Dealmaking in healthcare: A mid-year pulse check

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Haley Trethaway: Despite a year filled with macro uncertainty, deal making in healthcare remains active. Capital is continuing to flow to differentiated innovation, scalable platforms, resilient business models, and of course AI. In today's episode, we'll unpack the five key themes that have taken shape across the global healthcare landscape. Welcome to J.P. Morgan's Making Sense. My name is Haley Trethaway, and today I'm joined by Jerry Lee and Nick Richitt, global co-heads of healthcare investment banking at J.P. Morgan. Nick and Jerry, thank you for joining.

Nick Richitt: Excited to be here.

Jerry Lee: Thanks, Haley.

Haley Trethaway: As our first topic, let's hit on the market backdrop. Jerry, I'll throw this to you. So we're at the halfway point of 2026. How would you describe the healthcare deal environment today and what's different versus earlier this year?

Jerry Lee: It has been an incredibly busy time the last several weeks, months, and quarters, and that's across the entire spectrum of M&A, equity, debt, and the like. I would say, starting on the equity side, as you know well, the XBI — especially in biotech — is at five year highs. And every single week, we are seeing record setting pace across the full spectrum of equity products, including converts, data related follow-ons, and of course, innovative IPOs. And I couldn't be more thrilled about what our team's accomplishing with our clients. Now, when we think about the last couple of months and weeks, you and Ben Burdett have led the largest ever biotech follow-on for Revolution's medicines. That same week, you led the largest ever biotech IPO for Kailera.

And so I'm incredibly proud of the way that I think your team has really kind of handled the opportunity and really led the charge on behalf of our clients — and of course, their patients, to really fund that innovation of the next generation — because the innovation's truly there, and investors are clamoring to help finance that next wave of innovation. I would say the IPO markets and the XBI have certainly been buttressed, of course, by the M&A markets, which especially relative to earlier this year, relative to especially earlier last year, no comparison. And so I think people are seeing innovation as truly a global topic and sourcing that innovation wherever it makes sense to do so. We're seeing the U.S. look at European companies. We're seeing European companies like a U.S. company.

Just the last couple of months, our team was fortunate to announce the largest deal of the year. Cross border, that's Sun Pharma with Organon. We did just did the largest ever biotech private sell side in Europe for Tubulus to Gilead. So [it’s a] super exciting time. I would say people are looking across the side spectrum, thinking about the realm of the possible. So [it’s] super exciting time, super grateful for this team and thank you to all our clients for their support.

Haley Trethaway: And Nick, what about you?

Nick Richitt: Well, I think the story of healthcare year to date has really been bimodal. I mean, you think about the bio and pharma supercycle for the last six months, prior two years for services and health tech were actually pretty frothy, pretty active, whereas bio was pretty quiet. I think going into the year, we couldn't have been more excited. It felt like every subsector was firing on all cylinders. And then February happened. We got a combination of the SaaS apocalypse, which I know primarily is a technology condition, but it spread pretty quickly into a bunch of different adjacencies, [like] tech enabled services. And then we got the Iran war at the end of February. I would liken that combination of events very much so to Liberation Day from April of last year. It did suck the wind out of services and tech for about four months. And here we are in June and it feels like the engine is finally starting to move again.

We're starting to see deals come to market. The public equity side is a little bit slower for services in health tech, but I think as we get into the back half of the year, it will catch up to where the M&A market is. And we've seen some recent large announcements. I think there's a number that we're expecting in the back half of the year as well on the M&A side. The debt market's going to be more constructive and we do think of the debt market as a typical leading indicator of what's going to happen and equities in M&A.

Jerry Lee: Nick, now you got me going. The XBI sitting at basically a five-year high is incredible again, given where rates are, but it's really working. I mean, the innovation is very, very real. People are truly underwriting the next cycle of new modalities across oncology, INI and the like. And so we're super excited with, especially the cycle that's being driven by M&A. Now on the M&A side, what's been true this quarter, last quarter, last year, five years, 10 years ago is of course, as I've always said, LOEs.

