Biotech-based exchange-traded fund (ETF) iShares Biotechnology ETF (IBB Quick QuoteIBB - Free Report) has rallied about 35% over the past six months (as of Nov. 20, 2025), outperforming SPDR S&P 500 ETF Trust (SPY Quick QuoteSPY - Free Report) (up 12%). Year to date, IBB has risen 23.6% versus SPY’s 11.6% 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 12.7% and 6.8% over the past three- and one-month periods, respectively, outstripping returns offered by the S&P 500. The S&P 500 has rallied 3.9% over the past three months and has lost 0.3% over the past month.

Reasons 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 18.15X versus the S&P 500’s value of 19.43X (as of Nov. 20, 2025). The PEG ratio of the industry was 1.59X versus the 2.17X ratio held by the S&P 500. Moreover, projected EPS growth for the Biomedical and Genetics stocks is 22.38% versus the S&P 500’s 7.33%.

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 two rate cuts so far this year with the first one implemented in September. The central bank may cut rates further in the coming days. 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. 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 38 approvals have been recorded 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.

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

The following biotech ETFs have been hovering around a one-month high. These ETFs include Invesco Biotechnology & Genome ETF (PBE Quick QuotePBE - Free Report) , First Trust NYSE Arca Biotechnology ETF (FBT Quick QuoteFBT - Free Report) , Tema Oncology ETF (CANC Quick QuoteCANC - Free Report) and Franklin Genomic Advancements ETF (HELX Quick QuoteHELX - Free Report) .