Shareholder Activism In Life Sciences: Risks, Responses, And Outlook

Shareholder activism in the life sciences sector has intensified in recent years, with activist funds and other event-driven investors increasingly targeting companies to influence management, governance, strategy, and capital deployment. Since 2020, more than 320 public campaigns and related engagements have been initiated across life sciences and healthcare companies, driven largely by the prevalence of pre-revenue business models, binary valuation dynamics tied to clinical and regulatory inflection points, persistent trading below cash or asset value, and the susceptibility of companies in these industries to activist narratives on strategic optionality and capital allocation.

For boards and management teams, understanding the evolving activism landscape, identifying vulnerability indicators, and implementing proactive preparedness measures have become essential components of effective oversight and management. This article reviews major activism trends from 2025, analyzes the structural and market dynamics that shape life sciences campaigns, and offers practical guidance for companies preparing for activism in 2026 and beyond.

Activism Across Sectors in 2025

Shareholder activism across all US-listed companies remained robust in 2025, with approximately 400 public campaigns and related engagements initiated, not including private, nonpublic campaigns.¹ Overall activist campaign activity dipped slightly in 2025, largely due to tariff pressures and a subdued M&A environment in the first half of the year. Activity rebounded in the second half of 2025, and ongoing M&A dynamics are expected to continue shaping the activism landscape.

Several market trends continue to drive activism across sectors. Ongoing pressure from pension funds, hedge funds, and mutual funds for improved returns encourages support for strategic, operational, or governance reforms designed to enhance valuations. Evolving governance norms emphasizing accountability and board independence have further empowered shareholders to challenge management decisions.

Despite an uptick among public companies in readiness for activism, confidence among activist investors remains elevated. Institutional investors are receptive to cases for change, even from funds and parties without historical activist credentials, creating opportunities for campaigns to be heard by significant shareholders. Several investors with varying degrees of capital and market reputation have begun engaging in public activism for the first time, further broadening the activist universe. A substantial number of company targets are experiencing "swarming," in which multiple well-known activists target the same company simultaneously without forming formal groups, intensifying pressure on companies. In the last two years, activists increasingly targeted CEOs and senior executives, alleging operational and strategic underperformance. 2024 and 2025 saw historically high levels of CEO and other senior management changes linked to activist campaigns.

A Five-Year Lookback at Activism in Life Sciences

The life sciences sector ranks among the most frequently targeted by shareholder activists, alongside financial services, technology, and consumer goods. Since 2020, more than 320 public activist campaigns of varying degrees of intensity have been launched across life sciences and healthcare companies, with the vast majority occurring in the biotechnology, pharmaceuticals, and medical equipment and devices industries. Among biotechnology and pharmaceutical targets, approximately 75% to 80% of targeted companies are pre-revenue companies.

Activists focus on these companies for several industry-specific reasons, including their capital intensity, reliance on external financing and recurring dilution, challenges in valuing early-stage assets, and the impact of interactions with the U.S. Food and Drug Administration (FDA). Activist objectives in life sciences commonly include a sale of the company or another strategic transaction, support of unsolicited bids, board changes, return of capital, liquidation, or alternative value-creation strategies. At pre-revenue companies within the biotechnology and pharmaceuticals industries, campaigns more frequently center on existential questions of strategy, capital preservation, and clinical and commercial viability of the pipeline. At commercial-stage companies, campaigns often focus on operating performance, capital allocation discipline, and governance effectiveness.

Activism in life sciences is heavily concentrated in the small- and mid-cap universe, with approximately 72% of targets between $50 million and $1 billion in market capitalization, 18% between $1 billion and $10 billion, and only 3% exceeding $10 billion. Pre-revenue companies are disproportionately represented in the smallest market-cap cohort, while commercial-stage companies tend to cluster toward the upper end of the range.

