Biotech stocks have recaptured investors' attention this year amid a wave of drug innovation, which is spurring merger-and-acquisition activity in the biopharma industry and a fresh round of initial public offerings. The enthusiasm has lifted the State Street SPDR S&P Biotech exchange-traded fund nearly 26% year to date, to levels not seen since 2021, when Wall Street last went crazy for drugs.
A four-year bear market followed that breakout as interest rates rose and Wall Street cooled to companies without profits. This time, the bullish sentiment is likely to last.
"Biotech is coming off a protracted downturn, largely exacerbated by high interest rates and macro uncertainty," says venture investor Peter Kolchinsky, who runs RA Capital Management. "It feels like a return to a healthy pace of activity."
That may be an understatement. As Big Pharma looks to replace $200 billion to $300 billion in branded drugs coming off patent between now and 2030, companies have gone on a spending spree, snapping up smaller outfits with drugs in testing and, in some cases, marketed products. So far this year, there have been 33 buyouts of biotech firms worth $500 million or more, with three deals in June and July exceeding $10 billion each.
Likewise, the new issue window for biotech stocks is wide open again. Seventeen companies have come public this year, raising $5.5 billion, according to industry website BioPharma Dive, compared with just eight deals in all of 2025, which raised $1.5 billion. June's $670 million debut of Parabilis Medicines was the largest biotech IPO ever.
If biopharma companies are Wall Street's latest growth darlings, the longer-term outlook for their shares will depend on the success of the drugs they develop. Pivotal readouts from clinical trials for drugs to treat cancer and heart disease are coming later this year, and could be catalysts for further gains in the stocks.
Merck, Novartis, and Bristol Myers Squibb are the biggest pharmaceutical companies with critical readouts ahead. Among smaller companies, biotechs Moderna and Summit Therapeutics have the most riding on test results.
Drug trials have high failure rates, as investors are reminded all too frequently. Shares of AstraZeneca and Ionis Pharmaceuticals sold off in early July when the companies' drug Wainua failed a Phase 3 trial for a rare heart disease. At the end of the month, Novo Nordisk stock dropped 10% on the news that its treatment for artery inflammation didn't meaningfully reduce heart attacks.
Still, recent successes are attracting new buyers, especially as investors question the outlook for the market's other growth darling: artificial-intelligence stocks. "I'm seeing generalist investors interested in pharmaceuticals, after a multiyear slumber," says Goldman Sachs pharma analyst Asad Haider.
Even if some are buying pharma stocks as a hedge against AI shares, there is a lot of potential value from recent drug innovations, Haider says.
Bispecific Benefits
Cancer drugs historically have contributed about half of the drug industry's sales, and they remain a research focus, says Agustin Mohedas, a biotech analyst at Janus Henderson Investors. His firm's funds made a smart bet on Revolution Medicines, whose stock has doubled since mid-April, after a Phase 3 trial of its daraxonrasib pill produced unprecedented survival gains in pancreatic cancer.
Once seen as a likely acquisition candidate, Revolution is now a big swallow, given its $40 billion market cap.
Trial results for Summit Therapeutics' ivonescimab, another cancer drug, could prove the biggest biopharma stock catalyst of the year's second half, says Goldman Sachs biotech analyst Salveen Richter. That's because Summit has practically bet its future on the so-called PD1/VEGF bispecific antibody that combines an immune-boosting feature, like that of the top-selling PD1-inhibitor, Merck's Keytruda, with the power to choke a tumor's blood supply, like Roche VEGF inhibitor Avastin. Those features seem to work better in combination than administered as two separate drugs.
Many hope that bispecifics like Summit's will become part of the next standard of care for many cancers, replacing today's combination of chemo drugs and an immunotherapy. Merck sold $32 billion worth of Keytruda in 2025, but patent protections peel off in the next few years.
"Summit's bispecific cancer drug is looking to unseat Keytruda," Richter says. "Is it going to beat Keytruda? I'm more optimistic than not that it should."
Summit's Harmoni-3 study will be the first global Phase 3 trial that compares a PD1/VEGF antibody head-to-head against Keytruda, for the treatment of lung cancer. Before year end, the study should reveal how well Summit's drug stalled the progression of squamous small-cell lung cancer, with interim data on how many patients remain alive. Results for the more prevalent non-squamous lung cancer will come in 2027.
Richter believes the study will be deemed a success if it stalls lung cancer progression by 25% to 30% more than Keytruda.
