Biotech IPO window is open but big pharma M&A sets pace: Bankers

Public markets are starting to reopen for biotech companies after several years of muted activity.

But the strongest companies are still more likely to sell themselves to Big Pharma instead of testing investor appetite for an IPO, according to JPMorgan’s top healthcare broker.

The IPO window has reopened for high-profile biotech companies, but investors are more selective than they were during the crisis, Juha Anjala and Roy Wouters, co-chairmen. Photo by JPMorgan EMEA healthcare investment bank, told CNBC.

The current market also encourages many biotech companies to pursue a dual-track process: preparing for an IPO while at the same time working with potential acquirers.

In some cases, companies are poised to be listed, only to be bought by major pharmaceutical groups before hitting the public markets, Wouters said, adding that he has been aware of several such deals recently.

The trend reflects a broader recovery in the healthcare industry, particularly in biopharma, where drugmakers are under pressure to fill their pipelines before major patent expirations later this decade and in the early 2030s.

Big Pharma buyers are well-funded and increasingly willing to make big bets, bankers say. Strategic buyers “want to inject money” to deepen their pipelines, and shareholders are increasingly supporting M&A as a way to drive growth, Anjala said.

The result is a highly competitive market for high-quality biotech assets, especially those with diversified technologies or exposure to major therapeutic areas such as oncology, metabolic diseases, and infectious diseases.

For biotech founders and investors, that creates a stronger exit market than it was a year or two ago — but not an easy one. As the IPO window opens, Big Pharma’s quest for growth is expected to continue to gather pace.

However, Anjala and Wouters cautioned that the replication is not widely supported. Boards and investment committees scrutinize deals more before signing off on them, and private equity funds are becoming more focused.

“We’re seeing people take a more thoughtful view, and only look to support a company that’s going to be best in class, first in class,” Wouters said.

The current environment “provides these companies with a set of options, which they didn’t have on the IPO side, or actually on the M&A side, even a year to two years ago,” he added.

That marks a change from the easy money period of 2020 and 2021, when investors were willing to back more companies pursuing similar goals or technologies. Today, money flows preferentially to businesses that are viewed as segment leaders.

In a report released last week, EY said 38% of new drug approvals by 2025 will be first-in-class products. The company also said the biotech industry is regaining momentum despite headwinds such as cost pressures and impending patent cliffs.

Those pressures are forcing companies to reach for new financing models, including royalty agreements for pre-market assets and other new contract structures, according to EY.

Deal prices and upfront payments are also getting bigger, Wouters said. That shows confidence in the target market, the quality of the goods, and the level of competition among buyers.

“People are willing to risk a lot of money going forward [payment] because it is necessary, because of the competition for those goods,” he said.

By 2025, there were seven biopharma deals worth between $5 billion and $15 billion, according to JPMorgan. By the middle of 2026, there are already six deals on that list, suggesting that this year’s run rate may surpass last year’s.

Many of the industry’s most commercially successful drugs come from acquisitions or licensing rather than in-house research and development, highlighting why pharma companies continue to use M&A to add to their portfolios.

Shareholders also challenge management teams to do more deals, says Anjala, as cash flow remains strong and M&A is seen as a proven way to create value. The goal of finding strategies that can deepen pipelines or deliver synergies is particularly powerful, he added.

Major drug groups, including GSK again Novartishas long emphasized the preference for so-called bolt-on deals – acquisitions in the low single-digit billion-dollar range that complement existing portfolios without changing the entire business.

But some recent developments show a willingness to go above and beyond to find valuable assets. GSK recently agreed to buy US oncology biotech Nuvalent for $10.6 billion, a deal that marks a major push into cancer treatment and a move away from its traditional small-bolt manufacturing.

China is also becoming a very important force in global biotech. EY noted that Chinese companies now represent a real alternative to US and European biotech hubs, and Wouters said that innovation and capital flows into China continue at a rapid pace.

“For the past few years, it’s been ‘the signs are good, the grass shoots are here, next year is going to be a good year,'” Wouters told CNBC. “Actually, it looks like this year could be a very good year.”