Newsflash. Life sciences M&A is officially back! The first half of 2026 we saw 86 life sciences M&A transactions close, representing a total deal value of $196 billion (and a 141% increase in deal value over the same period last year) and the best start to the year since 2019.1 As we predicted coming out of the J.P. Morgan Healthcare Conference in January, the ingredients were in place for a strong year for dealmaking, and the industry delivered. A significant and enduring trend is a movement over the last several years to focus on de-risked assets. Companies with Phase II assets and beyond now comprise approximately 70% of deals as compared to only 50% of assets in 2021. No surprise, Phase III and approved assets command the greatest premiums.2 Also, interestingly, participation has not been limited to big pharma and big biotech; mid-sized companies have also been more active this year. Most of the M&A are billion dollar or so “bolt-ons” thus far, but the “mega merger” logjam may be breaking, and we expect to see one or more of those in the near term.
Key Drivers of the M&A Surge
The principal catalyst for the M&A surge is the patent cliff.3 It has been reported that approximately $305 billion in revenue is at risk due to loss of exclusivity over the next six to seven years. And, despite a restock of the pipeline over the last few years, there is still a massive shortfall to get back to current revenues—forget about growth. Also, the acceleration of innovation in certain sectors has spurred M&A as companies jockey to place bets on novel technologies. While this is not new, the clock is ticking. Further, pharma has copious amounts (approximately $14 trillion) of dry powder on their balance sheets to address their revenue problem. Valuation multiples for acquisition targets generally remain well below historical averages, providing flexibility to pay premiums for assets that can restock the proverbial cupboards. These conditions and the moderating of geopolitical and regulatory risk will make for a continued frothy dealmaking environment this year and into next. While we have not yet seen a so-called mega-merger (we last saw these in 2019—AbbVie and Allergan and BMS and Celgene), the current conditions also suggest that it is only a matter of time before we see one or more, as large horizontal deals are the most efficient way to address the industry’s revenue problem.
Hot Areas
Areas seeing the most activity thus far this year are cardiometabolic and obesity, late-stage oncology, immunology, central nervous system, radiopharmaceuticals, and AI-enabled diagnostics. These areas should continue to attract a lot of attention for their revenue generation and first-to-market potentialities.
Private Equity as a Willing Optimization Partner
One byproduct of the push to replace revenue is optimizing strategy and resources. Private equity is emerging as a key player, by acquiring neglected or non-core assets such as tools divisions, CDMO units, and/or older brands.
This has opened a window for the lower to mid-cap life sciences and pharma companies to get in on the M&A frenzy. A great example of a deal that captures the zeitgeist in 2026 across all facets of execution is United Therapeutics’ acquisition of Thymmune in July. Here we have a $22 billion market cap company purchasing a promising cell therapy portfolio in a deal primarily structured around milestones ($160 million) with an upfront payment ($140 million). We’ll investigate the prevalence of milestone/CVR deal structures more in the next section.
Special Focus on Contingent Value Rights (CVR)
While not new to life sciences dealmaking, recognizing the need to acquire novel technologies that may not be as de-risked, sharing of that risk in a deal is often accomplished with the use of contingent deal structures. One commonly used risk share mechanic is the contingent value right. Indeed, you are seeing these in roughly 1/3 of public target deals. CVRs condition payment of a good portion of the consideration in a transaction to certain clinical, regulatory and/or commercial milestones. While this is a tool to get to a deal where valuation gaps could have otherwise been insurmountable, given the potentially large amounts tied up in them, they must be carefully drafted or they can lead to significant disputes. As the acquirer will be operating the target’s business post-closing, CVR provisions are heavily negotiated, with the most negotiated (and litigated) term being the level of efforts that the acquirer will need to employ to attempt to achieve the milestones. Acquirers prefer a standard that is subjective (from the most aggressive of “sole and absolute discretion” to “commercially reasonable efforts” tied to the buyer’s investment metrics) whereas targets prefer an objective standard (“commercially reasonable efforts” of a comparable company taking into account cost or disregarding the payment of the milestone payment). Milestones are also a key negotiation point, with acquirers preferring narrow achievement paths and targets arguing for broader ones. And, depending on leverage, market practice tends to be the use of severable per-milestone payments, rather than an “all or nothing” approach. We expect the use of CVRs to continue in dealmaking, so it is important to pay attention to the language, as courts have been clear that they will not intervene to use equity to re-allocate a risk that was assigned by the definitive agreement.
All signs point toward a bullish end to the year in life sciences M&A. With so few differentiated assets with near-term potential in the right areas, and the need to replace revenue, the competition for good assets should remain fierce! We encourage dealmakers to be mindful of regulatory uncertainty, as always. Here’s to more deals and more innovation!
This article is a part of the 2026 Life Sciences Industry Report. Click here to read the full newsletter.
[1] Baral, Subin. (2026, July). M&A in Life Sciences Surges in 2026 with Record Deal Value [Written analysis with data thumbnail] [Post.] LinkedIn. https://www.linkedin.com/posts/subin-baral-94461718_ey-lifesciences-dealmaking-activity-7483173460790116352-KA-3/
[2] J.P. Morgan (2026). Q2 2026 Biopharma Licensing and Venture Report. J.P. Morgan.
[3] Stifel. (2026). Q2 Biopharma Market Update. Stifel, Nicolaus & Company
Subscribe to Ballard Spahr Mailing Lists
Copyright © 2026 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.
This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.