From scale to proof: healthcare and life sciences capital in 2026

Insights from the KPMG 2026 Healthcare and Life Sciences Investment Outlook

Healthcare and life sciences capital markets are entering a more constrained, more selective phase. After a volatile 2025 shaped by reimbursement pressure, regulatory recalibration, and uneven monetary easing, the investment environment in 2026 is no longer defined by expansionary ambition. It is defined by proof: proof of execution, proof of margin resilience, and proof that innovation can translate into operational and financial durability under tightening global constraints.

The KPMG 2026 Healthcare and Life Sciences Investment Outlook captures this inflection clearly. Transaction volumes declined across most subsectors, yet capital did not retreat. Instead, it concentrated. Fewer deals closed, but those that did were larger, more targeted, and structurally more complex. This is not a cyclical slowdown. It is a structural reset in how healthcare capital evaluates risk, return, and resilience.

Capital is repricing execution risk

The most important signal from the report is not where capital is flowing, but why. Growth narratives alone no longer clear investment committees. Assets are increasingly evaluated on near-term cash flow visibility, regulatory durability, and the ability to operate profitably within tighter labor, tax, and trade regimes.

This explains the divergence seen in 2025 data. Overall deal volumes fell year over year, while transaction values rose. Capital is shifting away from broad portfolio accumulation toward fewer, higher-conviction bets. In practical terms, this favors platforms with established reimbursement pathways, regional density, and demonstrated cost discipline over speculative growth models.

Healthcare services illustrates this dynamic most clearly. As care continues migrating toward lower-cost settings, assets in outpatient care, behavioral health, home-based services, and ambulatory surgery remain structurally attractive. These models align patient demand, payer incentives, and capital efficiency. Importantly, they also offer clearer levers for margin protection when reimbursement tightens.

Regulation, tax, and trade are now deal drivers

Regulatory pressure is no longer a background risk. It is an active determinant of deal structure and asset selection. Drug price negotiations, reimbursement recalibration, and tariff uncertainty are already reshaping portfolios. What is newer—and more strategically consequential—is the impact of global tax realignment.

The introduction of the 15% global minimum tax under Pillar Two, alongside domestic fiscal restructuring such as the One Big Beautiful Bill Act, reframes low effective tax rates from advantage to liability. Intellectual property location, R&D domiciling, and supply-chain design are now central to transaction logic. Deals increasingly embed tax restructuring alongside operational integration, particularly in life sciences.

Trade exposure compounds this pressure. A significant share of US-marketed medical devices faces potential tariff exposure ranging from 25% to 100%. In response, customs valuation strategies such as First Sale for Export and the unbundling of US-based R&D from customs value are becoming material margin-protection tools rather than niche compliance tactics.

Innovation is maturing, not slowing

Despite tighter capital discipline, innovation intensity is not declining. It is maturing. Investment is shifting away from broad technology experimentation toward infrastructure that directly improves productivity, accuracy, and cost control.

In healthcare IT, artificial intelligence has moved decisively from pilot programs to operational backbone. Adoption now centers on functions that absorb structural constraints: revenue cycle management, clinical documentation, diagnostics, and capacity planning. The emphasis is not novelty, but throughput.

A notable evolution is the growing focus on AI-enabled clinical decision support systems. These platforms, projected to become a multibillion-dollar market over the next decade, address a core operational bottleneck: clinician data overload. By synthesizing patient data into actionable insights, CDSS improves diagnostic accuracy while reducing cognitive and legal risk. This directly links technology investment to quality of care and liability management.

In life sciences, innovation is similarly shifting beyond traditional genomics. Multiomics, proteomics, and spatial biology enable simultaneous analysis of multiple biological layers, allowing more precise tumor subtyping and prediction of drug resistance. This strengthens diagnostic defensibility and supports more targeted therapeutic pipelines—an important advantage as patent cliffs approach.

Pipeline pressure meets geopolitical reality

Patent expiration pressure remains one of the strongest structural drivers of deal activity. Nearly 200 drugs are expected to lose exclusivity within five years, placing over $200 billion in revenue at risk. This has intensified competition for late-stage and commercial assets, particularly in biopharma.

However, pipeline replenishment now collides with geopolitical constraint. China currently represents roughly one-third of the global monoclonal antibody pipeline, making it a critical source of innovation. At the same time, policy initiatives such as the BIOSECURE Act aim to reduce dependency on Chinese-linked assets.

This creates a strategic tension. Rapid decoupling increases risk for companies already racing to replace expiring revenue streams. As a result, cross-border dealmaking continues, but with heightened scrutiny, layered contingencies, and a growing emphasis on optionality rather than full separation. Geographic diversification, rather than binary reshoring, is emerging as the more viable near-term strategy.

Infrastructure is becoming a bottleneck

One of the most underappreciated constraints highlighted by the report is infrastructure capacity, particularly in logistics. Advanced therapies—mRNA vaccines, biologics, and cell and gene therapies—depend on ultra-cold storage and specialized transport. Inadequate cold-chain infrastructure can undermine commercialization regardless of clinical success.

This has strategic implications beyond healthcare. Logistics providers are aggressively acquiring specialized assets to build end-to-end cold-chain capabilities, signaling that control of infrastructure is becoming as important as control of intellectual property. For investors, logistics readiness is increasingly a gating factor in evaluating advanced-therapy platforms.

Payers, providers, and portfolio rationalization

In payer segments, regulatory scrutiny and margin pressure have constrained megadeals. Instead, capital is flowing toward selective acquisitions and partnerships aimed at improving analytics, value-based care enablement, and provider integration. AI adoption in back-office operations is accelerating, but not without legal and regulatory friction, particularly around claims management.

Hospitals and health systems, meanwhile, are actively reshaping portfolios. Inpatient assets are being divested, while outpatient platforms are acquired to rebalance cost structures and align with reimbursement trends. These moves reflect necessity rather than opportunism. Persistent labor shortages, compliance burden, and margin compression leave little room for inertia.

Risk is concentrating, not disappearing

The risk landscape in 2026 is narrower but sharper. Regulatory and tax compression remains the dominant macro risk, amplified by trade policy volatility. Geopolitical exposure, particularly in innovation sourcing, introduces additional uncertainty. Workforce shortages persist as a structural limit on scalability, regardless of technology investment.

Perhaps most critically, AI governance risk is rising. As clinical and operational AI systems scale, gaps in oversight, explainability, and regulatory clarity create exposure that can erode trust and value quickly if mismanaged.

What this cycle rewards

The healthcare and life sciences investment cycle entering 2026 does not reward speed or scale for their own sake. It rewards coherence. Assets that integrate technology, tax structure, logistics readiness, and regulatory strategy into a unified operating model are attracting capital. Those that rely on narrative momentum without structural resilience are not.

This is a market that values proof over promise. Capital is still available, innovation remains strong, and dealmaking will likely rebound selectively. But the bar has moved. Discipline is no longer a defensive posture. It is the primary source of advantage.