CNBC Television• Dec 31, 2025• 3:30Interview

BMO's Evan Seigerman: More clarity out of the FDA could drive smaller biotech names in 2026

Evan Seigerman•Head of Healthcare Research, BMO Capital Markets

Executive Summary

The healthcare sector is recovering from a significant 2025 underperformance, with the obesity drug market remaining a dominant and durable investment theme.
Eli Lilly is viewed as executing exceptionally well and is preferred over Novo Nordisk, despite Novo's recent regulatory approval for an oral GLP-1 pill.
Merck & Co.
is seen as a positive comeback story, proactively building a pipeline through R&D and M&A to address the future patent expiration of its blockbuster drug, Keytruda.
A wave of M&A is anticipated across the pharmaceutical industry, as major players like Merck, Bristol Myers Squibb, and Novo Nordisk need to acquire assets to fill pipeline gaps.

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Concerns Raised

Disorganization and lack of clarity at the FDA is creating uncertainty for the sector.
Looming patent cliffs (Loss of Exclusivity) for blockbuster drugs like Keytruda pose a significant risk if not managed proactively.
Novo Nordisk may struggle to gain ground on Eli Lilly, even with its new oral drug approval.

Opportunities Identified

The obesity drug market is a durable, long-term growth category.
Increased M&A activity will create value, particularly for smaller biotech companies with promising assets.
Companies like Merck that are successfully building a post-patent cliff pipeline represent a compelling investment thesis.

Key Themes

Obesity Drug Market Dynamics

The GLP-1 obesity drug market is considered a long-term, durable investment category. The competitive landscape is highlighted by Eli Lilly's strong execution versus Novo Nordisk's efforts, with the recent approval of Novo's oral pill not seen as enough to shift the balance.

This theme is critical for investors as it identifies the key players and competitive factors in one of the most significant growth areas within the pharmaceutical industry.

Pharmaceutical M&A Acceleration

There is a strong expectation for increased M&A activity driven by large pharmaceutical companies needing to fill holes in their drug pipelines. The scarcity of high-quality assets makes smaller biotechs with positive clinical data prime acquisition targets.

This signals a major strategic focus for large-cap pharma and presents a significant potential catalyst for valuation and investment returns in the biotech sector.

Navigating the Patent Cliff (LOE)

The discussion on Merck & Co. exemplifies the strategic challenge of managing the loss of exclusivity (LOE) for blockbuster drugs like Keytruda. The company is being rewarded by the market for successfully developing and acquiring new assets to ensure growth beyond its key patent expiration.

This is a fundamental issue for all major pharmaceutical companies, and their ability to manage this transition is a key determinant of long-term shareholder value.

Regulatory Uncertainty as a Headwind

The analyst expresses concern over disorganization and a lack of clarity at the U.S. Food and Drug Administration (FDA). This uncertainty is presented as a drag on the sector, and increased regulatory clarity is viewed as a potential catalyst for improved performance, especially for smaller biotech companies.

FDA actions directly impact drug approval timelines and market access, making regulatory risk a key variable for investors in the healthcare space.

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Topics

Healthcare Sector Pharmaceuticals Biotechnology Investment Analysis Market Outlook Obesity Drugs GLP-1 Eli Lilly (LLY)Novo Nordisk (NVO)Merck & Co. (MRK)Bristol Myers Squibb (BMY)M&A (Mergers & Acquisitions)Drug Pipeline FDA (Food and Drug Administration)Regulatory Approval Patent Cliff / LOE (Loss of Exclusivity)Keytruda

Processed Apr 20, 2026 yt-dlp + mlx-whisper + Gemini