Longevity
Biotech IPOs jumped 573% in 2026, but early-stage startups are still struggling
By Life and Health Today Staff, . Life and Health Today.
Biotech's public markets staged a sharp recovery in 2026, with IPO proceeds reaching $7.776 billion across 27 offerings through the third quarter, up from $1.155 billion across 11 offerings in all of 2025, according to Locust Walk's 2026 Q3 Market Conditions Report. The two largest biotech exchange-traded funds (funds that track baskets of publicly traded biotech stocks) reflected the same momentum: the iShares Biotechnology ETF gained 34% over the twelve months ending in late October, and the State Street SPDR S&P Biotech ETF gained 39% over the same period, according to Genetic Engineering News.
Geoff Meyerson, CEO and co-founder of Locust Walk and co-founder of the startup incubator Banyan BioInnovations, told Genetic Engineering News that the sector has "absolutely had a comeback year." He was cautious about what that means for the full market.
Why startups are still struggling despite the rally
The IPO recovery has not translated into easier conditions for early-stage companies. Meyerson described the climate for startups seeking venture capital as still chilly, and the Locust Walk report shows that global licensing deals, one of the main alternative routes to capital, fell to a two-year low in the third quarter: roughly $48 billion across 41 transactions, down from $71.5 billion across 43 transactions in the second quarter. The average deal size dropped from $1.662 billion to $1.171 billion, with activity shifting toward clinical-stage assets and away from earlier, milestone-heavy discovery work.
Mergers and acquisitions told a different story over the longer arc. Total M&A value for the first three quarters of 2026 reached $173 billion, already larger than the full-year 2025 figure, according to Locust Walk. The third quarter alone came in at $42.1 billion, down from a three-year high of $80.7 billion in the second quarter.
How China became the center of global licensing
The most striking shift in the Locust Walk data is geographic. China accounted for 58% of global licensing deal value through the third quarter of 2026, up from 48% a year earlier. The United States placed second at 26%, with Europe and the United Kingdom together at 8%.
Meyerson explained the dynamic to Genetic Engineering News in terms that have little to do with science and a great deal to do with capital markets. Hong Kong's public markets, which Chinese biotech companies used heavily to raise money, have become significantly harder to access because of regulatory policies. At the same time, M&A accounts for roughly 1% of total deal value out of China, leaving licensing as the primary way Chinese companies can generate revenue or return capital to investors. "The licensing deals have become the lifeblood and the source of revenue or capital for Chinese companies," he said.
He also flagged a structural difference in how Chinese deals are priced: upfront payments tend to be a smaller share of total deal value, with large milestone payments making up the difference. Many of those milestones, he said, will never be triggered, which inflates the headline figures and makes direct comparisons with U.S. deal values misleading.
Geopolitical risk runs in both directions
Meyerson was asked about Washington tightening rules on U.S.-Chinese collaborations. His answer pointed as much at Beijing. On October 16, he noted, the Chinese government announced restrictions on transferring certain technology platforms outside China. "There's just as much, if not more, risk in the actions of the Chinese government compared to the U.S. government," he told Genetic Engineering News, adding that one-party rule can move faster and with more permanence than legislation in the United States.
His read was that cross-border deals will not be shut down entirely, but that conditions will get harder before they ease, driven by both governments.
On the competitive pressure Chinese activity creates for U.S. companies, Meyerson said some American firms have stopped publishing early-stage pipeline data and are delaying patent filings to prevent competitors from designing around their work as soon as a patent becomes public. Whether that competition is affecting U.S. stock valuations directly, he said he was uncertain: the clearer effect is that positive data from either country can move prices across a drug class, the same way any competitor's results can.
The Locust Walk report covers deal activity through the third quarter of 2026. The Genetic Engineering News interview was published as edited for length and clarity.
Life & Health Today provides information for educational purposes only, not medical advice, diagnosis, or treatment. Always consult a qualified healthcare professional.