Happy New Year, everybody.
A few weeks ago, Scrip published a lengthy article, in which various industry experts (investors, executives, etc.) provided predictions for our industry in 2026. Many of the predictions were centered on familiar themes, such as the “looming patent cliff.”
The article is definitely worth a careful read. In fact, I recommend reading the article before reading the rest of this post.
Having read the article, I was pleased to see a number of experts disagree on some key points, perhaps reflecting how impossible it is to predict how 2026 will turn out.
Nevertheless, it is instructive to focus on some of these areas of disagreement.
Safety versus Upside
As was observed in 2025, the prevailing mood among both investors and licensees is one of caution. Capital flowed (and may continue to flow) towards later-stage, “de-risked” candidates with proven mechanisms of action, credible manufacturability, and robust clinical data (especially for cases where multiple indications are possible).
On the one hand, this is a sensible approach, especially for GPs with anxious LPs who want to raise their next fund. Indeed, many pipelines are drawing from a very narrow set of targets or payloads. However, if we continue to crowd into safe, de-risked candidates (or candidates which appear to be safe and de-risked), where will the novel candidates come from? Especially when novelty is more likely to deliver above-average returns?
The obesity market is a great example of this. It may appear safe because there is plenty of upside left in this market…a market currently led by products which, frankly, are not great due to parenteral administration and loss of muscle. An investment or an in-license of a marginally superior (preferably oral) candidate makes sense. It would certainly be an easier sell for a GP pitching the Investment Committee.
But would that investment actually make sense in the long run? How many Licensees are willing to pay for massive Phase III programs (especially in Europe), only to then go head-to-head with established market leaders and biosimilars? Would it make more sense to eschew the obesity space entirely and more in a different, higher risk/higher reward direction?
Caveat emptor…
Licensing versus M&A
How transactions are structured depends on the particular situation. High risk candidates are more likely to be part of a license, while more advanced candidates (especially demonstrated platforms in a box) will be acquired.
Simple, right?
Maybe not. And it is certainly not simple enough to make this dynamic predictable.
The article presents two schools of thought. On the one side, M&A will increase, both in terms of value and number of transactions. The “looming patent cliff” (why is it always “looming”?) will drive this dynamic towards M&A. Competitive bidding wars, like the ones we saw in 2025, may also occur with increasing frequency in 2026.
But the question of “To M&A or not M&A” depends, in part, on the strength of the acquiree’s existing portfolio and late-stage pipeline. Option-preserving licensing makes far more sense to a company when the strategic urgency is simply not there.
A major wildcard in this context is the continued impact of China and Chinese innovation.
On Execution
Most of the interviewees agreed on the importance of execution, to the point where it can outweigh elegant biology spun into an elegant story conveyed by a charismatic leader.
I suspect some of this stems from the lessons learned during the cell and gene therapy investment bubble. Stories spun around cancer cures ran into investment losses due, in part, to an inability to reliably manufacture single-batches of complex therapies for clinical studies. Platform companies with exciting science but an inability to unleash their platforms towards compelling commercial opportunities have also burned more than a few investors in recent years.
These lessons learned now provide an advantage to management teams who can demonstrate manufacture-ability at scale, reliable drug delivery systems, and fewer “holes” in their CMC data package.
Large management teams with a track record based on successful fundraising and/or dealmaking may find themselves at a disadvantage to smaller, nimbler, younger management teams with a more rigorous technical approach that leverages external expertise (and, therefore, relationships), artificial intelligence, and related tools to identify and fill gaps in their CMC packages.
Some investors will shy away from these teams, especially those investors exclusively focused on efficacy, safety, “TAM”, and other measures.
However, smart investors will recognize that true license-ability will come from safety, efficacy, AND a near-flawless CMC package.
Academic thought leaders may always be the hero in our tales, but they will have to share the stage with the engineers and formulation scientists who labor to turn these stories into therapeutic reality.
In other words, charismatic storytelling will fade, and be replaced by practical data.
Predictions?
What strikes me most about these expert perspectives is not the optimism or caution per se, but the genuine uncertainty about which strategies will prove correct.
Will disciplined, risk-aware investing outperform bold conviction bets?
Will partnerships dominate dealmaking, or will M&A continue as patent cliffs continue to make themselves felt?
Has the industry permanently (and finally) shifted away from scientific storytelling and towards operational pragmatism?
These are not questions with obvious answers.
And that, perhaps, is the most honest assessment of 2026. It will be a year of opportunity for those who read the landscape correctly, and real risk for those who don’t.