5 key issues biopharma will confront in 2026

Key Issues Facing the Biopharma Industry in 2026

Each January, the J.P. Morgan Healthcare Conference in San Francisco brings together thousands of biopharma leaders, who often express renewed optimism for the year ahead. As the 2026 conference opens, there are genuine reasons for hope. The latter half of 2025 saw improvements in sector performance, deal activity, and funding, with generalist investors returning after a prolonged downturn. Several major investment banks forecasted continued momentum, at least in the short term.

However, the outlook remains uncertain. Ongoing regulatory ambiguity, the possibility of significant drug pricing reforms, sluggish IPO activity, and mounting competition from China all present challenges. Vaccine developers, in particular, are contending with evolving standards and increasing public skepticism, which could hinder future innovation.

Five Critical Questions for Biopharma in 2026

1. Is Biotech’s Comeback Sustainable?

The biotech sector experienced a split year in 2025. Early months were marked by regulatory and geopolitical concerns, which dampened M&A and venture capital activity. After a brief surge in IPOs at the start of the year, the market quieted, with worries about tariffs, drug pricing, and FDA stability making the sector seem especially risky. As Omega Funds’ Otello Stampacchia observed, even the perception of instability can be destabilizing.

Conditions improved as the year progressed. The Trump administration’s tariff and pricing policies proved manageable, interest rates fell, and several biotechs delivered strong clinical results, leading to acquisitions or successful product launches. Cantor Fitzgerald analysts noted in October that the industry is shifting from being cash-intensive to increasingly profitable.

Investor confidence returned, fueling both private and public funding. The XBI index, a key sector barometer, nearly doubled from its April low, reaching levels not seen since the pandemic.

This rapid upswing has sparked debate about whether the rally will persist into 2026. RBC Capital Markets analysts cautioned that ongoing regulatory volatility, inflated valuations, and crowded therapeutic areas could make further gains harder to achieve. A slowdown in dealmaking or disappointing clinical results could quickly deflate stock prices.

Still, there are positive signs. Rising private investment and strong performance from 2025’s IPOs may drive a long-awaited resurgence in new biotech listings. Venture funding is also expected to grow, as investors reinvest returns and maturing private companies seek additional capital. High-quality firms are likely to continue attracting large funding rounds. As long as the sector rewards robust clinical outcomes and drug pricing policy remains stable, analysts at William Blair believe the upward trend should continue.

“There are challenges and uncertainties at the FDA and in pricing, and competition is fierce,” said Monica Vnuk of Sanofi. “But the level of innovation is encouraging.” — Gwendolyn Wu

2. Will the Surge in M&A Activity Persist?

The start of each year typically brings predictions of increased mergers and acquisitions in biopharma. Entering 2026, the data supports this optimism: at least 28 acquisitions valued at $50 million or more were completed from July to December, up from 20 in the first half of the year and 15 during the same period in 2024.

Shankar Musunuri, CEO of Ocugen, noted in a recent Deloitte report that more deals are being finalized, which benefits the market and growth-focused companies needing significant capital. Deloitte’s survey found that nearly half of biopharma leaders consider M&A a top strategic priority, with many seeking to expand their pipelines and acquire early-stage assets.

PwC highlighted that upcoming patent expirations could put $47 billion in pharmaceutical sales at risk over the next four years, prompting companies to deploy their capital more aggressively and offer higher premiums for acquisitions.

Roel van den Akker of PwC predicts that M&A will accelerate in 2026, with success favoring those who invest decisively and strategically. Increased market uncertainty has also led to more creative deal structures, such as Novo Nordisk’s two-step payment approach in its bid for Metsera. Contingent value rights (CVRs) have become more common, featuring in about a third of major deals tracked by BioPharma Dive in the latter half of last year. — Jacob Bell

3. How Will the U.S. Address China’s Biotech Growth?

China’s rapidly expanding biotech sector has transformed the global pharmaceutical landscape, challenging the U.S.’s traditional dominance. Lower development costs, regulatory flexibility, and strong government backing have enabled Chinese companies to quickly develop competitive drug candidates, many of which are now being licensed or acquired by Western firms.

