The biotech M&A market is heating up as pharmaceutical companies confront a looming patent cliff that will strip $200 billion to $250 billion in branded medicine sales by 2032, according to an ING report published in January. As patents expire on blockbuster drugs, cheaper generic versions can enter the market and slash revenue for the original drugmakers.
The research projects both the number of acquisitions and the total dollars spent on deals will each increase 15% in 2026. Approximately 520 transactions totaling $230 billion expected across the sector.
The shift creates opportunities for investors in funds holding mid-cap biotech companies with drugs in advanced clinical trials, according to the ING analysis. Big Pharma is hunting for companies with drugs already proven effective in patients rather than betting on early-stage research. Some 80% of expected deals in 2026 focused on acquiring these more advanced treatments that can quickly move toward FDA approval and generate revenue.
The ALPS Medical Breakthroughs ETF (SBIO ) holds the type of companies pharmaceutical giants are targeting, according to ETF Database. The fund requires holdings to have at least one drug in Phase II or Phase III FDA clinical trials. This means each company has already demonstrated its treatment works in humans and is moving toward potential approval.
SBIO’s 87 holdings collectively have 205 drugs in Phase II trials and 118 in Phase III, according to the fund’s factsheet.
Pharma M&A Targets in SBIO Portfolio
An Equity Insider report published Monday highlighted diabetes and kidney disease as major chronic disease markets. The report notes 589 million people globally live with diabetes while 850 million are affected by kidney disease. SBIO holds companies developing treatments for these conditions, which are exactly what pharmaceutical companies need to replace their expiring drugs.
The fund’s diabetes-focused holdings include MannKind Corporation (MNKD), which develops inhaled insulin therapies. The company reported fourth-quarter revenue exceeding $100 million, according to the Equity Insider report. Viking Therapeutics, Inc. (VKTX) and Structure Therapeutics, Inc. (GPCR), which represent 2.2% and 3.4% of the portfolio respectively. Both companies are developing obesity treatments.
Travere Therapeutics, Inc. (TVTX), a 1.7% holding, focuses on rare kidney diseases, addressing the other major chronic disease area highlighted in the report.
The fund’s treatment focus breakdown shows rare and orphan diseases comprise 32.72% of holdings. Meanwhile DREEN conditions (dermatology, respiratory, eye, ear, and neurology) account for 29.67%, according to the fund’s factsheet. Cancer represents 21.46% and cardiology and hematology make up 16.14%.
SBIO has gained 58.5% over the past year, topping all ALPS ETF products in performance for 2025, according to ETF Database. The fund ended December with $141.9 million in assets under management and carries a 0.50% expense ratio.
Read more: ALPS ETFs in Biotech and Commodities Lead 2025 Gains
The ING report notes reduced uncertainty in the U.S. market following pricing agreements with branded pharmaceutical companies, while expected Federal Reserve rate cuts in 2026 will lower the cost of capital for acquisitions.
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VettaFi LLC (“VettaFi”) is the index provider for SBIO, for which it receives an index licensing fee. However, SBIO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SBIO.