And so every single large cap pharma is staring at a different set of LOEs. Some are later this decade, some are early next decades, some are even the back half of the 2030s, but they need to fill all of these LOEs. So the cycle continues. You've seen a number of large cap pharmas almost do a deal every week now. And so I think investors are especially excited about the recycling of capital. In many ways, I think the DRG investors, the large cap pharma investors, they're relatively price insensitive about what their large cap farmers are paying because the durability of these LOEs is just so large. So hopefully for all of us, the cycle continues. We continue to see XBI working and innovation continuing.

Haley Trethaway: On the topic of innovation, Nick, I'm going to throw the next question and topic to you. I want to spend a bit of time on AI given it is 2026. So AI has been a major theme for all of us across the different areas of healthcare, but how are you actually seeing it impact real decisions and transactions today with your clients?

Nick Richitt: Well, where are we not seeing it impact decisions? AI is the reason why deals are getting done. It's also the reason why deals are not getting done. It can be big data rich incumbents buying innovative AI startups. We're also seeing fast growing AI startups buying established businesses with existing distribution client bases. For the deals that aren't getting done though, it's a question of AI survivability and resilience. There's a lot of questions that are hard to answer right now and try as we might with some of our clients. I think there are some stories and some businesses out there that are turned in to show me stories and will be for at least another six to 12 months.

Haley Trethaway: So would you say even away from health tech, you're seeing your clients and companies sort of structurally repositioned around AI?

Nick Richitt: Absolutely, they are. I think what the SaaS apocalypse did is it changed the whole vernacular. All the terms and all the categories and all the ways that we use different language and phraseology to convey and communicate value has totally changed. And fundamentally a good company today is not that different from a good company two years ago. We're just explaining it differently, like more fundamentally about their ability to adopt or thrive in this new AI world in which we live. Again, you see it playing out with the public companies, all the public technology companies, health tech, even the services companies as they start to lean into these AI narratives and they offer up different data on all of their quarterly calls about how AI is transforming their businesses.

Haley Trethaway: So Jerry, let's spend a bit more time on the pharmaceutical supply chain. There's been no shortage of shocks to global pharma supply. You look at tariffs, energy costs, geopolitical disruptions. The list goes on. How are pharmaceutical and broader healthcare companies responding?

Jerry Lee: I think across healthcare, it doesn't matter if you're a services company or a pharma company. Everyone is thinking through the supply chain and the resiliency of the supply chain. And so I would say a lot of the Western large caps, both the U.S. and the European based large cap pharmas are thinking through piece by piece from API through to manufacturing exactly how integrated their supply chains are globally. Now, a lot of them had already thought through this, I would say in prior administrations and prior decades, driven by various you could argue externalities, meaning inversion wave also created a lot of thinking around just pharma supply chain, where do you actually base it? How do you optimize for tax? I think these days the question's even more critical as people think about the potential for true global shocks to where you're even getting fundamental API sourced from. And COVID showed us the importance of being able to actually have a fully built out, highly confident supply chain, the ability to manage shocks. And so I would say when I talk to CEOs, I think they're very focused on where they are sourcing API, how they're manufacturing. And Haley from the J.P. Morgan perspective with our SRI, Security and Resilience Initiative, we are working directly with our clients as to how we at J.P. Morgan can truly help with the resilience of supply chain across all industries, but especially pharma and biopharma.

Haley Trethaway: That's great, Jerry. Thanks.

Jerry Lee: Haley, from your perspective, what are you watching most closely in how healthcare companies are accessing capital right now?