A concentrated group of repeat activist and activist-leaning investors is particularly active in life sciences. Many of these investors are not generalists but instead focus on the sector and have familiarity with its regulatory, clinical development, and commercialization dynamics. This specialization enables them to focus systematically on areas of particular interest to them and pursue campaigns routinely and persistently.

Public activism campaigns in life sciences are frequently resolved through the occurrence of a material transaction — particularly in pre-revenue situations — or otherwise through settlements or informal understandings. Among 75 public campaigns announced and concluded since January 2024, approximately 34% preceded the company's acquisition or dissolution, 17% ended in formal settlement agreements, 12% achieved other objectives such as share repurchases or board changes, 11% reached partial success through informal understandings (including board refreshment, committee formation, transaction exploration, or investor-day commitments), 17% were abandoned without clear success, and only 9% proceeded to a shareholder vote. Notably, contested elections remain the exception rather than the rule in the sector.

The outcomes of the relatively few life sciences activism campaigns that reach the ballot box underscore the challenges associated with pursuing contested elections. While typically only the most intractable disputes proceed to a vote, outcomes are rarely certain, and company slates have tended to fare slightly better in recent years.

Proxy contests since 2022 illustrate these dynamics. Dissidents failed to secure board representation at several companies including Check-Cap, Forte Biosciences, LifeVantage, MindMed, and Neuphoria Therapeutics. Dissidents secured one board seat at the annual meeting of AIM ImmunoTech, two seats at Masimo, and three seats at Zevra Therapeutics. In another closely watched campaign, a prominent activist's "withhold the vote" effort, opposing the election of two company nominees, resulted in both candidates failing to receive majority support.

Drivers of Activism in Life Sciences

The life sciences sector presents a distinctive set of characteristics that makes it particularly attractive to activist engagement. The activist playbook also differs meaningfully between pre-revenue development-stage companies and commercial-stage biotechnology and pharmaceutical companies.

Development-Stage Versus Commercial-Stage Approaches

At pre-revenue companies, activism is rarely driven by traditional operating metrics or near-term profitability. Instead, activist theses tend to center on cash runway, pipeline optionality, reverse-merger value, asset monetization, or liquidation value. These companies are often valued primarily on balance sheet cash and a limited number of clinical or regulatory inflection points, creating binary valuation outcomes and dislocations between market prices and perceived intrinsic value. Activists frequently argue that continued independent operation undermines shareholder value through dilution, escalating burn rates, and prolonged development timelines and instead advocate for strategic alternatives such as asset sales, mergers, licensing transactions, or outright wind-downs.

At pre-revenue life sciences companies trading at or below net cash or implied liquidation value, activists frame campaigns around capital preservation and downside protection rather than long-term growth. Clinical failures, regulatory setbacks, or trial delays often serve as triggering events, prompting activists to challenge management credibility, demand leadership or board changes, and press for an immediate reassessment of strategic direction. In this context, wind-downs are often framed as means to preserve residual shareholder value and facilitate a return of capital before it is eroded by continued development spending and dilutive financing.

By contrast, commercial-stage biotechnology and pharmaceutical companies are more often targeted for operational underperformance, margin pressure, inefficient cost structures, or perceived failures in commercialization execution. Activist campaigns at these companies more closely resemble those in other industries, with an emphasis on revenue growth, sales-force effectiveness, pricing strategy, portfolio prioritization, and disciplined capital allocation. While pipeline optionality remains relevant, activists typically focus on the tension between funding R&D and returning capital to shareholders through buybacks, dividends, or divestitures.

Recent campaigns at larger, commercial-stage healthcare companies illustrate these dynamics. Over the past year, activists have engaged with established medical device, pharmaceutical, and life sciences services companies to press for improved operating performance, board refreshment, and enhanced oversight, often resulting in negotiated outcomes such as new independent directors, performance-focused committees, and formal strategic reviews.² In several cases, these campaigns concluded with activists or their nominees obtaining board representation through settlements or informal resolution rather than prolonged proxy contests.

