The biotechnology industry has demonstrated resilience so far this year despite an uncertain economic backdrop. Strong quarterly results, new drug approvals and positive clinical and pipeline developments have supported sector momentum despite ongoing pricing pressures, regulatory hurdles and broader market volatility. With demand for innovative therapies remaining resilient across economic cycles, the biotech sector is well positioned to sustain investor interest and capitalize on long-term growth opportunities.

The recent revival in mergers and acquisitions (M&A) activity following a period of slowdown, fueled by an evolving industry landscape and growing interest in AI-powered drug discovery, has provided an additional boost to the sector. Large pharmaceutical and biotechnology companies continue to strengthen their product portfolios and pipelines through strategic collaborations, licensing agreements and acquisitions as they seek to reshape their business models and counter increasing generic competition for key drugs. Against this backdrop, smaller biotech companies developing breakthrough technologies and novel therapies are attracting greater attention from larger industry players and investors, helping sustain momentum across the broader biotechnology sector.

Biotech companies like Halozyme Therapeutics (HALO Quick QuoteHALO - Free Report) , Repligen (RGEN Quick QuoteRGEN - Free Report) , Iovance Biotherapeutics (IOVA Quick QuoteIOVA - Free Report) , Arcutis Biotherapeutics (ARQT Quick QuoteARQT - Free Report) and Precigen (PGEN Quick QuotePGEN - Free Report) are poised to outperform the sector. 

Zacks Industry Description

The Zacks Biomedical and Genetics industry comprises biopharmaceutical and biotechnology companies that develop high-profile drugs utilizing groundbreaking technology. These biologically processed drugs, which address virology, neuroscience, metabolism and rare diseases, are manufactured using live organisms.

As technology becomes increasingly crucial to improving global health, biotech companies strive to utilize innovative technologies to rapidly develop breakthrough treatments. Several companies in this field are developing drugs and vaccines utilizing modern technology. Given the dynamic and evolving nature of technology, the sector seems riskier than the large-cap pharma or drug industry. 

4 Trends Shaping the Future of the Biotech Industry

Innovation and Execution Hold the Key: The primary focus in the biotech industry is on the performance of high-profile drugs and innovative pipeline development, as only a handful of companies in this industry have approved drugs in their portfolios. Most companies spend millions and billions of dollars to create a drug with path-breaking technology, resulting in significant research and development expenditures. The growing focus on using AI technology in drug discovery is driving additional investment into the industry. Precision medicine, also known as personalized medicine, is another rapidly evolving field in the industry.

On the other hand, successful commercialization is crucial for a drug to become a revenue generator for the company. Smaller biotechs often lack the necessary funds and expertise to reach the target population. This prompts collaboration deals with either pharma or biotech bigwigs, wherein sales are shared or royalties are received.

Sometimes, approved treatments come with side effects that emerge over time, and the uptake may fail to meet expectations. Hence, it takes several years before a biotech company turns profitable. Moreover, it may take quite a few years for any newly approved drug to contribute to its company’s top line.

M&A in the Spotlight: Consolidation has long been a key theme in the pharma and biotech industry, as leading companies continually seek to diversify their revenue streams amid declining sales from their flagship drugs. The recent spree of acquisitions signifies a focus on portfolio expansion and constant pipeline innovation, given the changing landscape and spotlight on AI-driven drug discovery.

Bigwigs in the space are also entering into licensing deals and collaborations for promising drugs and candidates to strengthen and expand their portfolios and pipelines in core areas and emerging fields. While oncology and immuno-oncology companies have traditionally been prime acquisition targets, the lucrative obesity and gene-editing spaces are also attracting growing interest.

Pharma giants like Eli Lilly and Novartis have been on an acquisition spree this year, strengthening their already diverse portfolios further. On the biotech front, Gilead Sciences has been quite active. Gilead’s recent aggressive dealmaking strategy, including the acquisitions of Arcellx and Tubulis, underscores its commitment to diversifying beyond its core HIV franchise and expanding into higher-growth oncology and immunology markets.

The recent spotlight on the usage of AI technology for drug discovery should lure further investment in this industry.

New Drug Approvals Strengthen Growth Prospects: New drug approvals have accelerated so far this year, with 33 novel drugs receiving the green light, as pharmaceutical and biotechnology companies seek to expand and diversify their product portfolios and strengthen long-term growth prospects.

Pipeline Setbacks & Potential Tariffs Weigh on Outlook: Pipeline setbacks are key deterrents for biotech companies, given the exorbitant cost of developing drugs using expensive technology. Most drugs/therapies take years to gain a regulatory nod. An unfavorable outcome from a crucial trial on a promising candidate is a huge setback, particularly for smaller biotechs, which are mostly one-trick ponies. The leading biotechs face other headwinds, including declining sales of high-profile drugs due to intensifying competition.

Moreover, ongoing geopolitical tensions remain a headwind. 

