The Morgan Lewis cross-functional and cross-jurisdiction life sciences and healthcare teams were represented in San Francisco for the 44th Annual J.P. Morgan Healthcare Conference from January 12–15, 2026.
The conference reinforced a familiar but evolving message for the life sciences and healthcare industries: capital remains constrained, exits are uncertain, and success increasingly depends on scale, optionality, strategic, and regulatory clarity. While the outlook for a potential reopening of public markets remains positive, structural shifts in funding, deal-making, and investor behavior appear more enduring. Below are the principal themes that emerged from panels and private discussions throughout the week in the areas of life sciences and healthcare deal-making and the evolving regulatory landscape for medical products.
State of the Life Sciences Funding Environment
Throughout 2025, the initial public offering (IPO) window remained effectively closed for most biotech companies, with only 11 life science and biotech IPOs taking place throughout the year, all driven by special circumstances rather than broad market confidence. This trend is expected to continue in 2026, and as a result public markets continue to be an unreliable exit pathway.
Private capital, meanwhile, has become increasingly concentrated. Large “mega rounds” dominate the financing environment, typically led by a small group of institutional investors. Priority is given to programs with credible paths to revenue, de-risked platforms, or clear bolt-on commercial opportunities. Participants also noted that high private valuations from earlier cycles had largely been corrected by late 2025, in many cases proactively, as companies position themselves for a potential reopening of IPO markets. While some investors view these corrections as cyclical, there was broad consensus that capital concentration is a more permanent structural shift.
Pharmaceutical companies continue to play an important role in the ecosystem, deploying large capital pools through partnerships, licensing, and later-stage acquisitions rather than traditional equity investment.
Venture debt and royalty financing are being used more frequently to bridge capital gaps, though concerns remain about layering debt onto pre-revenue companies. Hybrid funding models—combining equity, licensing, and selective spinouts—are viewed as underutilized but potentially powerful if better aligned with asset maturity and risk profiles.
M&A, Strategic Partnerships, and Licensing
While there is cautious optimism about the IPO market improving in 2026, with IPOs having been largely unavailable, M&A has taken on heightened importance, not only as an exit mechanism but also as a driver of large private financings. Mega rounds are often justified by pharma demand for “frontline” assets, particularly in oncology and cardiometabolic diseases, rather than narrower rare disease programs.
Pharma’s approach has shifted toward more selective engagement, prioritizing clinically validated or late-stage assets and with increased reliance on bolt-on acquisitions, option deals, and staged partnerships that preserve downstream flexibility, especially for earlier-stage assets.
Deal structures are becoming more complex and increasingly oriented toward optionality, with hybrid transactions combining elements of M&A, licensing, and option arrangements now commonplace. At the same time, investors are negotiating enhanced downside protections, including ratchets, antidilution provisions, and milestone-based economics.
Growing Concerns Around Regulatory Uncertainty
After years of emphasis in the regulatory space of increasing consistency and predictability for medicinal product development, in the United States in particular 2025 took a sharp turn. Given the key role that the US Food and Drug Administration plays even in global development programs, regulatory considerations for development programs are a greater focus earlier in development, as heightened regulatory uncertainty is increasing risk for developers and investors alike.
Front and center are questions regarding both the short-term and long-term impacts of leadership and staff turnover at FDA over the course of 2025, including both shifts in policy and approach to regulatory decision-making and enforcement and impacts on review timelines and agency engagement with industry.
While visible impacts of FDA turnover in 2025 may have been surprisingly minimal, many are predicting that greater impacts will become evident over the course of 2026. In addition to these issues, many recent announcements from FDA are receiving a lot of attention from industry, including the Commissioner’s National Priority Voucher program, recent announcements regarding the default number of studies required for approval, and enforcement trends in drug advertising.
In contrast, developments in Europe are generally seen more favorably, with optimism around some of the changes being proposed to the legislative framework for medicines and clinical trials, such as the Biotech Act, and devices and digital/AI products published at the end of 2025. These proposals seek to streamline the development and authorization process and reward innovative products. Many European countries are also positioning themselves as “clinical trial hubs,” and companies are increasingly considering parallel US and EU development pathways so that options remain open and strategies can be amended as development progresses.
However, caution remains as to how quickly these proposals can be implemented and whether they will truly impact the development pathway. Global pressure on pricing and access also continues to be difficult, and changes to the regulatory pathway may not have a practical impact for companies if there continue to be difficulties with the pricing and reimbursement of their products.
