Capital Markets – Revival or Reconfiguration?

While it is evident that the capital markets (especially in the life sciences space) are not anywhere near the feverish peaks of 2021, we are tracking signs of life that may be encouraging. What is exciting is that, as a result of macro trends, we might be seeing a shift in corporate development philosophy for late-stage capital raising among biotechs toward licensing as a public financing alternative.

Per J.P. Morgan’s Q1 2026 Biopharma and Venture Report, six biopharma Initial Public Offerings (IPOs) raised approximately $1.8 billion in Q1 2026 alone, already exceeding the total value of biotech IPOs completed during all of 2025. While that is encouraging in itself, it is important to note that this is more indicative of a narrow reopening of the public markets than a wider restoration of capital flow, and upon closer examination, an extension of trends we tracked last year. Nearly every life sciences company that has priced an IPO this year has met some combination of the following criteria: a Phase 2+ asset, a robust investor syndicate and resume of big-ticket venture deals, clinical proof-of-concept, and/or differentiated, proven platforms with an easy path to regulatory approval. Companies finding success in the public markets this year are in similar target areas to (a) companies currently finding lots of success in M&A exits and (b) companies that priced IPOs in 2025: obesity, oncology, AI drug discovery, and cardiovascular.

Digging deeper into interwoven mechanics and behaviors of the capital markets as they pertain to life sciences reveals a much more interesting picture—that of what appears to be a reconfiguration rather than a pure reversion to the mean. In our edition of this report last year, we noted the increase in follow-on offerings for fundraising in capital markets. The transactional flow for follow-ons continued to be strong in H1 2026, acting as sort of a “quality check” for publicly traded life sciences companies (i.e. public companies doing all the “right things” can look to closing secondary offerings as an affirmation of their approach). Royalty monetization transaction streams remain steady as publicly traded biotech and pharma companies (particularly ones contingent on partnered assets) keep them in the playbook to secure equity value while winning immediate cash flow for late-stage clinical trials and commercialization. PIPEs (private investments in public equity) have provided some utility (although not at the levels seen pre-2022) as an “event-based” alternative financing tool to help fund, in particular, development or pre-revenue stage companies in advance of a specific readout (e.g. late clinical-stage data drop or an NDA) while also attaching closely to licensing deals to extend runway to the next catalyst. This leads us to licensing emerging as the new linchpin of capital raising: J.P. Morgan recorded $82.7 billion in announced licensing deals in Q1 2026, an astronomical amount considering we were encouraged by several billions raised in IPOs!

Are IPOs back or have we entered a whole new paradigm? Perhaps a bit of both. IPO ambitions are certainly still on the table for certain life sciences companies that can muster up the right blend of product, area, and syndicate quality. Seats at the table are declining, however, particularly for early-stage and more speculative assets. We expect, however, that alternative capital sources, such as upfront licensing of development-stage assets, will continue to shape the way private biotechs and some publicly traded companies within the life sciences industry raise money. In 2026, we encourage stakeholders to look beyond the IPO as endgame and be dynamic in your approach to corporate development. Milestones (both literal and figurative) now provide a more palpable cadence in growth than ever. We are seeing companies kicking out future royalty and milestone streams for immediate cash, or licensing at or before an IPO to gain validation from a credible pharma diligence process and build runway. Timing matters tremendously in 2026 and companies must be prepared to navigate an environment that favors de-risking strategies more than ever.

There is hope for the IPO and follow-on markets to remain strong going into H2 2026, but stakeholders need to be decisive and deliberate before exploring the capital markets. Life sciences companies with public ambitions going into H2 2026 and eventually 2027 should focus heavily on advancing products toward concrete milestones with late-stage data along with governance and corporate housekeeping. Make sure your equity structure is propped up on stable accounting and refresh your option plan, maintain Section 409A compliance, and clean up early exercise terms, repurchase rights, and vesting acceleration triggers. You want to be audit-ready sooner than later, so don’t hesitate to engage a Public Company Accounting Oversight Board-registered auditor and complete two to three years of audited financials on IPO timelines. From an IP perspective, you want to get ahead of potential inventorship issues that never hesitate to strike in late-stage IPO prep by building diligence-ready data rooms. Since most IPO-ready biotech companies are late-clinical-stage in 2026, these companies should be prepared to show audit trails for key endpoints, protocol deviations handling, and Data and Safety Monitoring Board (DSMB) processes and safety reporting as part of a greater data integrity/inspection readiness strategy. By getting these pieces along with many others in order, biotech and pharma companies with public ambitions will best position themselves to ride the surprisingly resilient wave of life sciences capital raising going into EOY 2026.

This article is a part of the 2026 Life Sciences Industry Report. Click here to read the full newsletter.

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