The author Juergen Eckhardt, pictured center, speaking this week at a panel on medical innovation hosted by the WuXi Global Forum, at the JP Morgan Healthcare Conference.
Kimberley Davidson
This week, I had the pleasure of attending the annual J.P. Morgan Conference, the healthcare sector’s largest dealmaking event of the year. It’s a time I look forward to each year to meet promising startups, scout emerging innovations, reconnect with partners, peers and colleagues from around the world, and take the pulse of the industry. Luckily, this year we enjoyed beautiful sunny weather in San Francisco, which aligned well with the industry’s optimistic mood to kick off the year.
Those who follow this space may recall that one year ago, the industry also started with positive momentum, but the first half of 2025 became mired in geopolitical uncertainty and slower dealmaking. Then the pace picked up in the second half of the year, with multiple deals over $10 billion, as reported by Fierce Biotech. The industry is now in a strong position to continue the momentum, thanks to a robust innovation landscape for large pharmas like Bayer looking to acquire or partner with biotechs, or license new potential drugs. We’re also seeing decently positive capital markets to support investments, and possibly lower interest rates will materialize. In another positive sign, the XBI index of U.S. biotech stocks is up around 40% since last year at this time.
After the dreary “biotech winter” of the last several years, with a challenging IPO environment and reduced dealmaking across the industry, many experts including myself are hopeful that this year will cement our great reset. That would be wonderful news for companies and patients alike, because more deals mean more development opportunities for promising potential medicines that could eventually end up in your medicine cabinet, pharmacy, or hospital. Here are the five trends I’m watching closely this year:
1) The Surge in Dealmaking and M&A Activity
I expect to see more and bigger deals this year, with large pharmas focused on acquiring best-in-class and first-in-class opportunities. At an Endpoints panel with insiders predicting the dealmaking forecast for the year, the chief business & strategy officer at Abbvie, Nicholas Donoghoe, stated that the industry is in a “renaissance moment” right now, because there are many attractive assets ripe for further development and commercialization. I tend to agree, as the science is taking us in new directions with emerging modalities—some of them even curative–that were not on the horizon a decade ago.
2) China’s Rising Influence
There’s no longer any question: China has become a major player in the biotech industry alongside the U.S. and Europe. Seven years ago, China was developing mainly “me too” drugs, following the West’s novel science. That’s no longer the case. We’re now seeing a steady ramping up of their capabilities to deliver truly novel assets across multiple therapeutic areas, including not only cancer, but also inflammation, cardiometabolic diseases and rare diseases. It’s estimated that one-third of innovative medicines today are being sourced from China. Case in point: Nine deals between Western pharmas and Chinese companies have already been announced in 2026.
I visited China myself last year, where Bayer has had an established presence for more than 140 years, and I was genuinely impressed with the quality of the science and the speed with which their universities have built top-notch academic hubs.
In addition, China’s favorable policy environment toward biotech enables fast and cost-effective clinical trials, leaving many in the West calling for reforms to our own regulatory environments to match their pace. Alessandro Maselli, the CEO of Catalent, a contract development and manufacturing organization, said on an Endpoints panel about biotech predictions that running a phase 1 clinical trial in China now is about 30% cheaper and faster than in the U.S. It’s no surprise that some companies are going there to get first-in-human data.
“The U.S. let its guard down in a way by not having regulatory innovation and leaving a big hole,” said Bob Nelsen, a co-founder and managing director at ARCH Venture Partners, on a separate Endpoints panel called “Leaning into Disruption.”
To the FDA’s credit, despite the recent turmoil, its leadership has signaled an openness to regulatory reform. Still, uncertainty remains.
3) The Impact Of AI On Drug Discovery
The boom time in AI and biotech continues apace. One of the notable collaborations announced this week was between the chip giant NVIDIA and pharma giant Eli Lilly, who will jointly invest $1 billion over five years to develop a “co-innovation AI lab” tackling the “hardest problems in drug discovery.”
There’s no question that AI is already fundamental to drug development. At Bayer, we’re using it for many purposes, including to identify novel targets, streamline clinical trials, and develop novel drug candidates. Yet it’s still too early to witness a drug discovered by AI hit the market. I believe we will get there; it’s just a matter of when. Of course, we still expect human interaction to play a key role in the drug development process given the importance of safety to our industry.
One company whose progress I’m closely following is Recursion Therapeutics, formerly a Leaps portfolio company before it went public. Recursion’s platform leveraged AI insights to screen thousands of compounds and identified one with the potential to reduce polyps in FAP, a form of hereditary colon cancer. Last month, Recursion announced the compound’s phase 1b/2 results: it demonstrated rapid and durable reduction of polyps at 25 weeks post-treatment. These data marked the first clinical validation of Recursion’s AI platform.
Lots of hype still surrounds AI, to be sure, but the better the training data gets, I believe the better the outcomes will be.
4) Global Market Dynamics
The issue of drug pricing between America and the rest of the world is presenting complexities for many pharma and biotech companies. President Trump has negotiated with sixteen companies to lower the U.S. price of their drugs to more closely match what other developed nations pay, a policy referred to as “Most Favored Nations.” In exchange, Trump granted them a three-year exemption from the threat of tariffs.
European countries pay less than America for the same drugs because of price negotiations by their national health systems. A report from the U.S. Office of Health Policy found that prices for drugs in America across brands and generics were nearly 2.78 times as high as in comparison countries, which included France, Germany, and Italy, among others. But that comes with delayed market entry for European patients. As Sebastian Guth, the chief operating officer of Bayer Pharmaceuticals, recently told Reuters News: “If you look at innovative medicines that were launched and approved over the past 10 years, Americans have access to 80% of those while Europeans have access to less than 50%. There’s structurally a very significant delay in Europe.”
A major question now is whether European countries will agree to pay more for medicines in exchange for faster access. Amid the uncertainty, innovative medicines may continue to face roadblocks on their path to Europe.
5) Emergence of New Modalities
The trend that most excites me is the rise of new therapeutic modalities that could significantly improve patients’ lives across many diseases. In particular, I’m optimistic about siRNA, a promising modality that offers the possibility of silencing specific genes (and Bayer has just announced a strategic collaboration with Souffle, a Leaps company and leader in the field, to develop an siRNA-based treatment for a rare subset of heart disease).
I’m also hopeful that we will see continued advances in xenotransplantation–transplanting gene-edited pig organs into human patients. A clinical trial is underway now in kidney patients led by Leaps portfolio company eGenesis.
I’m anticipating the continued advancement of cell therapies for autoimmune diseases like lupus, broadening the scope of such therapies beyond blood cancers. And I believe there is great potential for cell and gene therapies in the treatment of neurodegenerative disorders like Parkinson’s disease and Alzheimer’s disease.
We are still in the early innings of these developments, so stay tuned. I look forward to reporting on the promising opportunities this year for emerging medicines to transform the lives of millions of patients.
Thank you to Kira Peikoff for additional research and reporting on this article.