Transaction-Oriented Activism and Deal Pressure

A fragmented innovation landscape, with numerous small- and mid-cap companies pursuing overlapping indications or platforms, creates opportunities for activists to push for consolidation, asset combinations, or reverse mergers as means to unlock value and achieve scale. In practice, these dynamics have manifested repeatedly in activist-backed transactions involving subscale biotechnology and pharmaceutical companies operating in crowded therapeutic areas. Activists have argued that standalone development and commercialization strategies lack the scale, capital efficiency, or competitive positioning necessary to succeed independently. Many campaigns have therefore emphasized consolidation, asset combinations, and mergers as mechanisms for monetizing public company status, pooling complementary platforms, and accelerating access to capital and regulatory infrastructure.

More than half of recent life sciences activist campaigns have involved some degree of pressure for strategic transactions or formal reviews of strategic alternatives. This transaction focus reflects not only the valuation and capital constraints facing many development-stage companies but also activists' perception that unsolicited acquisition activity in the sector remains relatively limited and genuinely hostile transactions are exceedingly rare. The sector generally gravitates toward friendly, negotiated transactions, including in situations that begin with an unsolicited bid, for reasons specific to life sciences.

Within the field of life sciences M&A, acquirers typically require extensive access to nonpublic clinical, regulatory, and manufacturing data to underwrite scientific and execution risk, reinforcing the importance of early-stage engagement and management support in any credible transaction. Much of enterprise value also resides in management teams, R&D personnel, regulatory strategy, and key opinion leader relationships, further strengthening the activist view that cooperative processes are essential. These factors heighten sensitivity to disruption risk and talent flight in contested situations.

Against this background, activists often take the view that boards are reluctant to initiate or pursue sale processes absent external pressure. From this perspective, activists frequently advocate that such pressure is a necessary means to advance potential transactions that, in their view, would ultimately serve the best interests of shareholders.

Deal Activism

The flip side of activists pressing companies to pursue strategic transactions is reflected in several recent situations in which investors opposed announced deals on either the target or acquirer side. On the target side, this activity, sometimes referred to as "bumpitrage," occurs when activists seek to block or delay transactions they view as undervaluing the company. These efforts may lead to price improvements or alternative outcomes. Because deal opposition was an active feature of the life sciences landscape in 2025, often accompanied by credible threats to vote down transactions or withhold support, it attracted significant attention from boards, advisers, and market participants. In several instances, activist pressure contributed to revised terms, enhanced governance concessions, or, in some cases, the abandonment of proposed transactions.

Most deal-related activism in the sector does not escalate into full proxy contests. In many cases, activists rely on public letters, regulatory filings, voting announcements, and selective shareholder engagement rather than proxy solicitation campaigns to influence outcomes. Only a minority of situations progress to organized proxy solicitations designed to mobilize broader shareholder opposition. This dynamic reflects both the high cost of formal solicitation and the reality that concentrated ownership, deal-specific voting thresholds, and institutional investor scrutiny often allow well-positioned activists to exert substantial influence without launching full-scale proxy fights.

How Activists Profile Life Science Companies

In general, shareholder activists searching for new portfolio targets tend to review a broad range of performance, financial, and governance indicators to identify vulnerabilities and stress points that may support demands for operational change, strategic alternatives, or leadership transition.

At pre-revenue companies, activist profiling is primarily focused on capital sustainability and development risk. Activists closely analyze cash runway under multiple development scenarios, projected financing needs, and the likelihood of achieving value-inflection milestones before requiring additional capital. Pipeline composition, stage distribution, and probability-adjusted clinical outcomes are central to this analysis, as are regulatory pathway clarity, FDA interaction history, and trial design integrity.

