Biotech IPO window is open, but big pharma M&As set the pace: bankers

Public markets are beginning to reopen for biotech companies after several years of subdued activity.

But stronger companies are still more likely to sell to Big Pharma rather than test investor appetite in an initial public offering (IPO), according to JPMorgan's top healthcare dealmakers.

The IPO window has reopened for high-quality biotech companies, but investors are much more selective than during the pandemic-era boom, Juha Anjala and Roy Wouters, co-directors of JPMorgan EMEA healthcare investment banking, told CNBC.

The current market is also driving many biotech companies to follow a two-track process: preparing for an IPO while also engaging with potential buyers.

In some cases, companies are ready to go public, only to be bought by large pharmaceutical groups before hitting the public markets, Wouters said, adding that they have advised on several such deals recently.

The trend reflects a broader recovery in healthcare deals, especially in biopharmaceuticals, where drugmakers are under pressure to fill out their portfolios before important patents expire later this decade and early 2030s.

Big Pharma's buyers are well-funded and increasingly willing to make bigger bets, bankers said. Strategic buyers are “looking to deploy capital” to deepen their projects, while shareholders increasingly support mergers and acquisitions as a way to drive growth, Anjala said.

The result is a more competitive market for the highest quality biotech assets, particularly those with differentiated technology or exposure to large therapeutic areas such as oncology, metabolic diseases and infectious diseases.

For biotech founders and investors, that creates a stronger exit market than existed a year or two ago, but not necessarily a simple one. As the IPO window opens, Big Pharma's quest for growth is expected to continue setting the pace.

Still, Anjala and Wouters cautioned that the rebound is not necessarily broad. Boards of directors and investment committees are scrutinizing transactions before approving them, and private equity is becoming more concentrated.

“We're seeing people take a more considered view and really just look to support the company that's going to be the best and the first in its class,” Wouters said.

The current environment is “providing these companies with a set of options, that they just didn't have on the IPO side, or necessarily on the M&A side, even a year or two ago,” he added.

This marks a shift from the easy money period of 2020 and 2021, when investors were willing to back multiple companies pursuing similar goals or technologies. Today, capital flows more selectively to companies considered category leaders.

In a report published last week, EY said 38% of new drug approvals in 2025 were for first-in-class products. The firm also said the biotech sector is regaining momentum despite headwinds such as cost pressures and looming patent cliffs.

According to EY, those pressures are pushing companies toward new financing models, including royalty agreements for pre-commercial assets and other innovative contracting structures.

Settlement values ​​and upfront payments are also increasing, Wouters said. That reflects confidence in the target market, the quality of the asset and the level of competition among buyers.

“People are simply willing to risk more capital in terms of the down payment [payment] because they have to, because of the competition around those assets,” he said.

In 2025, there were seven biopharmaceutical deals valued between $5 billion and $15 billion, according to JPMorgan. Almost halfway through 2026, there have already been six deals in that range, suggesting this year's run rate could surpass last year's.

Many of the industry's most commercially successful drugs come from acquisitions or licensing deals rather than internal research and development, highlighting why pharmaceutical companies continue to use mergers and acquisitions to complement their portfolios.

Shareholders are also challenging management teams to close more deals, Anjala said, as cash flows remain strong and mergers and acquisitions are seen as a proven way to create value. The tailwind for strategic acquisitions that can deepen projects or generate synergies is especially strong, he added.

Large pharmaceutical groups, including GSK and Novartishave long emphasized a preference for so-called bolt-on deals: acquisitions in the low-billion-dollar range that complement existing portfolios without transforming the entire business.

But some recent transactions show a willingness to go higher in priority assets. GSK recently agreed to buy US oncology biotech Nuvalent for $10.6 billion, a deal that marks a major push into cancer treatments and a move away from its typical smaller transactions.

China is also becoming a more important force in global biotechnology. EY noted that Chinese companies now represent a genuine alternative to US and European biotech hubs, while Wouters said innovation and capital flows into China continue to accelerate.

“Over the last few years, it's always been said, 'the signs are good, the outbreaks are there, next year is going to be a great year,'” Wouters told CNBC. “Actually, it looks like this year could be a great year.”