Haley Trethaway: Great question, Jerry. So the equity capital markets are having a banner year. At the time of this recording, we're coming off a period where we just saw over 150 billion raised across sectors in the matter of 10 days between the Alphabet deal and the SpaceX IPO. So, it's a very exciting time in ECM broadly. But setting those jumbo deals aside, it's been incredible to see the continued momentum in biotech that you alluded to earlier. And with that, we've seen a strong level of activity both on the IPO and the secondary follow-on side. It's already been the most active year for biotech IPO activity since 2021, which is exceptional and we're only halfway through the year. And I think one of the thing that's been particularly exciting for our team is just the prevalence of larger and larger raises that we're seeing get done.

As you mentioned earlier, we've seen the two largest IPOs ever in the biotech space have both priced this year. One is for Kailera, which we led. We also saw the largest follow-on of all time for Revolution  Medicine, which was a great outcome as well. We've been seeing certain issuers leverage the convert product to raise additional proceeds in these transactions. And so seeing that broadening out of not just traditional follow-on capital, but seeing the convert market activated, has been really exciting and encouraging just to see the level of capital formation that we're having in the space. That being said, I don't want to over index too much to what we're seeing in biotech because it is a bit of a tale of two cities in ECM right now and this goes back to some of Nick's comments that we're seeing in other parts of healthcare because on the one hand, the market's wide open for AI, aerospace and defense, and I'd include biotech in that bucket.

Anything that's part of this bigger future trade and thematic is going incredibly well. But on the other hand, the market is far more selective for some sort of traditional defensive sectors, which a lot of healthcare falls into. And so deals are getting done. I mean, you can look at the Alamar IPO, for example, the first life sciences tool IPO we've seen since 2021, which we led back in April, but it is a higher bar and the market is a bit more selective when you get away from some of these bigger thematic plays. With that, we're seeing some companies stay private longer. They're thinking through private capital alternatives, they're looking to be creative around equity solutions, but whether you're in the camp of have or have nots, we know that the IPO process can feel incredibly rigid. And so we're always trying to look for ways to challenge that convention and innovate ways to raise equity capital for our clients. And so thinking outside the box we think is going to continue to be a major theme as we go forward.

Jerry Lee: I mean, Haley, you just mentioned kind of creativity, innovation, thinking outside of the box. Even in a market where, as you mentioned earlier, we're at a XBI five year high. We're double the volumes of last year. People still want your black belt advice around approaching specific market windows or timing. How do you think about that these days?

Haley Trethaway: I think when we think about market timing and windows, the only thing that we know for certain is that the future is uncertain. And so when we speak with our clients, we're encouraging everyone to get ready and to be ready. Market windows are going to continue to open and close, but preparedness is going to afford maximum optionality. And so getting ready, being ready is the best advice that we can give at this point. You don't want to miss an open window when it presents itself.

Nick Richitt: What’s interesting, you use the term capital formation and I think the beauty of a platform like J.P. Morgan is how we help our clients access capital in all its various forms. When a lot of us got into the business, call it 20 plus years ago, it felt like there were three flavors of capital. There was venture, there was private, and there was public. Nowadays, even for venture, there's various flavors. Private equity has moved upstream, downstream. We've seen things like the go private of electronic arts. We've seen these mega buyouts. We've seen growth equity turn into a new category and now with the SpaceX IPO, we've seen companies make it to nearly $2 trillion before going public. And I think one of the things our clients really do benefit from is J.P. Morgan's ability to access all those different flavors of capital and find the right investors for every opportunity.

Haley Trethaway: So switching gears, let's talk a bit about cross border and global innovation. Cross border activity has obviously been a key theme again this year, particularly around access to innovation. How are you thinking about that evolving and what role is China playing in particular in shaping the next phase of healthcare deal activity?

Jerry Lee: I think that patients really don't have borders. I think that oncology doesn't have borders. I think that immunology doesn't have borders. CNS doesn't have borders and therefore I think we as a candidly, as a financial community, we should think about innovation really without borders. And all of this is for one ends, which is patients are global. Now I think what's very, very top of mind for every single board and every single CEO is China, especially in biopharma.

