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2026 US Investment outcomes monitor
Baker Tilly’s Investment Monitor: Life Sciences examines the data and market forces behind these shifts and what they could mean for investors, executives and other industry stakeholders.
After several years of market recalibration, life sciences investment is gaining momentum. But the recovery looks different from the last cycle.
Capital is concentrating around fewer, larger transactions. Venture investors are increasingly favoring later-stage, clinically validated companies. Strategic buyers are pursuing acquisitions to strengthen pipelines ahead of looming patent cliffs. And new dynamics—from AI-enabled drug discovery to cross-border licensing and the reshoring of R&D and manufacturing—are influencing where opportunities emerge.
Key trends
Venture capital: Fewer, bigger, later-stage deals
Life sciences VC is increasingly concentrated in larger, later-stage investments as investors favor scaled, clinically validated companies. AI-integrated life sciences companies are also attracting significant capital as the technology moves from early hype toward execution.
Private equity: Steady activity shaped by megadeals
PE activity remains relatively steady, while large transactions continue to have an outsized impact on overall deal value. Opportunities are also emerging in areas such as drug delivery, driven by GLP-1 demand and continued growth in capsule manufacturing.
M&A: Strategic buyers are fortifying their pipelines
Life sciences M&A has rebounded sharply, driven largely by strategic buyers seeking scale and clinically validated assets ahead of looming patent expirations. M&A value reached a record $218.3 billion in 2025, with another $156.6 billion recorded in the first half of 2026.
Cross-border dealmaking: Global sources of innovation are shifting
European buyers are playing a growing role in acquisitions of U.S. life sciences companies, while China’s influence is increasingly being expressed through licensing rather than inbound M&A. Chinese-originated assets are becoming an important source of innovation for U.S. and European pharmaceutical companies.
Capital and liquidity: New pathways are gaining importance
As investors become more selective, licensing agreements, partnerships, structured investments, reverse mergers and other capital-efficient approaches are becoming more important. The life sciences IPO market is also showing signs of improvement, although access remains concentrated among companies with differentiated science, later-stage assets and clear paths to value creation.
A market increasingly focused on scale and validation
The opportunity set is evolving. Investors are applying greater scrutiny to early-stage companies while directing capital toward differentiated science, stronger balance sheets and clearer paths to value creation. At the same time, pharmaceutical companies continue to look externally for innovation as they prepare for major patent expirations.
Understanding these dynamics can help companies and investors make more informed decisions about capital, partnerships, acquisitions and growth.