It is clear that as regulatory considerations and products become more complex, realistic and well considered plans for development and marketing continue to be important deal-drivers for investors.
Hospital and Health System Strategies
Representatives from prominent non-profit health systems and academic medical centers provided insights into innovation and investments in the hospital and health system sector. As hospitals and health systems navigate financial headwinds, many are focused on expanding ambulatory, outpatient and primary care sites to reduce expenses and increase efficiency. Systems highlighted their pursuit of strategic partnerships to outsource non-core services and provide better patient access outside of inpatient settings.
Executives also noted increasing integration of digital health and participation in value-based care arrangements, with investments continuing in digital tools and the implementation of artificial intelligence (AI) to augment operations as well as clinical care. While AI has previously supported functions such as revenue cycle management, AI is being further integrated into electronic health records to create chart summaries and provide clinical insights. The use of AI scribes by physicians also has been demonstrated to increase job satisfaction, reduce burnout, and improve patient interactions.
Takeaways within Specific Sectors
- AI and Machine Learning in Life Sciences Development and Healthcare: Artificial intelligence and machine learning continued to be an area of focus and attention for pharma and healthcare. Both are delivering tangible benefits in drug discovery, molecule design, trial forecasting, and site feasibility. However, both technologies still face certain limitations, including capturing the “art” of clinical development, particularly in areas such as contextual judgment, strategic trade-offs, and decision-making. For example, improved logging of development decisions and rationales could lead to more meaningful AI integration in late-stage development and regulatory interactions.
- Innovation in China: China continues to expand its role as an innovator in the biopharma space, leading to a number of US and European companies partnering with Chinese companies.
- New developments in drug discovery, including targeted delivery of therapeutics such as antibody-drug conjugates and siRNA, are emerging from China, showing its shift to global innovator. Investors are also finding China’s condensed development timelines and overall lower costs of carrying out clinical trials in China compared to the United States or Europe appealing.
- Multinational pharma companies are increasingly sourcing innovation from China through licensing and co-development transactions, driven by faster development timelines and cost efficiencies. At the same time, cross-border transactions remain subject to evolving regulatory, data security, and geopolitical constraints, and as a result deal structures are becoming more sophisticated, with greater emphasis on ensuring compliance with evolving data and privacy laws, parallel development pathways, and early regulatory alignment to mitigate execution risk and preserve global commercialization optionality.
- Women’s Health: Women’s health was again a significant topic of discussion at the conference, with numerous meetings and sessions focused on the subject, including a panel hosted by Morgan Lewis on the Women’s Health Funding Landscape. Panelists Emma Tinsley, CEO of Weatherden and Elevara Medicines, Irina Berkon, CFO of the Digital Banking Network Metallicus, and Regina Salvat, Principal at Forbion, brought their depth of knowledge on company structuring, securing funding, and innovation to this year’s talk, providing attendees with actionable takeaways for key decision-making in 2026. Despite heightened social and cultural attention, women’s health remains materially underfunded. Investors cited compounding “risk stacking” in the sector, including unclear regulatory endpoints, complex translational pathways, safety expectations for long-term therapies, reimbursement uncertainty, and the absence of consistent pharma M&A precedents. A single blockbuster M&A or commercial success could materially change investor sentiment and unlock sustained venture funding.
- GLP-1 Programs: Industrywide impacts of developments in the GLP-1 space continued to attract attention, however the focus has shifted away from the approvals and launches themselves to longer-term and more systemwide impacts that the products are driving. This includes the shift toward direct-to-consumer sales of pharmaceutical products, the evolving reimbursement landscape, and the ongoing evolution of related markets.
Looking Ahead
Several actionable themes emerged during the week:
- Closely monitor Q1 and Q2 2026 for signs of reopening IPO markets and increased M&A activity.
- Prepare for increasingly complex, optionality-driven deal structures.
- Engage proactively and strategically with regulators.
- Explore flexible and hybrid financing models tailored to asset maturity.
- Track how momentum translates into capital deployment, including for development programs based in China and in arenas such as women’s health.
- Invest in documentation and institutional memory to support AI readiness and development efficiency.
While market conditions remain challenging, participants expressed cautious optimism that clearer valuations, creative deal-making, and targeted regulatory engagement could set the stage for a more functional exit environment in the years ahead. Our team will continue following the developments and keeping readers up to date.