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Biotech ETFs Hovering Around a 52-Week: Here's Why

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Biotech-based exchange-traded fund (ETF) iShares Biotechnology ETF (IBB - Free Report) has rallied 26.1% over the past six months (as of Oct. 27, 2025), outperforming SPDR S&P 500 ETF Trust (SPY - Free Report) (up 24.4%). Year to date, IBB has risen 18.2% versus SPY’s 17.2% gain.

The performance marks a sharp turnaround in 2025. Note that the MSCI USA Pharmaceuticals, Biotechnology and Life Sciences Index (USD) offered muted returns of 3.74% in 2024 and 0.97% in 2023. The returns were too shallow, given the 25.1% and 27.1% returns offered by the MSCI USA index, respectively, in 2024 and 2023.

More specifically, the Biomedical and Genetics industry has returned 8.10% and 6.38% over the past three- and one-month periods, respectively, outstripping returns offered by the S&P 500. The S&P 500 has rallied 7.05% over the past three months and has advanced 2.45% over the past month.

Reason Behind the Rally

The space has surged lately due to a host of factors. Below, we highlight a few of them.

Cheaper Valuations of Biotech

Even with the recent rally, biotech stocks trade below the broader stock market. The MSCI USA Pharmaceuticals, Biotechnology and Life Sciences Index traded at a forward P/E of 15.92X versus 23.25X possessed by the MSCI USA index, as of Sept. 30, 2025.

The Biomedical and Genetics industry traded at a forward P/E of 20.30X versus the S&P 500’s value of 20.22X (as of Oct. 27, 2025). The PEG ratio of the industry was 1.65X versus the 2.34X ratio held by the S&P 500. Moreover, projected EPS growth for the Biomedical and Genetics stocks is 19.47% versus the S&P 500’s 7.04%.

Fed Rate Cut Hopes

Biotech companies usually remain in need of cheaper funding. The smaller the size and scale of the company, the greater the need. The Fed enacted its first rate cut of 2025 in September and may cut rates further this year. 

We will probably not see the return of rock-bottom rate levels of 2020, but the decline from the present level would be a positive. Biotech, being a high-growth sector, performs well in a falling rate environment.

Regulatory Tailwinds in the Cards?

The lingering uncertainties around tariffs and trade measures are concerning. President Trump has threatened to impose heavy tariffs, as high as 250% (as quoted on CNBC), on pharmaceutical imports over time. Trump wants American pharma companies to shift pharmaceutical production back to the United States.

But then, Pfizer recently struck a deal with the U.S. government to lower prices on certain drugs for Americans enrolled in Medicaid, and committed to investing $70 billion in the United States. In return, the company secured a three-year reprieve from import tariffs. AstraZeneca, too, made a deal with Trump to lower drug prices and dodge tariffs (read: 4 Reasons to Buy Pharma ETFs Now for a Healthy Portfolio).

These deals are the latest signal of relief for the pharmaceutical industry after months of uncertainty.

Steady Flow of FDA Approvals

In 2025, the FDA approved quite a few biotechnology drugs, including dordaviprone for diffuse midline glioma, sunvozertinib for non-small cell lung cancer, and linvoseltamab-gcpt for multiple myeloma.

Other approvals include Wayrilz (rilzabrutinib) for immune thrombocytopenia and paltusotine for acromegaly. About 34 approvals have been received so far, followed by 50 approvals in 2024 and about 55 approvals in 2023.

Biotech Deal Activity

Biopharma venture investment totaled $5.8 billion across 86 rounds in the third quarter of 2025, per a J.P. Morgan report issued on Oct. 15, 2025, taking the year-to-date number to $17.1 billion. Biopharma completed 35 merger and acquisition transactions totaling $30.8 billion. Meanwhile, biopharma has completed seven initial public offerings year to date, raising $1.1 billion.

The J.P. Morgan report went on to highlight that the licensing scenario continued to support larger, later-stage deals in the third quarter of 2025, with biopharma licensing reaching $63.7 billion in quarterly announced value and $183.7 billion in the year-to-date frame.

Biotech ETFs in Focus

Biotech ETFs that have been hovering around a 52-week high lately include ALPS Medical Breakthroughs ETF (SBIO - Free Report) , Virtus Lifesci Biotech Clinical Trials ETF (BBC - Free Report) , Virtus Lifesci Biotech Products ETF (BBP - Free Report) and S&P Biotech SPDR (XBI - Free Report) .

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