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greenbutterfly, iStock After a prolonged funding chill, investors say 2026 is shaping up for continued dealmaking and diversified bets beyond oncology and immunology. Biotech’s “nuclear financial winter” is thawing for 2026, setting the stage for continued M&A and dealmaking, agreed health investment firms that recently spoke to BioSpace . In addition, competition from China biotechs plays a role in pushing the innovation scorecard, and investor interest in therapeutic areas beyond oncology and inflammation and immunology (I&I) has seen an uptick, they added. These sentiments by Maha Katabi, general partner at the U.S.-based Sofinnova Investments and Andrew Lam, managing director, head of Biotech Private Equity at Ally Bridge Group, headquartered in New York and Hong Kong, are based on the strong show of recent, huge M&A deals and larger private rounds seen in the latter half of 2025. M&A Bonanza Drives Interest One of the biggest deals of 2025, Pfizer’s $10 billion buyout of the biotech Metsera for its pipeline of obesity medications, grabbed global news headlines. The 2025 M&A landscape is almost as sthrong as that in late 2023, Katabi said. At that time, for example, AbbVie acquired ImmunoGen, an antibody drug candidate-focused biotech with the ovarian cancer drug Elahere, for roughly $10.1 billion. In December 2023, Pfizer closed its acquisition of Seagen for $43 billion, the largest M&A agreement in the sector in three years. The flurry of M&A deals in 2025 replenishes big pharma revenues, Lam said; as reported by BioSpace , 2026 is set to be a banner year for M&A in biopharma, as buyers facing major patent cliffs fight for a small pool of late-stage assets. Big Pharma has a fear of missing out on the M&A frenzy, Lam added. The market upturn has mitigated the “biotech winter” valuations and deep discounts that have plagued the sector, Lam said. The M&A spurt has in turn led to syndicates considering fully funding programs, leading to larger private financing round, Katabi said. Syndicates also have focused on runway and execution as companies remain private for longer. While IPOs are still consideration, especially for a long-term, healthy biotech ecosystem, Lam said, they require deeper or broader public pools of capital. Factors that Underscore Capital Investment Macro factors that all equity investors look for include the favorable interest rate environment and the appetite for equities versus other asset classes, Katabi said, noting the latter remains at an all-time high. In terms of company valuations, “we’re working closely with management teams to continue to create options around IPOs or M&A,” Katabi said. She noted there is also investment competition from healthtech and AI, with investors weighing financial returns and patient impact. Company founder and management profiles also serve as investment considerations. It’s important to consider whether a company is nimble and can pivot effectively, such as adapt its trial design and enrollment criteria based in a rapidly evolving regulatory environment, Katabi said. A company should also know its value inflection points and engage in solid storytelling, Lam said. China Biotech Competition These investment theses are important when considering China’s explosive pharma growth. China is both an opportunity and threat to U.S innovation, Lam said, noting 2025 has been a record year for multinational licensing. Western VCs have also created ‘newcos’ — new companies— around Chinese clinical assets, he added. The ability to run trials in the country at about three times faster for about a third of the cost of U.S. trials has proven extremely attractive, especially for early, proof-of-concept data, Kabati said. Therapeutic Areas of Interest Crowded but hot investment areas continue to be obesity, metabolic, I&I, oncology, Katabi and Lam agreed. There are also underexploited opportunities in ophthalmology, respiratory disease, neuromuscular conditions and neurodegeneration with siRNA, brain shuttles and lipid nanoparticles, Katabi said. Lam agreed the respiratory space has grabbed recent headlines with Merck’s acquisition of Verona Pharma, with Merck highlighting the latter’s Ohtuvayre COPD maintenance treatment in a press release . He also added a selective resurgence in cell and gene therapy, highlighting UniQure’s recent positive data for Huntington’s disease. Modalities such as T‑regulatory cells, and epigenetic editing are the “next chapter” for investment, Lam said. Ultimately, investors and the market are hungry for innovation, they agreed. Global competition from Chinese firms exerts pressure for U.S. players to excel in deep science to attract capital. These topics will be further discussed on a Denatured podcast episode January 8.