April 2026 Newsletter: A Closer Look at Q1 Biopharma Dealmaking
- Jun 1
- 3 min read
Dear colleagues, Q1 2026 closed with more than $45 billion in biopharma M&A, with deal premiums at their highest level in two years. We see buyers responding to different pressures, each with distinct implications for timing, valuation, and transaction design. In this issue, we share our read on two themes from recent M&A activity, along with a few external resources we have found useful.
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Patent cliffs: The strategic context behind recent acquisitions. Differences in patent cliff exposure are shaping buyer behavior in ways that are easy to miss if recent M&A activity is treated as a single wave. Some of the largest biopharma companies face substantial loss of exclusivity (LOE) by 2030, relying on acquisitions as a defensive strategy while others with considerably longer runways are pursuing offensively-minded deals to broaden their portfolio across therapeutic areas. Merck’s $6.7 billion acquisition of Terns Pharmaceuticals is a good example of a response to impending patent cliffs. Keytruda’s primary patent expires in December 2028, leaving roughly half of Merck’s revenue at risk. The decision to acquire a potential best-in-class candidate in chronic myeloid leukemia reflects a strategy to defend its oncology position before the window closes. Novartis faces similar pressures, although its LOE risk is not dominated by a single asset. Approximately 25% of Novartis’ revenue is at risk through 2029 and recent acquisitions of Excellergy and Pikavation Therapeutics represent additional pipeline buildout ahead of LOE pressures. Conversely, Eli Lilly is buying from a position of strength with minimal near-term LOE pressure, and its deal pace reflects an offensive posture. Acquisitions of Centessa Pharmaceuticals, Orna Therapeutics, and Ventyx Biosciences appear to broaden Lilly’s capabilities across therapeutic areas. Looking across the quarter, this distinction helps explain why similar deals can reflect very different strategic logic. Partnership to acquisition: How co-development arrangements can create a path to sale. Gilead’s $7.8 billion acquisition of Arcellx illustrates how a co-development partnership can become an acquisition pathway. Gilead had been co-developing anito-cel, Arcellx’s BCMA-directed CAR-T for multiple myeloma, through Kite, since 2023 and held a minority equity stake before moving to full ownership. Gilead acted after the BLA had been filed for anito-cel and a PDUFA date had been set for December 2026, paying a 68% premium to acquire the remainder of the company. Partnership first allowed Gilead to build familiarity with the asset; acquisition followed when the remaining risk was narrower and the case for full ownership was easier to underwrite. For biotech companies in early BD discussions, this pattern is worth monitoring. A co-development agreement can function as more than a financing or risk-sharing tool. In some cases, it can also establish the path to a later sale, which makes governance, control, and exit terms more important from the outset. This month's newsletter was researched and drafted by Headland Associates Kaitlyn Ryu and Peter Dykstra. |
What we are reading and listening to. A short list of external resources we are finding helpful:
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