After years of market downturn, cautious optimism is returning to the biotech sector. At a recent BIOLINK fireside chat, Jalal Taleb, Senior Analyst at Octagon Capital Advisors, and Rami Rahal, Partner at MPM BioImpact, took stock of where the markets stand, what’s driving renewed M&A activity, and why China’s rise in clinical development is an existential challenge the industry can no longer ignore. 

A Rally Built on Fundamentals

From 2022 to mid-2025, the biotech sector endured a prolonged correction. The cleanup, both Jalal and Rami agreed, was necessary: during the 2020-2021 frenzy, companies with shaky fundamentals had gone public far too early in their clinical development at inflated valuations. Most of those companies have now gone extinct or became shells of themselves. 

What changed was the quality and consistency of positive news. Beginning in the summer of 2025, a series of compelling late-stage clinical readouts, led by French biotech company Abivax, demonstrated that the market would reward genuine scientific achievement. “It was a healthy rally,” said Jalal. “The market is basically a live scorecard of the quality.” Rami added that the market has shed about “20% to 30% of the low quality companies that were polluting the sector.”

M&A: The Engine is Running Again

After a two-year drought, during which valuations were low and patent cliffs loomed, M&A activity surged in late 2025 and has accelerated in 2026. “We’ve had 15+ M&A deals this year to date, over $50 billion in deal volume. And you’re not only seeing M&A on the public side, you’re also seeing M&A on the private side,” said Jalal. He pointed to mounting patent cliff pressure as the forcing function (Merck’s Keytruda alone is a $30B+ drug facing exclusivity loss in 2028), combined with a market that now rewards smart acquirers and penalizes companies that miss deals. 

BIOLINK chair François Nader added a word of caution: management systematically underestimates operational risk in M&A, in his experience, and should rigorously assess the real probability of achieving the milestones underpinning a valuation. 

What Investors are Looking For Now

Investor appetite has shifted decisively from platforms to assets. Four years ago, a compelling technology platform could attract capital on its own. Today, investors want to know: what is the first asset, which indication, what does the competitive landscape look like, and what is the near-term timeline? Jalal summarized the new bar:

• First-in-class or clearly best-in-class molecule, with expandable biology into multiple indications as an added plus.
• Biomarker or patient enrichment strategy that identifies the right patient population and de-risks the development path. 
• Tangible value visible within 12 to 24 months, not abstract platform optionality.

Drug Pricing and the MFN Debate

Hassan Jaroudi, Senior VP and Head of International at BridgeBio, raised the issue of Most Favored Nation (MFN) reshaping companies’ approach to ex-U.S. launches. Those filing in international markets might reserve the right not to launch if European pricing endangers their U.S. business. Rami cited Insmed’s decision to halt its launch in Europe and Japan of Brinsupri, despite having the first approved drug for non-cystic fibrosis bronchiectasis. The question of whether orphan and rare disease drugs will receive exemptions from MFN remains unresolved.

The China Challenge

Jalal and Rami identified China’s ascent as the single most structural shift facing the industry. China accounted for 30% of clinical trial launches last year, catching up with the U.S. Chinese biotechs have less regulatory hurdles, can enroll faster, thereby generating human proof-of-concept data more efficiently. Increasingly, Chinese biotechs are producing first-in-class molecules—no longer just me-too or me-better drugs. 

Over the last 24 months, there has been a significant uptick in U.S. pharma and biotech acquiring U.S. IP rights of Chinese assets, in both fast-follower drugs and first-in-class molecules, anchoring the ascent of biotech public markets in both Hong Kong and Shanghai exchanges. Rami raised caveats about data integrity: “there are reports that patients in China underreport tolerability issues to remain eligible for the trial.” Dr. Toni Choueiri recommended to “double check” Chinese data before drawing conclusions. 

Jalal noted that replicability of Chinese datasets in U.S. patients has increased, and more Chinese companies are presenting at notable U.S. and E.U. academic conferences and publishing in prestigious journals.

The Bottom Line

The biotech sector has emerged from a multi-year hangover, driven by genuine clinical progress and a long overdue M&A wave. But, the tailwinds arrive alongside structural headwinds: drug pricing pressure, an accelerating China, talent pipeline risk (H-1B restrictions), and an FDA in need of modernization. The investors who will win, Jalal and Rami argued, are those who stay disciplined on fundamentals, focus on specific assets, and engage China as both a competitive threat and a legitimate source of innovation worth partnering with.