Activists also assess the monetization potential of development-stage assets, including licensing prospects, asset sale opportunities, reverse-merger value, and liquidation scenarios. Intellectual property strength, freedom-to-operate considerations, collaboration and licensing terms, and residual asset value are evaluated to determine whether continued independent development is economically rational. A company's historical approach to capital raising, dilution, and investor communication is scrutinized for signals of discipline or managerial entrenchment.

At commercial-stage companies, activist profiling more closely resembles screening methodologies used in other industries. Analysts emphasize revenue trajectory, market penetration, pricing and reimbursement dynamics, sales effectiveness, margin structure, and operating leverage. Pipeline optionality remains relevant but is typically evaluated in the context of return on invested capital and portfolio prioritization. Capital allocation frameworks also receive heightened attention in this context, including reinvestment versus shareholder return policies, leverage capacity, acquisition discipline, and divestiture strategy. Activists also examine commercialization execution, supply chain resilience, market access infrastructure, and management credibility in meeting financial and strategic targets.

Across both cohorts, governance and execution quality remain central to activist profiling. Activists assess board structure, director tenure and independence, commercialization and transaction experience, insider ownership levels, and potential conflicts of interest. Founder-led governance models, science-driven boards, limited public company or commercialization experience, and weak refreshment practices are often viewed as amplifiers of execution risk, particularly at pre-revenue companies. These governance profiles frequently lead activists to target board refreshment, enhanced independence, and the addition of directors with transaction or operating expertise. Long development cycles frequently clash with public market expectations, or at least those of activist funds, prompting activists to advocate for nearer-term catalysts or strategic exits rather than extended and purportedly uncertain development paths.

Short Attacks

While distinct from traditional shareholder activism discussed above, short-seller campaigns — often referred to as "short attacks" or "bear raids" — are a related feature of the modern shareholder-engagement landscape. In a typical campaign, a fund establishes a relatively small short position and then publishes purported "research," the quality and reliability of which vary widely. These reports often allege weaknesses in clinical data, regulatory positioning, disclosure practices, commercialization assumptions, and governance oversight and, in some cases, raise more traditional financial reporting concerns to profit from the resulting price decline.

Over the past five years, there have been more than 50 notable public short campaigns involving life sciences companies, many of which were led by repeat players well-known to market participants.

Across these campaigns, core allegations tend to cluster around a consistent set of themes. For pre-revenue and early-stage commercial issuers, short reports most often challenge the integrity, interpretation, or clinical relevance of trial data. These campaigns frequently allege selective disclosure, inflated efficacy claims, inadequate safety reporting, or statistical weaknesses. Downside narratives are often constructed around a single inflection point, such as a pivotal trial readout, FDA decision, or advisory committee outcome. By contrast, campaigns targeting more mature companies place greater weight on commercialization risk, reimbursement durability, competitive displacement, and revenue sustainability.

A second recurring theme involves governance, disclosure, and financial reporting practices. In early-stage companies, critiques often focus on promotional activity, management credibility, capital dependence, and dilution risk. For later-stage issuers, short sellers more frequently question revenue recognition, acquisition accounting, related-party transactions, off–balance sheet structures, and internal controls. In both settings, scientific and operational critiques are commonly paired with broader claims of managerial entrenchment, excessive compensation, undisclosed conflicts, or aggressive capital raising, framing reports as warnings that market prices rest on incomplete or overly optimistic disclosures.

While some campaigns have led to sustained repricing, regulatory scrutiny, or strategic change, others have faded as companies successfully defended their science, disclosure, and governance practices. In many cases, the reports are sufficiently inaccurate or misleading to prompt litigation by the target company, aimed at undermining the short thesis and restoring investor confidence.

For boards and management teams, these episodes underscore the importance of rigorous disclosure controls, disciplined investor communications, and early preparedness for organized short-seller challenges.

Preparedness for Activism at Life Sciences Companies

The companies that are best positioned to preempt and manage activist situations are those that assess vulnerabilities in advance, build strong shareholder relationships, and establish response frameworks before pressure emerges. Effective preparedness reduces disruption, strengthens board credibility, and preserves strategic optionality when a campaign arises.

