moderna The stock price plunged on Thursday, spooking investors. But it’s still one of the hottest biotechs of the year. And it’s not alone. The sector is growing well and looks poised for further gains.
of iShares Biotechnology ETF (IBB) rose 24% through Oct. 23, building on a 28% gain in 2025. 20 of the ETF’s 233 stocks have more than doubled since the beginning of the year. moderna Despite falling 18% following the leak of clinical data for the company’s cancer vaccine (which was actually positive), it led the pack with a 587% jump.
Analysts say a new biotech cycle is underway, driven by clinical trial results, M&A activity, and promising technologies such as genomics, mRNA, and AI.
“We are in the midst of a strong innovation cycle,” said portfolio manager John Hall. T. Rowe Price Biotechnology ETF. “What’s really interesting is that newer modalities are starting to come to market.” Companies are “understanding the biology of the disease better,” he said, adding that that could ultimately lead to more new drugs coming to market.
Investors are excited about technologies such as mRNA and genomics, as well as new drugs being approved. The FDA approved approximately 12 new biologics in 2025 for a total of 46 approvals. Moderna and Merckanticancer drug for malignant melanoma, Eli Lilly.
iShares Biotechnology ETF (IBB) Year-to-date
Analysts say AI could also lead to increased approvals as companies deploy it to speed up drug development.
“Biotechnology is an incredible application of artificial intelligence and machine learning,” says Piper Sandler analyst Ted Tensoff. “Frankly, we can set up exciting predictive models that can do things that we haven’t been able to do before in the field of novel drug discovery.”
Indeed, the industry is recovering from a fallow period. The sector’s last strong performance was during the coronavirus era, when ultra-low interest rates encouraged investment in early-stage drug development companies and mRNA vaccines fueled a surge in profits for companies like Moderna. pfizer and biontech.
Since then, many early-stage companies have failed and the sector has cooled down. Demand for coronavirus vaccines has evaporated, and interest rates have soared, dampening IPOs and M&A activity.
The risks haven’t gone away yet. This sector still takes years to develop products and results in far more failures than successes. But analysts say the outlook is healthier now. That’s reflected in strong performance and richer valuations, but there are still good reasons to invest.
Innovation is paying off
Results from recent clinical trials are stirring excitement that new drugs in development have the potential to address some of medicine’s toughest problems.
For example, Moderna and Merck’s melanoma drugs use mRNA to trigger a patient’s immune response to target tumors that are surgically removed and genetically analyzed. Although it is not a preventive vaccine, it uses a similar immunological mechanism and was shown to reduce cancer recurrence or death by 42% (in combination with Merck’s cancer drug Keytruda).
Although the Phase 3 results disappointed Wall Street, oncologists said the results were still very positive. And they believe this technology is a potential game changer that could usher in an era of personalized cancer treatment. Moderna and Merck said they aim to submit the drug for FDA approval and launch it in 2027.
Inflammation treatment is also a promising area. AstraZeneca and Amgen recently announced positive Phase 3 results for another use of their Tezspire shot, which is approved to treat nasal polyps and asthma. Clinical trials have shown that it was successful in reducing swallowing symptoms and healing microscopic and visual tissue damage in patients with severe throat inflammation.
Meanwhile, Roche scored a victory after the FDA approved its drug Enspring, a treatment for rare inflammatory and autoimmune diseases. This was the first and only at-home injection for adults with thyroid eye disease.
Obesity drugs have also advanced beyond first-generation GLP-1. Eli Lilly’s letaltortide, a “triple agonist” that targets three different hormone receptors, cleared two additional clinical trials over the summer. Lilly said the drug produced 28 to 30 percent weight loss at the highest dose in the study. The company plans to apply for FDA approval in the first quarter of 2027.
High-tech tools and M&A
Much of the innovation is occurring not only in pharmaceutical manufacturing, but also in areas such as gene sequencing, mRNA, and high-tech equipment.
Illumina This year, it has more than doubled. The DNA and gene sequencing company sees demand for its NovaSeq X high-end sequencing platform accelerating. including pharmaceutical companies, bristol myers squibMerck & Co., Ltd. Storehouse is collaborating with Illumina to develop precision oncology solutions.
Another big winner was 10x genomicsan increase of over 300%. This biotechnology company provides laboratory equipment to help scientists conduct research in cancer, immunology, and neuroscience. The company’s Atera platform helps generate datasets for training AI models, a process that accelerates personalized treatments.
