Merger and Monetisation – Life Sciences Update – May 2026

Dealmaking and investment

Despite ongoing economic and geopolitical headwinds, global dealmaking activity has remained resilient. Several big hitters have announced deals, including:

• Eli Lilly - acquisition of Centessa Pharmaceuticals (sleep-wake disorders);
• Gilead – acquisitions of Arcellx (blood cancer) and Ouro Medicines (autoimmune disease); and
• Merck – acquisition of Terns Pharmaceuticals (blood and bone cancer).

Taken together, these transactions underscore a clear strategic theme: large pharmaceutical companies are positioning themselves ahead of looming patent expiries by acquiring smaller developers that have successfully navigated the clinical process and are approaching commercialisation.

Strategically, there is also a push towards diversification of portfolios to help guard future long term revenue streams and manage concentration risk. The clearest example of this is with Merck.

Merck’s flagship oncology drug, Keytruda, comes off patent in the USA in 2028 (with European exclusivity extending until 2031). Keytruda is reportedly worth £30bn a year to Merck who have been working hard to mitigate against the upcoming loss of protection. This has included a proactive acquisition strategy; aside from Terns, they have also done deals for Verona Pharma and Cidara Therapeutics in the last year. 

But in addition to M&A, Merck have announced that they are splitting their business into two divisions; oncology and non-oncology. The intention appears to be twofold: to preserve leadership in oncology while simultaneously broadening the company’s asset base. So far it’s working; at the time of writing Merck’s share price has risen by approximately 40% over the previous twelve month period.

What is the outlook in the UK?

The picture in the UK remains a mixed one. 

On the positive side, the quality of the UK’s academic study and research remains strong. That’s also combined with decent financial support for early-stage businesses (including university spinouts) who are closer to the start of the clinical process rather than the end. These advantages position the UK well at the front end of the innovation pipeline.

However, the momentum often falters when it comes to scaling up operations and doubling down on capital being committed. The UK is not so good at taking the remaining steps towards that spinout or start up getting full regulatory approval and having a product on the market.

The USA has been better at this for a sustained period of time. Part of this is due to the way in which the USA has a much greater depth of capital and larger venture capital funds which are dedicated to, or engaged in, the sector. This also explains why UK biotechs have been a popular target for US investors and buyers – the underlying assets are good, but the ability to fully exploit and develop them is not so strong.

Prices and the politics

In early April, the UK and the USA agreed a deal regarding medicine pricing. The issue of how much the UK (and Europe) is willing to pay for medicines has been a contentious topic over the last year – at times, that has been a source of tension between industry and government. The pharmaceutical industry has been keen to see a willingness for the UK to put more resource into buying medicines.

In brief, the UK government has pledged:

• to allocate more resource into acquiring new medicines;
• to raise the National Institute for Health and Care Excellence (NICE) Quality-Adjusted Life Years (QALY) threshold; and
• reduce the repayment rate under the Voluntary Scheme for Branded Medicines Pricing and Access (VPAG).

In return, the UK gets the benefit of no tariffs for three years on UK pharmaceutical exports to the USA and no further new tariffs will be placed on medical technologies for the same period.

The announcement is a meaningful step in the right direction as far as industry is concerned. It provides a greater level of certainty regarding the pricing regime and begins to address the issue of the UK being globally uncompetitive on medicine pricing. This is demonstrated by the £300 million investment in the UK that AstraZeneca has just announced, which gives a welcome economic boost to the UK government.

The pharmaceutical industry would like the government to go further by addressing the UK’s pricing structure as whole. To compete effectively on a global scale, the government will likely need to deploy a broader range of fiscal and regulatory incentives to attract research activity and inbound investment.

However, with the UK’s public finances under sustained pressure, it’s hard to see the level of investment deployed offered by government being strong enough to truly shift the dial. The reality is that the world is getting more competitive rather than less – the advances made by China mean that the USA is arguably no longer the only ticket in town.

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