Ernst & Young is projecting biotech revenues will grow by at least 12% in 2026, recording growth for the third straight year as the industry continues its upswing.
“We find ourselves with a biopharma industry that is in a decidedly in a more positive and optimistic position than when we spoke this time last year,” EY analyst Ashwin Singhania said during a media roundtable last week, while cautioning that there are still many challenging headwinds to navigate. Those include economic and political disruption, cost pressures, looming patent cliffs and regulatory uncertainties.
Biotech’s effervescent activity has allowed it to overcome the hurdles and sustain momentum into 2026 as the volume and value of licensing and M&A deals continues to increase, EY said. The analysts also cited an uptick in IPOs and the recovery of venture capital funding.
EY’s analysis is available in its 36th annual Biotech Beyond Borders report, which offers executives a rundown of trends and an industry outlook.
The report is full of interesting nuggets, including that a record 72 companies generated revenue of more than $500 million in 2025. This is occurring despite an unusual paradox in the funding landscape: While “megarounds” are being signed, more and more biotechs are in a “liquidity trap,” EY wrote.
The landscape has produced an imbalance in the biotech industry. While total funding and revenues are up, there are fewer companies overall, with the numbers shrinking each year. Five years ago, there were 977 biotechs. Today there are 750.
“There is some cleaning up going on,” Arda Ural, Ph.D., EY Americas Life Sciences Leader, said during the briefing. “Some non-traditional capital flew into this space that proliferated, spawned these biotechs with a concept and that kind of normalization; I would like to believe we are at the end of that cycle.”
M&A and partnerships were “the biggest story for the year, for 2025 and into 2026,” Singhania said, noting that EY counted $100 billion of capital deployed in deals in 2025, with the pace ratcheting up in the first quarter of this year with $36 billion spent.
“This is the single biggest driver of confidence in the industry at the moment,” Singhania added.
As for partnerships, China was a big part of the story in 2025 as companies there claimed roughly 40% of the U.S. biobucks that were committed in the year.
“Chinese biotech companies are increasingly viewed as a credible source of advanced innovation, especially when we think about advanced technologies like antibody-drug conjugates, bispecific antibodies and next generation therapeutics in general,” Singhania said. “At the same time, what we're seeing is that big pharma needs to balance innovation opportunities in China with the evolving geopolitical and regulatory pressures.”
In addition to R&D advances in China, EY says that the innovation engine throughout the industry remains “exceptionally strong,” pointing out that 38% of the new drug approvals last year were for first-in-class products.
“AI is increasingly becoming a part of the innovation story here, particularly in biopharma R&D,” Singhania said. “We see AI playing a key role in drug target identification, drug design, and clinical trial patient recruitment, and companies are increasingly seeing AI as a long-term productivity and efficiency driver for their R&D engines.”
After the industry doldrums of the post-pandemic era, there has been an “optimism fatigue,” as Ural put it, in the last few years as observers have anticipated a turnaround that has been slow to materialize. But now “it feels more real,” Ural said.
“We just need to continue to have trust in the U.S. innovative nature of the of the industry,” he added.