Will Pharma M&A Slow Down This Year?

The approaching patent cliff—projected to expose as much as $300 billion in annual drug sales to loss of exclusivity by 2032—is expected to keep pharmaceutical M&A activity active in 2026, but not necessarily drive a dramatic year-over-year spike in deal volume or size. According to Dan Chancellor, Norstella’s vice president of thought leadership, the impact of deals being signed today should be viewed through a longer-term lens, as most acquisitions influence company performance three to five years out, rather than immediately.

He emphasized that the patent cliff is neither sudden nor unexpected. Large pharma companies have been aware of the risk for years and have already incorporated it into their portfolio strategies. As a result, current and near-term deal activity reflects forward-looking pipeline and revenue needs, rather than a reactive response to exclusivity losses.

While 2025 was characterized as a strong year for M&A, 2024 had been relatively quiet, despite widespread discussion about the coming patent cliff. That contrast suggests deal flow is shaped less by urgency alone and more by the availability and quality of viable assets. Pharma companies generally have ample cash and transaction capacity, but remain selective—prioritizing first-in-class or best-in-class assets that strategically fit their portfolios. If those criteria are not met, deals are unlikely to proceed.

Beyond patent expirations, companies are also confronting broader growth gaps driven by maturing portfolios and insufficient late-stage pipeline output. Analysis of the top 12 pharma companies shows that most are projected to grow below the broader market average of about 7%, with only a few exceptions. Collectively, large manufacturers face an estimated $100 billion revenue shortfall relative to desired growth targets by the end of the decade.

M&A remains one of the most direct tools to address that gap, alongside lifecycle management and internal R&D investment. As a result, 2026 is expected to bring continued, steady dealmaking—similar to 2025 levels—rather than a sharp surge, as companies keep using acquisitions to reinforce future growth.

Chancellor also comments on the specific market indicators that suggest whether 2026 is likely to exceed last year’s pharma deal value, and much more.

A transcript of his conversation with PC can be found below.

PC: With more than $220 billion in total pharma deal value reported for 2025, what specific market indicators suggest whether 2026 is likely to exceed that total?

Chancellor: It’s going to be difficult for ‘26 to exceed ’25. I'm in two minds—'25 certainly was, are we going to look back and say this was an outlier year? I think there are some suggestions that it could be. I think there were something like five deals of more than $10 billion signed, 30 deals of more than $1 billion signed. There was a ot of bolt on activity of attractive biotech companies. The more deals that get signed, the fewer opportunities there are that remain. The pool in which you're fishing from is now is smaller.

I suspect there will be a lot of activity, but to quite say whether it's going to surpass, in spite of the need for pharma to replace this growth, and I feel this growth gap can only be seen with hindsight. If I was going out on a limb, I'd say probably it will come in lower, but we might actually see some larger deals.

So of the companies that are being rumored—Abivax, Revolution Medicines—these are going to be deals that will be very expensive if they are signed. We might see potentially even larger ones, but fewer of them. In terms of therapeutic areas that are driving, it's the areas in which pharma’s currently kind of mature. Certainly oncology, certainly immunology, certainly many companies are pivoting towards cardiometabolic, although, interestingly, the Metsera acquisition aside, most companies are entering cardiometabolic through licensing of, well, a mixture of strategies, so it's not necessary.

There isn't necessarily a single company out there that you can go away and buy, and instantly have a competitive portfolio. Drug companies are generally building actually more for longer term, and making sure they're finding their own niche and their own differentiation. It was early this week that AstraZeneca was making more moves in cardiometabolic with a range of licensing options.

The therapeutic areas where we expect to see high-value deals are oncology, immunology, neurology, cardiometabolic, rare diseases, potentially. What drives high-deal valuation? One of the factors is competition and potentially having pharma companies bidding against each other, driving premiums up. Generally, these are the more mature therapy areas where pharma companies are facing competition, and it's unlikely, for example, to see a really high-value deal in somewhere like ophthalmology, where there's just less competitive intensity for example. If you're a biotech with a promising ophthalmology asset, there's only really a few companies you might be speaking with.