Life Sciences Outlook 2026: Growth, AI, and Activism Risks Shape Industry

The life sciences industry approaches 2026 with strong optimism, as 92% of leaders remain positive about their company's growth outlook despite a slight dip in revenue growth in 2025, according to a C-Suite Barometer report. Technology transformation, particularly artificial intelligence, is the paramount strategic focus, with nearly 70% of U.S. executives reporting AI is delivering a substantial impact and 90% having realigned organizational structures to facilitate its implementation.

Growth expectations are being driven by innovation in GLP-1 drugs, where transformation from syringe-based to oral-based delivery methods is advancing. A commercial agreement between Novo Nordisk and Hims & Hers allows the telehealth platform to distribute branded Ozempic and Wegovy, ending an earlier dispute over compounded GLP-1 products. Another growth driver is anticipated loss of exclusivity for key moneymakers, which is expected to fuel merger and acquisition activity as companies seek to replenish pipelines, though macroeconomic uncertainty about interest rates may affect investment.

However, headwinds include tariff-related uncertainties, with drug manufacturers scrambling to source within the U.S. or consider building new facilities, and medical device companies facing confusion at ports about which tariffs apply. Leadership changes at the U.S. Food and Drug Administration since early 2025, including the departure of many senior leaders and workforce reductions, create uncertainty about investment in vaccine trials, especially for mRNA technologies.

Simultaneously, shareholder activism in the life sciences sector has intensified, with more than 320 public campaigns initiated since 2020 across life sciences and healthcare companies. In 2025, approximately 400 public activist campaigns were launched across all U.S.-listed companies, dipping slightly in the first half due to tariff pressures and subdued M&A before rebounding. Activist funds target life sciences companies due to their pre-revenue business models, binary valuation dynamics, and persistent trading below cash or asset value.

Among biotechnology and pharmaceutical targets, approximately 75% to 80% are pre-revenue companies, with activism heavily concentrated in small- and mid-cap firms—72% of targets have market capitalizations between $50 million and $1 billion. Activist objectives commonly include a sale of the company, board changes, return of capital, or alternative value-creation strategies. The trend of "swarming," where multiple activists target the same company simultaneously, has increased pressure, and historically high levels of CEO and senior management changes linked to campaigns were seen in 2024 and 2025.

Despite these challenges, the sector continues to boost investment, with 67% of firms increasing spending averaged across all business activities. The top factors holding back growth are increased competition (55%) and supply chain restrictions (47%).