When you look back at 2025, the sheer volumes of China BD deals into the U.S. and Europe were staggering. We saw 150 deals east to west, $135 billion of Biobucks and $7 billion upfront. And so incredible increase in the share volume of deals.

China has done in various industries over the last 30 or 40 years, they migrated from API to generics to biosimilars to me fives to me toos to now truly potentially best in class, first in class. And so it's a super exciting time to be involved in innovation, whether you're in China, the U.S., Europe, or otherwise. I think a lot of U.S. and European large caps specifically think about China as really a place of real innovation. They're spending real time on the ground. They're doing their own innovation summits in Shanghai, Zhangjiang district, thinking about really just where's the next new best in class or first in class oncology, INI, CNS asset coming from. So I would say it's an important time for investors to be focused on this space too. A lot of our Boston based investors now also have full-time teammates that they have in China, thinking about innovation in China, thinking about new coast, thinking about in licensing and the like. So it's very much a global market for these compounds, for this science now.

Haley Trethaway: Nick and Jerry, what's the one trend you're watching most closely in the second half of the year? Nick, let's start with you.

Nick Richitt: I would have to say the reentry of private equity into the market. I mentioned the EA (Electronic Arts) deal from last year feels like it's been remarkably quiet since then from the private equity perspective. And I think for all of them which have been and are invested in software, that's probably part of the reason why. They've been minding their own house and trying to rethink the value paradigm for companies they want to invest in. As we move into the second half, I think they're eyeing a lot of very attractive opportunities, whether those are public companies or private companies. And I think the ways in which they are going to pursue those opportunities are going to be creative. We've seen venture firms doing buyouts recently. We've seen private equity firms doing venture rounds and I expect we'll see more partnership between publicly traded companies and private equity firms as they look to find creative ways to get deals done.

Jerry Lee: So I think the one main thing that I would say my clients and I are truly watching is given the toppiness of the overall markets and the higher beta nature of where you and I operate in biotech is even with the M&A cycle continuing, which I see it continuing for the rest of the year, can we actually maintain this velocity and these volumes of the XBI and in financing? And so I think if inflation continues to worsen and we say rate hikes get pulled forward, I think that could be an issue, maybe not a defining issue, but certainly an issue for biotech financing markets. And as you can imagine, that obviously amplifies throughout the concentric circles of biotech financing from later stage converts to mid-stage follow-ons to early stage IPOs and therefore to series Cs and Bs and As and inceptions. So it's just something to watch.

I think on AI, Nick hit this a little bit earlier, super important topic for biotech and for pharma. I think a lot of large cap pharma, mid cap biotech and early stage biotech are all thinking through at least two facets of AI. Number one is I think across industries this is true too, is just how will AI change kind of the operational footprint and how we think about the basic fundamentals of the company. And that oftentimes is actually, it's really a cost question as they think about optimizing costs and optimizing processes and that's true outside of pharma as well. So I think a lot of large caps even have chief AI officers thinking about kind of overall processes and optimizing. What I think is most exciting, however, is an AI is not a new language for biotech. We've had machine learning, we've had computational biology for decades in biotech, but the key Pandora's box that we could try to unlock here is just can AI truly improve, accelerate the development, the discovery of novel compounds.

That's where I think the real excitement is. And you've seen a number of new unicorns in AI fluent biotech, that really could be revolutionary. I think many people have talked about, can we actually truly solve cancer in this generation? And it's possible that AI will help us do that. So that's what I go to sleep thinking about. That's what I wake up thinking about, which is just can AI actually truly, truly accelerate the innovation that the world needs today.

Haley Trethaway: Jerry, Nick, really appreciate the insights. Thank you for your time. For more on themes we discussed today, you can read J.P. Morgan's mid-year healthcare investment banking outlook, which we've linked in the show notes. And as always, thanks for listening to Making Sense.

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