• An internally conducted vulnerability analysis, performed before an activist emerges, is critical. Activists systematically evaluate pressure points. For life sciences companies, vulnerability analysis should include assessment, as applicable, of pipeline risk, regulatory pathway clarity, clinical trial design and data integrity, intellectual property strength, collaboration and licensing arrangements, manufacturing and supply chain resilience, commercial readiness, cash runway, capital allocation discipline, management track record, and peer benchmarking.
• Companies should be prepared to explain capital allocation decisions. Transparent communication regarding program prioritization, development timelines, in-licensing strategy, burn-rate management, and strategic alternatives can preempt concerns and strengthen investor confidence.
• Develop a clear view of the company's long-term standalone value. Subject to each company's unique circumstances, it may be advisable to develop or update the company's internal assessment of the standalone strategy as compared to alternatives.
• Boards should periodically assess and refresh their governance profile. Although governance is not a one-size-fits-all matter, boards should regularly evaluate their composition, leadership structure, and the company's compensation framework in light of strategic priorities, capital needs, investor feedback, and long-term objectives. Life sciences boards should also ensure that their composition and committee structure align with the company's scientific, regulatory, and commercial profile.
• Companies should prioritize proactive shareholder engagement. Ongoing dialogue with investors — beyond traditional proxy season interactions — builds trust and surfaces concerns early. Companies should consistently articulate their value proposition, long-term strategy, and governance philosophy in a manner that aligns with expectations and addresses investors' priorities.
• Scenario planning and response protocols are essential. Boards should be prepared to respond nimbly if an activist campaign emerges. A fragmented or defensive response can embolden activists, while a calm, fact-based approach preserves credibility and stabilizes investor sentiment.

While activists may identify real areas of vulnerability, most public companies face some degree of operational, strategic, or governance risk. The existence of these risks does not mean that an activist's proposals are necessarily appropriate, workable, or aligned with long-term shareholder interests. This may be particularly true when management and the board have strong, well-supported conviction in the company's strategy, grounded in a deep understanding of its science, regulatory position, and commercial outlook.

Even in these circumstances, boards and management teams often benefit from taking the time to understand the activist's perspective and underlying assumptions. Careful review of the activist's thesis and analysis supports sound decision-making and creates a record of constructive engagement. This approach strengthens board and management credibility and puts the company in a stronger position to assess the activist's proposals.

Preparation for potential short attacks is a related but distinct discipline, given the speed with which such campaigns can develop and the risk that reports may be selective or misleading. Boards and management teams frequently treat such work as part of ongoing governance rather than crisis response. This includes regularly reviewing disclosures, valuation frameworks, and governance practices and ensuring that key judgments and assumptions are well-documented. Strong disclosure controls and response protocols further reduce the risk that a short campaign gains traction and help preserve credibility if a campaign emerges.

Looking Ahead to 2026

Shareholder activism is an embedded feature of the public company landscape in the life sciences sector. The capital intensity, valuation volatility, regulatory complexity, and long development cycles that particularly define biotechnology and pharmaceutical companies make them susceptible to activist scrutiny and intervention. The combination of specialized life sciences–focused activists, heightened investor sensitivity to execution risk, and persistent capital market pressures ensures that few life sciences companies are immune, regardless of size, stage, or scientific promise. By maintaining strategic discipline, engaging proactively with shareholders, and investing in thoughtful preparedness, boards and management teams can reduce the risk of disruptive confrontation and navigate activist challenges more effectively.

Footnotes

1. Activism and trend data is derived from Deal Point Data and FactSet as of February 1, 2026. Activism data includes proxy contests, public engagements without nominations or proposals, and activism in connection with hostile or unsolicited acquisition bids and generally excludes short attacks and exempt solicitations. ↩

2. "Healthcare firms see growing activist investor investment in the past year," Reuters (August 2025). ↩

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