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“Trust the science” or walk away is arguably the key to how activists view biotech companies as they size up targets. Fluctuating valuations, capital-intensive business models, product pipeline cliffhangers and long-tenured incumbents have kept biotechnology on the radar of activists seeking value in the U.S. healthcare space. In the five-year period from 2021 to 2025, biotech has driven the lion's share of activism in the wider healthcare sector, with six companies accounting for one-third of U.S. targets in the space last year, Diligent Market Intelligence (DMI) data show. A more limited playbook Unlike other sectors where activists seek to unlock opportunity, value in biotech is observed as largely driven by scientific outcomes rather than operational performance. "You've got one or two lead pipeline candidates, and the number of key questions that are facing the board of directors may be comparatively limited: Do we go out and get more funding and move on to the next phase of testing or do we close up shop and pursue a strategic transaction or other exit," Leonard Wood, a partner at law firm Goodwin, told DMI. This, in turn, makes activist campaigns more focused on a limited set of strategic choices. “In biotech especially, value is tied to binary clinical and regulatory outcomes, which gives activists more room to challenge strategy and capital allocation to unlock value,” said Brendan McVeigh, co-founder of Anteris Advisors. Capital allocation and deal-making The small and mid-cap biotech industry is “extremely capital intensive,” according to Michael Fein, founder and CEO of Campaign Management, with a “high burn rate” offering a platform for investors to come up with “a clear and credible narrative around discipline, runway, and strategic alternatives.” “Issues like trial prioritization and financing strategy invite a greater degree of scrutiny than other sectors," Fein explained. After capital allocation, M&A is one of the key levers used by activists targeting biotech, with many pointing to greater upside potential for targets in the hands of larger pharma entities. Since 2021, activists have pushed for dealmaking at nine U.S. healthcare targets, five of them operating in the biotech space. Large pharma’s patent cliffs and the need for fresh pipelines mean activists frequently push companies to run sales or partnership processes. With higher interest rates and the change in capital market conditions, buyers are also viewed by market participants as more disciplined in their approach. "They are looking for deals that are on a post-data basis. They're waiting for these certain validation points to be hit and that creates an opportunity for the larger biopharma to come in with an offer," said Wood. "Activism comes into this mix to essentially accelerate strategic outcomes, basically pushing boards to run processes where it seems like the public markets aren't recognizing values." In one such example, Shah Capital Management returned to vaccine developer Novavax in late 2025, renewing its call for the company to find a bigger suitor following “underperformance” and “rollout slipups” related to its COVID-19 jab. Another strategy sees activists look for buybacks and dividends. In an April 2025 settlement, Atea Pharmaceuticals persuaded Bradley Radoff and Michael Torok to withdraw their slate, in part by rolling out a share repurchase program. Keros Therapeutics incorporated the repurchasing of stakes held by ADAR1 Capital Management and Pontifax Venture Capital as part of a wider buyback that saw the activists exit the company’s board last October. Personnel shake-ups But when it came to challenging healthcare companies over strategy and valuations, seeking changes to the board has been a central focus for activists. Four of the six biotech targets to draw activist attention in 2025 came under pressure to refresh their boards, replace CEOs or amend bylaws as activists sought to highlight links between performance and personnel in a small-cap space known for long-tenured directors. “Activists may see low hanging fruit where there are directors that have been serving for 10 or more years,” said Wood. “The fact that a director has a long tenure does not, however, necessarily mean it’s in the best interests of the company or shareholders for that director to be replaced." The aforementioned Atea settlement was based in part on adding Howard Berman, former CEO of Coya Therapeutics, to the company’s board. Similarly, Fortrea settled with Starboard Value last February, with the activist securing one seat while Goodwood saw success at Cosciens Biopharma, with its campaign ending last June to secure four seats for the dissident and naming the activist’s Peter Puccetti as chair. According to Fein, while smaller-cap biotech companies often feature considerable medical and scientific expertise, often among founding directors, activists have pushed for change where boards appear to lack directors with business acumen or with a track record of driving value. “While boards of biotech companies typically have considerable scientific depth, they may have less capital markets or operational expertise, giving governance critiques more credibility,” Fein said. At Novavax, 9% stakeholder Shah called for new directors, citing the need for “pragmatic entrepreneurial experience” in an early-April statement that confirmed it will vote against the board and the pay plan at the company’s annual meeting, set to be held on June 18. In the near-term, healthcare and biotech supply-chains remain exposed to geopolitical and international trade-related disruptions, potentially further fuelling activists’ cases for change. “For generics, medtech, diagnostics and CDMOs, higher oil and gas prices can flow through to raw materials, packaging, freight and manufacturing costs," said McVeigh. "For development-stage biotech, the bigger issue is often cash runway: higher costs can accelerate burn, increase dilution risk and strengthen the activist case for sharper capital allocation, portfolio rationalization, or strategic alternatives."
