Life Sciences: The Return of Capital and Deal Activity

Life sciences capital markets have reopened in 2026, for both acquisitions and financings.

Biopharma acquisitions above $250 million reached roughly $130 billion in the first half of the year, close to the total for all of 2025, and medtech deal value passed $36 billion over the same period. On the financing side, US biotech companies raised more than $51 billion by mid-August through IPOs, follow-on offerings and convertible notes, with IPOs at their strongest since 2021 and convertible issuance at a record. The largest transactions draw the headlines. For lower middle market and mid-market companies, the more useful story sits a level below them.

The patent cliff is pulling capital downstream

More than $300 billion of branded pharmaceutical revenue faces loss of exclusivity before the end of the decade. Large pharma is replacing that revenue by acquiring and licensing clinical and late-stage assets, and every program it brings in needs clinical trial support, specialist manufacturing and packaging capacity. That demand flows through to the biotech companies developing those assets and to the contract research, contract manufacturing and specialty services businesses that support them.

Biotech financing is open, for the right companies

Investors are back, and they are selective. Capital is concentrating in clinical-stage companies with data in hand, a clear regulatory path and a large addressable market, with Phase 2 and Phase 3 programs best placed. Follow-on offerings have carried most of the volume, convertibles have become a mainstream tool, and many of this year's IPOs priced above the company's last private round. Part of the money comes from M&A itself, as proceeds from pharma acquisitions are recycled into new offerings. For a clinical-stage biotech, timing a raise around the next data readout, with enough runway to negotiate from a position of strength, matters as much as the headline valuation.

Structured capital is filling the gaps

Equity is one route among several. Royalty financing reached $7.1 billion in 2025, with a median transaction of more than $220 million, and terms have moved in favor of companies, with many synthetic royalties now uncapped. For businesses with an approved product or meaningful revenue, royalty and revenue-based structures, licensing partnerships and private credit can fund growth with far less dilution than an equity round. Profitable services and device businesses can also draw on private credit lenders who are active in the sector.

The two tracks feed each other

Large pharma is acquiring clinical assets both before and after IPO, and companies increasingly prepare a financing and a sale side by side. A credible financing process often brings strategic interest forward, and it gives shareholders a genuine alternative when offers arrive.

Specialization is being rewarded

The last cycle favored outsourcing providers that tried to offer everything. Buyers and investors now look for depth in a defined capability, such as sterile injectables, radiopharmaceuticals, complex biologics or precision components for medical devices. A business with a clear technical niche, a strong quality record and long-standing customer relationships tends to attract both strategic acquirers and private equity platforms, often several of each.

Carve-outs and sponsor exits are widening the buyer pool

Large pharma, tools and medtech groups are pruning their portfolios and selling non-core units, and many of these carve-outs become new private equity platforms that need bolt-on acquisitions to build scale. At the same time, sponsor-backed life sciences businesses held through the slower 2022 to 2024 period are coming to market as financing conditions improve. For an owner-managed business in an adjacent niche, that means more potential buyers, and more competition for their attention.

Supply chains are moving closer to home

Tariffs on pharmaceutical imports, US-China trade policy and the push for domestic production have raised the value of onshore capacity. Manufacturing in the US and Europe that can serve regulated customers locally carries more strategic weight than it did, and both buyers and investors are factoring that into their pricing.

What buyers and investors are asking

Across acquisitions and financings, diligence centers on a small number of issues. Buyers focus on quality systems and regulatory track record, customer concentration, capacity utilization and the path to margin expansion. Investors in clinical-stage companies focus on the strength of the data, the cash runway to the next value-creating milestone and how the proceeds will be used. Terms on both sides increasingly include milestones, contingent value rights and other deferred consideration, which makes it important to compare offers on the value delivered at completion and the certainty of closing.

What this means for owners and boards

For shareholders and boards of mid-market life sciences companies, conditions are as constructive as they have been for several years. Buyers are active, capital is available across equity, credit and royalty markets, and the demand behind both is driven by structural pressures that will outlast the current cycle. The companies that achieve the best outcomes will be those that prepare early, position around a defined capability or clinical milestone, and run a competitive process, whether it ends in a sale, a minority investment or a financing.