Biotech’s slump may finally be over in 2026. In interviews with BioSpace, Zymeworks’ CEO Ken Galbraith and Zai Lab’s President and COO Josh Smiley explain what’s fueling the comeback.
As the pharma and biotech industry head into the J.P. Morgan Healthcare Conference 2026 in January on firmer footing, several forces are nurturing the landscape’s cautious optimism: the resurgence of deals and partnerships, successful alternative financing models and China’s accelerating role in global development, two biotech executives said.
Zymeworks’ CEO Ken Galbraith and Zai Lab’s President and COO Josh Smiley spoke to BioSpace about the positive impact of these market drivers. Zymeworks, a Canadian biotech founded in 2003, gained recent media attention for its announcement pivoting to a royalty-based revenue stream. Zai Labs, based in both the U.S. and Shanghai, noted in its Q3 investor presentation it is “a bridge between China’s thriving biotech ecosystem and global markets.”
Factors Fuel Cautious Optimism
Galbraith noted less pessimism than in recent years, with signs the sector is emerging from a prolonged downturn. Scientific and clinical progress is driving renewed optimism, agreed Smiley. Reduced uncertainty about U.S. policy has contributed to increased pharma deals and M&A, they noted.
Their comments echo a report from William Blair analysts published December 10. The XBI—a performance tracker for U.S. biotech companies—started the year with a 20% drop-off, but since April, has climbed nearly 75% to reach levels that haven’t been seen since the end of 2021.
From the policy perspective, there’s less uncertainty about issues such as Most Favored Nation drug pricing, Smiley said, although there continues to be concern on the volatile regulatory environment. As BioSpace recently reported, 2025 has seen the attrition of more than half the FDA’s senior leadership.
Both company executives noted the spate of M&A activity is encouraging. BioSpace recently reported that dealmaking made significant inroad in 2025. Pfizer and Novo Nordisk’s bidding war for biotech Metsera and its obesity pipeline topped one of the more recent news headlines in the Q4. Ultimately, Pfizer won the bidding war with a $10 billion price tag.
Regardless of M&A dynamics, companies should maintain a viable independent strategy rather than rely on acquisition outcomes, Galbraith noted. Zymeworks announced in November a decision to “evolve from a traditional biotechnology company into a royalty-driven organization differentiated by in-house R&D capabilities,” Galbraith said in press release. The company adopted a revised strategy following encouraging late-stage clinical results, reflecting confidence in its pipeline’s potential, Galbraith said.
China Innovation Spurs Interest
Galbraith and Smiley agreed there on the growing global demand for China-originated innovation. U.S. biotech faces pipeline competition not only from large pharmas but from hundreds of well-equipped Chinese biotechs. Galbraith said. In addition, there are increasing novelty therapeutics emerging from China; U.S. players must match the country’s clinical speed and product quality to remain competitive.
China is nurturing innovation in oncology and broadly in the field of immunology and inflammation, said Smiley. As one example, Chinese antibody drug conjugates have shown advancements such as optimal linker-payload combinations, he said. The next development frontier is in neuroscience, Smiley predicted.
Zymeworks leverages geographic optionality—e.g., Japan’s favorable cost dynamics, untapped UK capacity post-Brexit, and a Singapore-based clinical and regulatory team—to accelerate development, Galbraith said.
Zai has headquarters in Cambridge, Massachusetts and in Shanghai, and leverages these capabilities to harness the innovation coming out of China, Smiley said. For example, access to China’s enormous patient base accelerated development, especially in oncology and immunology, he said. While the company scouts globally for attractive assets, Zai increasingly finds first or best-in-class assets are in China.
Ultimately, drug innovation and strong science continue to be the primary drivers of opportunity, Galbraith said. Despite FDA turmoil, the fundamentals of FDA approval pathways, especially in oncology, remain steadfast, Smiley said. Companies should ignore daily political noise and focus on historical regulatory principles, he added.
