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A multitude of factors are coming together to bring a big burst in biotech M&A.
The high-profile bidding war between Pfizer and Novo Nordisk over Metsera and its leading weight loss drug candidate shows just how competitive some pockets of the sector have become, as Big Pharma frantically works to fill the looming revenue hole.
Some of the best-selling drugs in the world are facing a loss of exclusivity in key jurisdictions in what the sector calls “the patent cliff.” By 2032, losses of exclusivity for best-selling brands are worth at least $173.9 billion in annual sales, according to CNBC calculations. Estimates vary on the total amount of revenue at risk when factoring in smaller brands, with some analysts putting the number between $200 billion and $350 billion.
That poses a real threat to their makers’ top lines — unless they manage to replenish their pipelines with new, revenue-bearing innovations.
The need for pharma to top up their pipelines coincides with the broader biotech sector coming back to life after years of depressed valuations following a boom in healthcare investing during the Covid-19 pandemic.
M&A in the sector picked up dramatically in September and October 2025, following a terrible start to the year. The lifting of overhangs from Trump’s war on high drug prices for Americans and threats of triple-digit pharma sector tariffs, as well as the beginning of an interest-rate cutting cycle, has further encouraged dealmaking.
Now, companies are facing a situation where they need to fill their pipelines, while also navigating a competitive environment for the best assets.
Filling the revenue hole
The biopharma sector is unique in that companies face a loss of patent for lead assets every decade or so. That lifecycle of assets requires companies to constantly come up with new innovations – or buy those who do.
“Biotech, being the innovation kind of engine of healthcare, is where pharmaceutical companies have come historically to build their biopharma businesses,” Linden Thomson, senior portfolio manager at Candriam, told CNBC.
Pharmaceutical firms, many of which started as chemical companies, typically built their businesses on simpler, small molecule drugs, while biotechs use living organisms to make medicines like antibodies and mRNA. Over time, the distinction between the two has blurred as pharma invested heavily in biotech and many of the drugs on the market today were instead discovered by biotech companies or involved with biotech manufacturing, Thomson said.
The looming patent cliff, which includes the loss of exclusivity on Bristol Myers Squibb’s Eliquis, Merck’s Keytruda, and Novo Nordisk’s Ozempic, is a driving force behind M&A and a key part of many large-cap pharma companies’ business strategy.
According to analysis by healthcare market researcher and consultant Joanna Sadowska, about half of the blockbuster drugs approved between 2014 and 2023 were bought, as opposed to being developed internally. The two most successful drugmakers in terms of the number of blockbusters approved over those years were Eli Lilly and AstraZeneca, which acquired eight and five medicines out of a total of 13, respectively.
European heavyweights GSK and Novartis are among those clear about the need to add to their pipelines through deals. Both are looking for what they call “bolt-on deals” that fit in with their key therapeutic and technology areas.
During an investor event in London in November, Novartis CEO Vasant Narasimhan emphasized the company’s strong cash generation “that really allows us to invest in the business.”
While Novartis doesn’t put a size on these bolt-on deals, having done deals of up to $12 billion, GSK is more specific.
Chris Sheldon, global head of business development at GSK, calls it the “sweet spot”: going after validated biology, often in mid-stage development in the $1 billion to $2 billion range, where the outcome of a drug candidate isn’t yet obvious. Many acquisitions of late-stage assets end up becoming a maths problem, Sheldon told CNBC, particularly if it’s a listed company that has reached fair value.
“BD [Business development] I always describe as a contact sport. If an asset is good enough, there’s multiple suitors,” he added.
Deals can range from partnerships and licensing and royalties agreements to clear-cut buyouts.
“We would do licensing every day of the week versus M&A if we could, because you can manage risk and reward the partner as value is unlocked and risk is discharged,” Sheldon said.
However, an acquisition with a big price tag paid up front may at times be the only option, and it can have some attractive benefits, such as taking total control of the development plans and acquiring talent as well as the molecules. “The reality is actually the seller often dictates that, a lot of people don’t realize that,” Sheldon said.
A competitive environment
As biotech M&A became hot again, November saw arguably the sector’s most dramatic event of the year take place: the public bidding war between Pfizer and Novo Nordisk over clinical-stage weight loss drug maker Metsera, ultimately won by Pfizer in a deal worth up to $10 billion.