On the AI front, companies are leveraging this technology for more efficient drug discovery, says Shreefāl Mehta, president of Guidant BioTherapeutics. Using AI, he said, “we can now get drugs into clinical trials with less capital, and we’re seeing more investment in companies that are proving that.”
Research and consulting firm Towards Health predicts that the global AI market for drug discovery will grow from a $20 billion market in 2025 to more than $160 billion by 2035.
Illumina, YTD
Another potential catalyst for the sector is M&A. Jeet Mukherjee, biotechnology analyst at BTIG, points out that biopharmaceutical transaction value reached $134 billion in the first half of 2026, up from $112 billion in all of 2025. This is a positive signal and indicates that more drugs in development have clinical promise.
It also helps that major pharmaceutical companies face an upcoming “patent cliff.” According to research firm RTW Institute, products accounting for $180 billion in revenue will lose exclusivity by 2030. Companies facing expiration dates are “looking for novel and innovative products to incorporate into their pipeline,” Mehta said.
The blockbuster success of GLP-1 has left some companies with deep pockets for acquisitions. Eli Lilly The company alone completed 10 acquisition deals worth $25 billion in 2026.
Where to invest in biotech now?
ETFs can capture investment themes, but not all are alike. iShares Biotech ETF is one of the lower cost funds. It tracks a market-cap weighted index of biotech stocks led by companies such as. Gilead Sciences, amgen, vertex pharmaceuticalsModerna.
of State Street SPDR S&P Biotech ETF Hold equities equally weighted to increase exposure to small- and mid-cap stocks. Major holdings are Moderna, Natera, twisted bioscience and Halozyme therapeutic drug.
Piper Sandler called Illumina and 10x Genomics “key infrastructure players” in the life sciences space and said their technology is “powering the next generation of precision medicine.”
Piper analyst David Westenberg rates Illumina a “buy” and targets the stock at $305. This suggests a 14% upside from recent prices around $267. He has a hold rating of 10x and a target of $80, above recent prices of around $70.
State Street SPDR S&P Biotech ETF Year-to-date
twisted bioscience is another name to consider. The company manufactures customized synthetic DNA and sells DNA sequencing tools. Twist partnered with Eli Lilly’s AI and machine learning platform and in August also partnered with Anthropic to begin testing Claude, an AI model for protein development.
According to consensus estimates, Twist is not expected to achieve EPS earnings until 2029. However, sales are expected to reach $833 million in 2029, up from $572 million in 2027. The average analyst price target is $168, suggesting a 21% return from the recent share price of around $138.
In the small-cap space, Piper Sandler’s Tensoff likes it. Monte Rosa Therapeuticsa pioneer in proteolysis that selectively destroys disease-causing proteins.
The company is collaborating with: Novartis Developing drugs to treat inflammatory conditions and autoimmune diseases. The companies announced a Phase 2 clinical study of the autoimmune disease treatment in September, which Tensoff said is “the catalyst for the milestone for Monte Rosa.”
Tensof rates the stock a Buy, with a price target of $37, and the stock has recently traded around $10.70.
Even in the small-cap space, BTIG’s Mukherjee recommends: Faes Therapeutics.
Biotechnology companies are developing new two-drug combination therapies to treat breast cancer and other tumors. The regimen “has the potential to address the safety and dose limitations of other recently approved breast cancer drugs,” he says. And it could become “a pillar of future treatment paradigms for breast cancer and other cancers.”
Faeth is a clinical-stage company, meaning it has not yet brought a drug to market. Still, the stock has risen 93% since the beginning of the year, trading at around $18 on positive clinical trial results. Mukherjee has set a target of $55.
Kymera Therapeutics is also worth considering. The company is developing (manufacturing and co-developing) an oral version of the blockbuster drug Dupixent. Regeneron Pharmaceuticals and sanofi). But Dupixent is an injectable drug, and the oral version is “often preferred by patients,” Mukherjee said. “This drug has the potential to not only take market share away from patients taking Dupixent for many immune diseases, but also expand the market to patients who are not taking systemic biologics,” he told CNBC.
Kymera said it does not expect a patent battle over Dupixent because the drug is distinct and not a biosimilar or biological copy.
T. Rowe’s Hall also likes Kymera’s potential to “uncover targets for diseases traditionally thought to be untreatable.” The stock is the second-largest holding in T. Rowe’s Biotechnology ETF, accounting for 4.2% of the portfolio.
