With M&A rising, venture capital returning and policy risks easing, biotech is on a positive trajectory following a prolonged post-pandemic slump, Truist Securities declared after a survey of sector leaders.
The biotech sector’s performance over the past 18 months has “more than made up for a challenging 2+ year period,” analysts from Truist Securities said. And with regulatory risks abating, M&A already topping 2025 and more positive trends underway, the firm believes the momentum will continue through the end of the year.
“Looking ahead, and from our analysis, we view the sector’s drivers as being largely positive, though with less room for error than at the start of the year,” Truist wrote in a note to investors on Thursday after surveying biotech leaders.
Several key trends have helped drive the outlook. The S&P Biotech ETF (XBI) ended the first half up 34% year to date, where it still sits as of Friday. M&A has returned in force, with $136 billion spent across 57 deals—which has already cleared the total number of deals from 2025.
The financing window for biotech has remained open, bringing more venture capital into the sector. Indeed, a flurry of fundraising announcements have arrived as the summer tips toward fall.
“We believe 1H26’s momentum sets the stage for a constructive 2H26, driven by continued patent cliff-induced dealmaking, improving access to capital, and a supportive regulatory backdrop,” Truist wrote.
Big Pharmas headed into 2026 with massive patent cliffs looming, and Truist has been impressed with the pace of deal activity that these companies have executed to seal up these gaps in future growth. “The responses mounted have been aggressive, even faster than expected,” the analysts wrote.
The firm pointed to AbbVie’s takeover of Apogee, GSK’s Nuvalent buy and Vertex Pharmaceuticals’ Crinetics acquisition—all deals that were $10 billion or above—as key examples.
IPOs have also picked up dramatically, with $5.9 billion worth executed across 21 debuts in the first half, compared to $1.54 billion for all of 2025.
The number of companies trading below cash—when a company’s total market capitalization is less than net cash holdings—has fallen to 15% from 22% in the second half of 2025, Truist noted.
Meanwhile, the FDA situation has settled down under Acting Commissioner Kyle Diamantas. “Regulatory and policy risks are largely played out, in our view; innovation has taken over price action,” Truist said. With White House aide Heidi Overton now nominated as the next FDA chief, the biotech experts surveyed by Truist see the situation stabilizing.
Despite all the disruption from leadership departures, the FDA has largely continued its important work, with 36 novel approvals from the Center for Drug Evaluation and Research occurring through August 28. Another arrived on Thursday, with Ionis getting the regulatory greenlight for its Alexander disease therapy zilganersen, which will now be known as Zanvastro. The approval arrived more than two weeks ahead of schedule.
Ten of the 36 approvals this year came via the Commissioner’s National Priority Review (CNPV) Program, which has been controversial but seems to be pushing swift drug reviews, Truist noted. Another drug to receive a CNPV was Revolution Medicines’ Rasonque, which was approved for pancreatic adenocarcinoma 6.5 months ahead of deadline.
While the Trump administration announced the addition of nine midsized companies to the Most Favored Nation (MFN) drug pricing program earlier this week, Truist said the risk of this program has also eased. “MFN now reads as an accepted ‘cost of doing business,’” Truist said.
And there’s more excitement to come in the second half. Truist pointed to the potential takeout of Abivax, the microRNA biotech with a current market cap of $9.95 billion. The company has long been the subject of M&A rumors but remains independent.
The surveyed leaders were also asked about the potential for a mega-deal and were split on that outcome, although a “slim majority” leaned toward yes, Truist said.
Since it became clear that the rumored talks between Bristol Myers Squibb and AstraZeneca were not going to result in the largest pharma deal of all time, others have also speculated on mega-mergers in biopharma’s future.
“We think that consolidation among the weaker large-cap companies is inevitable,” Raghuram Selvaraju, senior healthcare equity research analyst at H.C. Wainwright & Co., recently told BioSpace. “Other companies that could be the subject of takeover speculation include the weakest of the traditional large-caps, namely GSK and Pfizer.”