It’s rare for bidding to take place in the public eye, said Stefan Loren, managing director at Oppenheimer. “It’s a very public thing to chase a company, and so you have to worry about the reputational damage: A, if you lose; B: if you get too exuberant and go to buy,” he told CNBC.
“That definitely says something about the biotech market and companies wanting to play catch-up,” Loren added. “They are responding to what their situation is, their situation is that they’re about to have a lot of things come off patent.”
[Business development] I always describe as a contact sport. If an asset is good enough, there’s multiple suitors.
Chris Sheldon
Global head of business development at GSK
Typically, pharma shopping sprees tend to last up to a year and a half before pulling back, Loren added.
The GLP-1 market for weight loss drugs has become one of the most competitive segments in global pharma as major players race to secure next-generation assets through both internal development and acquisitions, noted PitchBook researchers in their 2026 Healthcare outlook published early December. More than 120 metabolic assets are currently in development across 60 companies, creating a deep pool of potential M&A targets, they added.
“The high-profile battle between Pfizer and Novo Nordisk for Metsera underscores the escalating strategic urgency in this space,” they said. “We expect competition to intensify as differentiation windows narrow and policy tailwinds expand reimbursement and regulatory support.”
While the obesity space lends itself well to illustrate current competitive dynamics, the biotech boom isn’t confined to one single therapeutic area. Neurology, oncology, immunology, and inflammation are other key areas of activity.
“It’s idiosyncratic what’s popular at any given point,” said Loren. “They [companies] are going for what can fill the pipelines as quickly as possible.”
A boom, dip and another boom
During the Covid-19 pandemic, biotech sailed to the top of investors’ wishlists. Amid increased attention, investors’ optimism, and low interest rates, the sector flourished, valuations skyrocketed, and many biotech companies went public or were bought by larger peers.
As the biopharma industry is a cost-intensive research business, raising money is critical for drug discovery. Early-stage biotechs operate with high stakes, often making them early casualties of a risk-off market like the one following the pandemic boom.
Throughout much of 2025, the Trump administration also clouded the outlook for biopharma with threats of high sector tariffs, cuts to federal health agencies, and lower drug prices. But as companies have made deals with Trump on pricing and the president has made clear that if they invest in U.S. manufacturing, they would be exempt from additional tariffs — two big overhangs for the sector have cleared.
A flurry of good data readouts has also boosted biotech valuations, said Loren. Only a year ago, even good data sent stocks down, he said. “People were using everything as an event just to get out.”
By late spring, the market started to shift and now, investors take good data and run with it. “There’s a point at which these things get so low that at the end of the day, what’s the risk?” Loren said. “And now, when we saw the acceleration of M&A, the good news is that that play became very real.”
More deals in 2026
In 2026, deals could pick up even further, analysts say.
“We see 2026 as providing one of the best investing opportunities we have seen in decades,” the PitchBook analysts said, driven by the clearing of U.S. healthcare policy overhangs and additional rate cuts spurring more speculative investing postures.
Rajesh Kumar, head of European life sciences and healthcare equity research at HSBC, similarly expects a “big ramp up of deal flows” in the year ahead now that the noise around drug pricing has settled.
“The market’s margin expectations beyond [2026] might be a bit more optimistic than it should be, but nonetheless, the companies are deploying capital in the U.S., manufacturing is happening, clarity is there, and that is a great environment for actually doing biotech deals and early stage biotech funding,” he told CNBC’s “Squawk Box Europe.”
Other developments in the pharma sector could make for another year of significant headwinds – potentially adding to the urgency for drugmakers to make deals.
Prices for certain bestselling drugs will start to come down under the U.S. Inflation Reduction Act in 2026, which appears to treat the active ingredient of drugs by the same manufacturer as the same, limiting life cycle management options in some cases, HSBC analysts said. Biosimilars in the U.S. might also become easier to launch if a recent Food and Drug Administration draft guidance is implemented.
“All these factors might mean that the fade beyond the patent cliffs, especially for biologics, might be more aggressive than in the past,” the analysts said.
