coverage in major European markets in the second half of this year and in the US in 2028. BMS could lose up to 11.5 per cent of its revenue from 2026 to 2030 due to patent expirations, JPMorgan has estimated.
“We are moving closer to the cliffs for the guys with the highest need,” said Rod Wong, chief investment officer at RTW Investments. For M&A in 2026, “I would expect it to be more competitive,” he added.
The tail-end of last year brought several intense battles between pharma groups over coveted biotech assets. Pfizer and Novo Nordisk squared off in a public bidding war for weight loss biotech Metsera, with Pfizer prevailing by agreeing to pay more than $10bn.
Before selling to Merck in November for $9.2bn, flu-prevention biotech Cidara Therapeutics received bids from three other companies, according to regulatory filings.
“Everybody needs to transact in a meaningful way,” said Siddhart Nahata, global head of healthcare investment banking at Morgan Stanley. “There’s enough interesting biotechs out there that we could get past the M&A volumes of last year.”
Spying an opportunity, investment banks are redoubling their efforts to fight for advisory roles in healthcare M&A. Goldman Sachs this year vaulted to the top of the ranking for the total dollar value of healthcare deals. Goldman has started to chip away at boutique bank Centerview Partners’ dominance in winning lucrative roles selling biotechs. But Centerview retained its crown as the bank with the highest fees generated from the healthcare sector, according to LSEG data.
A turning point for the sector arrived in September when Pfizer became the first drug company to strike a drug pricing agreement with the Trump administration. Pfizer agreed to cut certain drug prices between 50 per cent and 85 per cent.
More than a dozen other pharmaceutical companies followed Pfizer in announcing deals with Trump by the end of last year. Now, bankers have said the pharma giants have certainty about US drug pricing policy that did not exist in early 2025. This certainty could further unlock M&A activity in the months ahead, they said.
A more favourable antitrust environment also means Big Pharma could turn up the dial on bigger takeovers, after last year produced four deals worth more than $10bn.
“Under the previous administration, Big Pharma doing a big deal provoked knee-jerk scrutiny,” said Jenny Hochenberg, a partner at Freshfields. “People are a lot less anxious about scrutiny over big deals.”
All the talk of bigger deals has even increased speculation that the first Big Pharma consolidation wave in more than a decade could be just around the corner.
“In the past, large-cap consolidation happened during periods of growth challenges, pricing shocks and constraints to the ability to fund R&D,” said David Gluckman, global head of healthcare at Lazard.
“We’ll need to see how the policy environment unfolds.”