Zacks Industry Rank Indicates Grim Prospects

The group’s Zacks Industry Rank is basically the average of the Zacks Rank of all the member stocks.

The Zacks Biomedical and Genetics industry currently carries a Zacks Industry Rank #157, which places it among the bottom 36% of more than 247 Zacks industries. The rank reflects a grim outlook for the space as of now, mostly due to the challenging macroenvironment. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Before we present a few biotech stocks that are well-positioned to beat the industry based on a strong portfolio/pipeline, let’s take a look at the industry’s stock market performance and current valuation.

Industry Versus S&P 500 & Sector

The Zacks Biomedical and Genetics industry is a 665-stock group within the broader Zacks Medical sector. It has outperformed the Zacks Medical sector but lagged the S&P 500 composite sector year to date.

The stocks in this industry have risen 10.7% year to date compared with the Zacks Medical sector’s gain of 6.2%. The S&P 500 composite has gained 11.5% in the same period.

YTD Price Performance

Industry's Current Valuation

Since most companies in the biotech sector do not have approved drugs, valuing these becomes a complex process. On the basis of the trailing 12-month price-to-sales ratio (P/S TTM), which is commonly used for valuing biotech companies with approved portfolios of drugs, the industry is currently trading at 2.59X compared with the S&P 500’s 5.86X and the Zacks Medical sector's 4.53X.

Over the past five years, the industry has traded as high as 3.39X, as low as 1.81X and at a median of 2.39X, as depicted in the chart below.

5 Biotech Stocks Worth Buying

Repligen is a global life sciences company that develops and commercializes highly innovative bioprocessing technologies and systems that increase efficiencies and flexibility in the process of manufacturing biological drugs. The company is witnessing strong growth across all business segments, driven by healthy order trends.

RGEN’s chromatography and process analytics businesses continue to support revenue growth. The protein business is also seeing strong demand, which should help drive additional growth through 2026. Repligen has made a few promising acquisitions of late to diversify its business or boost its core competencies.

RGEN currently carries a Zacks Rank #1 (Strong Buy). 

Price and Consensus: RGEN

Shares of RGEN have gained 10.9% year to date. The Zacks Consensus Estimate for 2026 earnings per share (EPS) has increased to $2.06 from $1.99 in the past 30 days.

Halozyme Therapeutics has collaboration deals related to its ENHANZE technology with several large pharma companies that generate milestone payments, driving the top line. Robust demand for the subcutaneous formulation of Darzalex, Phesgo, and Vyvgart Hytrulo is boosting royalties and the top line. The momentum is likely to continue in the upcoming quarters. Halozyme’s focus on signing new collaboration deals to aid growth bodes well.

HALO currently carries a Zacks Rank #2 (Buy). Shares have surged 62.4% year to date. The Zacks Consensus Estimate for 2026 EPS has increased to $8.19 from $7.96 in the past 60 days.

Price and Consensus: HALO

Iovance Biotherapeutics is focused on developing tumor-infiltrating lymphocyte (TIL) therapies for solid tumors. Iovance’s top line is driven by Amtagvi, the first treatment option for advanced melanoma that has progressed on or after prior anti-PD-1 therapy. The momentum is expected to continue throughout 2026 and beyond, fueled by patient enrolments. This encouraging demand has also driven the surge in Proleukin sales, as the drug is used in the Amtagvi regimen.

Shares of this Rank #2 company have skyrocketed 62.4% year to date.

 

Price and Consensus: IOVA

Arcutis Biotherapeutics, a commercial stage company, has a growing portfolio of advanced targeted topicals approved to treat three major inflammatory skin diseases — plaque psoriasis, seborrheic dermatitis and atopic dermatitis. The company’s lead product Zoryve (roflumilast) cream 0.3% for the treatment of plaque psoriasis has been performing well.

Consistent label expansion of Zoryve has boosted sales. Zoryve topical foam 0.3% is approved for the treatment of seborrheic dermatitis while Zoryve cream 0.15% is approved for the treatment of mild to moderate atopic dermatitis.

ARQT currently carries a Zacks Rank #2.  Shares have gained 17.6% in the past three months. The Zacks Consensus Estimate for 2026 EPS has increased to 40 cents from 15 cents in the past 60 days.

Price and Consensus: ARQT

Precigen, a commercial-stage company specializing in innovative precision medicines, is making steady progress with strong commercial performance from its sole marketed drug Papzimeos (zopapogene imadenovec-drba). As the first and only FDA-approved therapy for adults with recurrent respiratory papillomatosis (RRP), Papzimeos provides Precigen with a differentiated commercial position and a potentially durable revenue base. Papzimeos has demonstrated strong early commercial momentum since its launch.

Price and Consensus: PGEN

PGEN currently carries a Zacks Rank #2. EPS estimates have improved to 25 cents from a loss per share estimate of 2 cents in the past 60 days. 

You can see the complete list of today’s Zacks #1 Rank stocks here.