Newsletter: Industry Insights
“Industry Insights” is a bi-weekly email newsletter published by Cain Brothers, a division of KeyBanc Capital Markets. The newsletter features innovative and original perspectives about healthcare services, healthcare IT, and life sciences from our team of experienced investment bankers. Read the latest newsletter content below, and subscribe to start receiving the newsletter in your inbox.
Key Leading Indicators Point to Sustained Tailwinds for the Pharma Services & Tech Ecosystem
The pharma services and technology universe is approaching the end of 2026 on markedly firmer footing than it stood a year ago. Biotech funding has surged back toward record territory; clinical trial starts are compounding on a multi-year recovery; and FDA approvals are running well ahead of last year’s pace, supported by continued innovation. Each of these leading indicators — capital formation, pipeline breadth, and regulatory throughput — point in the same direction, and taken together, there is much cause for optimism as investors look forward to Q4 2026 and beyond.
Biotech Funding
Trailing twelve months biotech funding has staged a decisive recovery, climbing from a post-2022 trough of roughly $48 billion to $98 billion in quarter two of 2026 — within striking distance of the $100 billion peak set in quarter one of 2021 and more than double the annual trough reached just 3 ½ years earlier. Year-over-year growth has re-accelerated sharply through 2025 and into 2026, reflecting a follow-on and IPO market that has reopened alongside steady venture deployment.
The recovery is being reinforced by an unusually active biopharma M&A market. Top 20 pharma have signed 21 biopharma transactions >$1 billion through September, surpassing the 10 such deals struck across the same period of 2025 — pushing aggregate deal value toward $84 billion in nine months versus $51 billion over the same period last year. That pace of consolidation matters beyond the headline values: capital returned to investors via M&A is being recycled into new company formation and earlier-stage pipelines, refilling the funnel that eventually flows across the pharma services and tech ecosystem.
Innovation shows no sign of slowing either. Moderna and Merck’s personalized mRNA cancer vaccines, paired with Keytruda, cleared a pivotal Phase 3 melanoma readout in August 2026. This marks the first positive late-stage result for an individualized neoantigen therapy, and a milestone likely to catalyze further investment in personalized oncology to continue to drive investment alongside continued investments within in-demand therapeutics areas, such as central nervous system and rare and orphan.
Clinical Trial Starts
Clinical trial starts have followed a similarly constructive path. After the most recent bottoming in late 2022 amid funding constraints, quarterly starts have built steadily higher, reaching 1,367 in 2Q26 — a post-2021 high and a clear signal that sponsors are once again committing capital to new programs, rather than simply triaging existing ones. For contract research organizations and adjacent outsourced service providers, rising starts are one of the most direct proxies available for future bookings, since nearly every new trial requires some combination of outsourced design, site management, data, monitoring capabilities, etc. The steadiness of the climb — six consecutive quarters of improvement — suggests this is a durable trend.
FDA Approvals
FDA approval activity offers further confirmation of the sector’s momentum. Through September 2026, the agency had cleared 51 novel drugs, up meaningfully from 35 approvals over the same period the prior year — a roughly 46% increase that puts the year on pace to rank among the more productive of the past decade, alongside 2023 and 2018. Sustained approval throughput validates the regulatory pathway biopharma and their investors are underwriting, and it signals to service providers that the back end of the pipeline — regulatory affairs, launch readiness, and commercialization support — will have steady work to absorb.
Outlook
Put simply, the transaction environment has improved, and pharma services and tech are back in favor across the board. We see this reflected in our own conversations across the space — companies with a genuine right to win are performing well, in both services and technology, and we expect transaction volume to increase.
That said, this recovery differs from prior rebounds in one important respect: investors are more discerning than they were in past up-cycles, and capital is flowing selectively. A rising tide will lift the strongest franchises meaningfully, but, unlike previous recoveries, it will not lift all boats — differentiation, not sector beta, will determine the winners from here.
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