Summit's co-CEOs, Bob Duggan and Maky Zanganeh, have shown they know a good thing when they see it. In 2003, they sold the robot surgery firm Computer Motion to Intuitive Surgical. In 2015, they sold Pharmacyclics to AbbVie, for $21 billion. And they were among the first U.S. pharma leaders to recognize China's growing prowess in medical research, when Summit licensed ivonescimab from Hong Kong--listed Akeso in 2022.
Wall Street is optimistic about Summit's drug trial because Akeso has done four successful trials in China. With two approvals there already, it has treated 70,000 Chinese patients. "The amount of data already generated on ivonescimab is tremendous," says Summit's strategy chief, Dave Gancarz.
Summit has rights to the drug outside of China. Excitement over Akeso's trial results in China lifted Summit stock as high as $33 in the past couple of years. Lately it has traded below $14.
The consensus among analysts tracked by S&P Global's Visible Alpha is that approvals for treating cancers of the lung and other organs could lift Summit sales from nothing today to $800 million in 2028. In a decade, sales could top $30 billion.
That's why the Harmoni-3 trial will be a stock catalyst. Richter thinks successful readouts over the next year could vault Summit stock to $41. In a buyout, she thinks the stock could fetch above $70.
Summit won't have the PD1/VEGF bispecific market to itself, however. Bristol and Pfizer have bispecifics in clinical trials. Even Keytruda seller Merck says it is ready to put its own PD1/VEGF into Phase 3 trials.
Vindication for Cancer Vaccines?
Another key readout this year could vindicate vaccines as a cancer treatment.
Cancer vaccines had a history of disappointment until June, when Merck and Moderna reported that a randomized Phase 2 trial of their intismeran autogene vaccine cut the risk of melanoma relapse in half, when used with Keytruda after surgeons removed the skin cancer. Moderna stock nearly doubled in the subsequent weeks to more than $85, although it has since fallen back to $56.
The companies will report interim results later this year from the Phase 3 trial of their melanoma vaccine.
One reason cancer vaccines are showing better results is that doctors are using them before tumors have spread and insulated themselves against the immune system, says Moderna's chief development officer, David Berman. Another key to their success is the way messenger-RNA technology like Moderna's can individualize the vaccine for the mutations of each patient's cancer. Moderna targets as many as 34 abnormal proteins in a patient's tumor. Side effects are minimal.
The Phase 3 interim analysis could be shared at the European Society for Medical Oncology conference in late October. UBS analyst Michael Yee thinks the news might move Moderna stock as much as 25%, even though he has been neutral on the stock this year. A strong benefit would also bode well for vaccines that Moderna and Merck are developing for cancers of the lungs, kidneys, bladder, pancreas, and stomach.
"If this study is positive, what it will mean for patients is amazing," says Jane Healy, who heads Merck's early clinical development for oncology.
Because cancer vaccines like intismeran are customized for each patient, it is a challenge to scale up treatment volumes. So, analysts think the product will matter most for Moderna's business. The Visible Alpha consensus predicts that cancer vaccines could rise from less than 10% of Moderna's sales in 2028 to two-thirds of its $7 billion in sales by 2035.
Cardiology Renaissance
This year is also delivering the fruits of what Goldman Sachs calls the cardiology renaissance. A crop of new drugs could make the biggest contribution to reducing heart attacks and strokes since statins began lowering LDL cholesterol 30 years ago.
Cardiovascular disease remains the leading cause of death. Further research has zeroed in on other troublemakers besides LDL. One is lipoprotein(a), a blood fat that is too high in 20% of the world's population. The condition is genetic, and no amount of dieting or exercise can lower lipo(a). There has never been a drug to treat it, either.
Until now. In the next few months, Novartis will report the results from the Horizon study of pelacarsen, an injectable drug that it developed with Ionis Pharmaceuticals. The 8,300-person Phase 3 trial is the first pivotal test that will show whether reducing lipo(a) leads to fewer heart attacks, strokes, or emergency heart stents.
Success in this first test of a lipo(a) treatment is mostly discounted in the current stock prices of Novartis and Ionis, says Richter. But their proof of concept could bring a boost to other firms testing lipo(a) treatments. Amgen has a lipo(a) drug in Phase 3 trials that Richter thinks will prove more potent than the Novartis product. Eli Lilly has Phase 3 studies on a lipo(a) injection and a pill.
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