After years in a trough, dealmaking involving contract development and manufacturing organizations (CDMOs) for the biopharma and medical-device industry is poised for a revival.

Pent-up private equity exits, improving credit markets, intensifying onshoring, and a shift toward more specialized, higher-value modalities are all aligning, dealmakers said.

“We’ve entered 2026 with twice the value and volume of activity that we entered 2025 with – and 2025 was a growth year,” said Jeremy Johnson, senior managing director at Bourne Partners.

The period between 2022 and 2024 saw a structural reset in biopharma valuations, as rising rates led to a drop in pharma funding. Deal activity and valuation multiples sank with it. With credit markets and the financing environment recovering, buyers will want to strike before valuations reset in 2026, said Mark Freitas, a managing director at Alvarez & Marsal.

Source: Mergermarket, data correct as at 26-Feb-26

Regionalization, specialization

Several catalysts for a rebound are at play, according to Johnson.

Debt markets have loosened, rates are drifting down, and yields are tightening, reviving LBO financing.

Regionalization is another driver. Even without tariffs, supply-chain shortening that began during Covid-19 has continued as governments push for domestic drug production for national security reasons, Johnson said. Regulatory policies, including passage of the BIOSECURE Act, will reward domestic production of branded or generic drugs. That will spur CDMO M&A as pharma companies shift manufacturing to local markets, he added.

Specialization is the third catalyst. The previous M&A cycle peaked in 2021 with CDMOs trying to “do everything” for pharma. The next cycle will emphasize narrower expertise – sterile injectables, radiopharmaceuticals, complex biologics – leading to consolidation as some companies acquire to specialize and others shed non-core assets, said Johnson.

Medtech CDMOs

Many device makers, facing slower growth and pricing pressure, are carving out their manufacturing assets to focus on innovation. Teleflex is a case in point, said Freitas. In December, it agreed to sell its Medical OEM business to Montagu and Kohlberg for USD 1.5bn and carved out its acute care and interventional urology units to Intersurgical.

“Teleflex is a big deal in the industry, in the sense of the size and the number of assets that it’s doing,” said Freitas. “Everyone’s watching that as we’re coming out of the trough – just to understand where valuations will set at.”

Freitas said three “archetypes” of MedTech CDMO platforms will be in demand in 2026.

Regenerative and biomaterials platforms – involved in advanced materials for tissue engineering, wound healing, and organ regeneration – is the first. Evergen and Regenity are potential attractive targets in that category, he said.

Precision manufacturing platforms – focused on components for minimally invasive surgical devices and complex implants – is the second archetype. A fragmented market ripe for roll-ups, companies to watch include Alleghany Performance Plastics, Cretex Medical, and Forj Medical.

Specialty and modality platforms – focused on specialized areas like advanced imaging and radiopharmaceuticals – is the third type. Eckert & Ziegler, Nucleus RadioPharma and Triple Ring Technologies are companies in that space, said Freitas.

MedTech CDMO assets aligned with surgical robotics, cardiology, and in-vitro diagnostics are attracting buyers, said EY-Parthenon’s Mark Ginestro and Alex Diamond.

Next, medical device companies may reacquire manufacturing assets they previously divested. For years, they outsourced manufacturing to CDMOs, which then expanded into areas such as combination drug devices, development and regulatory services, said Cheryl Reicin, international chair of life sciences at Mintz. With rising pressure on costs, reimbursement, and margins, some larger device OEMs may now see value in bringing those outsourced services back in-house, she said.

Biopharma hotspots

Biopharma funding has also been recovering in recent months, creating renewed demand for manufacturing as the fresh capital gets deployed.

Pharma CDMOs focused on sterile injectables remain highly coveted due to constrained capacity from soaring demand for GLP-1 drugs, said Johnson. Those factors underpinned Novo’s USD 17.3bn acquisition of Catalent in 2024.

With the future of clinical development shifting to complex, large-molecule drugs, the manufacturing of advanced drug modalities, such as anti-drug conjugates (ADCs), is also in demand, Johnson said.

Radiopharmaceutical manufacturing is yet another hot segment given the uptick in clinical development and the specialized production needed for isotopes with short half-lives. Johnson flagged AtomVie and PharmaLogic as companies to watch there.

Meanwhile, large multinationals such as Thermo Fisher and Lonza will likely prune their portfolios as they focus, while speculation persists around further portfolio shaping at Novo-owned Catalent.

Private equity exits

Many PE-backed CDMOs have been held beyond their typical hold periods due to the weak exit environment in 2022-24, said Freitas and Johnson.

With demand recovering, performing assets are expected to come to market this year, Johnson said.

Likely exit candidates, he added, include Permira-backed Cambrex, EQT-backed Recipharm, Thomas H Lee/Frazier-backed Adare Pharma Solutions, CD&R-backed Sharp Packaging Services, and Altaris Capital-backed Kindeva Drug Delivery.