In 2025, over 60 deals were made between Chinese and Western companies, with Jefferies analysts estimating these accounted for a third of industry licensing spending. Increasingly, these collaborations involve innovative, first-in-class drugs rather than just improved versions of existing therapies.

This shift has raised concerns among U.S. industry leaders and lawmakers. Several bipartisan commissions have warned Congress about China’s rapid progress, and Pfizer’s CEO has publicly called for greater government support. Despite some FDA efforts to streamline drug development, China retains significant advantages in cost and regulatory speed. Proposed U.S. measures to curb Chinese deals have yet to materialize, and tariffs have had little impact.

Some experts advocate for a more collaborative approach, suggesting that U.S. and Chinese companies co-develop drugs to leverage each country’s strengths. Monica Vnuk of Sanofi views China’s rise as an opportunity for global investors and pharmaceutical companies to diversify and strengthen their pipelines.

“I see this as a positive development,” Vnuk said. — Ben Fidler

4. Can the FDA Regain Stability?

The Food and Drug Administration experienced significant upheaval last year, with frequent leadership changes, mass layoffs, and resignations. Commissioner Martin Makary and deputy Vinay Prasad faced criticism for fostering a difficult work environment, bypassing standard rulemaking, and implementing inconsistent regulatory standards.

Makary’s initiatives, such as awarding special vouchers for drugs aligned with national priorities and proposing single Phase 3 trials for approvals, have drawn scrutiny for potentially politicizing the agency and lowering safety standards. Prasad has tightened requirements for certain treatments, including vaccines and cancer cell therapies, while sometimes overruling agency reviewers.

Further complicating matters, key leaders like Richard Pazdur retired, and regulatory guidance has shifted unexpectedly, frustrating investors and analysts. As 2026 begins, the sector’s performance may depend on whether the FDA can restore stability. Analysts at Leerink Partners warn that ongoing leadership turnover and policy uncertainty are creating unpredictable risks, which could steer M&A activity toward companies with more advanced products.

RBC analysts caution that further approval delays and inconsistent regulatory decisions could deepen investor concerns, with nearly half of surveyed investors citing the regulatory environment as the sector’s biggest challenge. — Jonathan Gardner

5. What’s Next for Vaccine Policy?

Since Robert F. Kennedy Jr. became head of the Department of Health and Human Services, support for routine vaccinations has weakened, with potential consequences for public health in 2026. Kennedy replaced the CDC’s vaccine advisory committee with members skeptical of vaccines or lacking relevant expertise. This new panel softened recommendations for COVID shots, advocated splitting certain immunizations, and called for the removal of a preservative targeted by anti-vaccine groups. In December, they dropped the universal recommendation for newborn hepatitis B vaccination, a move that could reverse decades of progress against liver disease.

The FDA has also tightened its vaccine approval standards and issued narrower authorizations for COVID vaccines. Agency leaders have reportedly scrutinized the VAERS safety monitoring system to link vaccinations to child deaths, a move that could prompt major regulatory changes, according to a leaked memo from top vaccine official Prasad.

These decisions have faced pushback from medical organizations, states, and insurers. Former advisory committee members have even called for a new, independent group to restore trust. The FDA’s use of VAERS has been criticized by nearly all living former commissioners and has yet to yield credible evidence.

Nevertheless, these policy shifts have fueled vaccine hesitancy and led to outbreaks of preventable diseases. RBC analysts warn that a more stringent regulatory environment for vaccines could slow development and shift focus to drug treatments.

Momentum for these changes is growing. President Trump recently called for a review of the childhood immunization schedule, and the CDC’s advisory panel raised concerns about vaccine ingredients and the safety of multiple simultaneous shots, despite a lack of supporting evidence. At the start of 2026, federal officials reduced the number of recommended childhood vaccines, bypassing the usual rigorous review process.

“We expect ongoing policy changes and public statements from the administration to further erode trust and suppress vaccination rates through the upcoming election and beyond,” wrote Leerink’s Mani Foroohar in December. — Delilah Alvarado