Moderna gave investors a scare when its stock plunged on Thursday, yet it remains one of the year’s hottest biotechnology names. The company is far from alone: the sector is on a tear and appears positioned for further gains. The iShares Biotechnology ETF (IBB) has risen 24% through October 23, building on a 28% advance in 2025. More than two dozen of the fund’s 233 holdings have more than doubled year to date. Moderna leads the pack with a 587% surge, even after an 18% decline triggered by a leak of clinical data for its cancer vaccine — data that was, in fact, positive.
Analysts say a new biotech cycle is underway, propelled by clinical-trial successes, merger activity, and promising technologies such as genomics, mRNA, and artificial intelligence. “We’re in the midst of a powerful innovation cycle,” said John Hall, portfolio manager of the T. Rowe Price Biotechnology ETF. “What’s super exciting is we’re seeing newer modalities start to make it to market.” Companies “understand the disease biology better,” he added, a development that could ultimately bring more novel drugs to patients.
Investors are enthusiastic about mRNA and genomics, as well as a steady stream of new drug approvals. The FDA approved roughly a dozen novel biologic drugs in 2025 out of 46 total approvals. About 66 novel drugs are in the pipeline, including potential blockbusters such as a melanoma treatment from Moderna and Merck and a next-generation obesity drug from Eli Lilly.
IBB YTD mountain iShares Biotechnology ETF (IBB), YTD
Analysts also highlight AI’s potential to accelerate approvals. “Biotech is a phenomenal application for artificial intelligence and machine learning,” said Piper Sandler analyst Ted Tenthoff. “You can set up exciting predictive models that, frankly, can do things we’ve never been able to do in the space in terms of novel drug discovery.”
The industry is rebounding from a fallow period. Its last strong run coincided with the Covid era, when ultra-low rates fueled investment in early-stage developers and mRNA vaccines drove revenue surges at Moderna, Pfizer, and BioNTech. The sector subsequently cooled as many early-stage companies faltered, Covid vaccine demand evaporated, and rising interest rates chilled IPOs and M&A. Risks remain — drug development takes years and fails far more often than it succeeds — but analysts say the outlook is healthier now. While strong performance has led to richer valuations, the fundamental case for investment remains compelling.
Innovation Paying Off
Recent clinical results are stoking excitement that novel drugs could address some of medicine’s toughest challenges. Moderna and Merck’s melanoma candidate, for instance, uses mRNA to trigger an immune response against tumors that have been surgically removed and genetically analyzed. Though not a preventive vaccine, it employs a similar immunological mechanism and demonstrated a 42% reduction in cancer recurrence or death when combined with Merck’s Keytruda. While Phase 3 results disappointed Wall Street, oncologists called the outcomes highly positive and see the technology as a potential game changer for personalized cancer treatments. The companies aim to submit for FDA approval and launch in 2027.
Inflammation treatment is another promising area. AstraZeneca and Amgen reported positive Phase 3 data for an expanded use of Tezspire, an injectable already approved for nasal polyps and asthma. The drug relieved swallowing symptoms and healed tissue damage in patients with severe throat inflammation. Roche also scored a win when the FDA approved Enspryng, the first and only at-home injection for adults with thyroid eye disease, a rare autoimmune condition.
Obesity drugs are advancing beyond first-generation GLP-1s. Eli Lilly’s retatrutide, a “triple agonist” targeting three hormone receptors, cleared two additional clinical trials over the summer, producing 28%–30% weight loss at the highest doses. Lilly plans to file for FDA approval in the first quarter of 2027.
High-Tech Tools and M&A
Much of the innovation extends beyond drug-making into gene sequencing, mRNA platforms, and high-tech instruments. Illumina has more than doubled this year on accelerating demand for its NovaSeq X sequencing platform. Pharmaceutical giants including Bristol Myers Squibb, Merck, and Kura are collaborating with Illumina on precision oncology solutions.
Another standout is 10x Genomics, up more than 300%. The firm provides lab instruments for cancer, immunology, and neuroscience research. Its Atera platform generates data sets to train AI models, accelerating personalized therapies. “Using AI, you can now bring a drug to clinical trials with less capital,” said Shreefāl Mehta, president of Guidant BioTherapeutics. “More investment is flowing to companies demonstrating that.” Global AI in drug discovery is projected to grow from a $20 billion market in 2025 to over $160 billion by 2035, according to Towards Health.
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M&A is another catalyst. Biopharma dealmaking reached $134 billion in the first half of 2026, up from $112 billion for all of 2025, noted Jeet Mukherjee, biotech analyst at BTIG. This signals that more drugs in development are showing clinical promise. Big Pharma also faces a “patent cliff”: products representing $180 billion in revenue will lose exclusivity by 2030, per RTW Institute. Companies with looming expiries “are looking for novel products and innovative products to put into their pipeline,” Mehta said. GLP-1 blockbusters have left some firms flush with cash; Eli Lilly alone completed 10 acquisitions in 2026 worth $25 billion.
Where to Invest in Biotech Now
ETFs offer diversified exposure, though they differ in construction. The iShares Biotech ETF (IBB) is a low-cost, market-cap-weighted fund led by Gilead Sciences, Amgen, Vertex Pharmaceuticals, and Moderna. The State Street SPDR S&P Biotech ETF (XBI) uses equal weighting, providing greater exposure to small- and mid-cap names such as Moderna, Natera, Twist Bioscience, and Halozyme Therapeutics.
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Piper Sandler calls Illumina and 10x Genomics the “primary infrastructure plays” in life sciences, saying their technologies are “driving the next generation of precision medicine.” Analyst David Westenberg has a buy rating and $305 target on Illumina (implying 14% upside from recent levels near $267) and a hold rating with an $80 target on 10x Genomics (above recent prices around $70).
Twist Bioscience is another name to watch. The company produces customized synthetic DNA and sequencing tools, and has partnered with Eli Lilly’s AI platform and Anthropic to test the Claude model for protein development. While not expected to turn an EPS profit until 2029, revenue is forecast to grow from $572 million in 2027 to $833 million in 2029. The average analyst target of $168 implies 21% returns from recent prices near $138.
In the small-cap space, Piper Sandler’s Tenthoff favors Monte Rosa Therapeutics, a pioneer in protein degradation that selectively destroys disease-causing proteins. The firm has partnered with Novartis on an autoimmune disease treatment, with a Phase 2 study announced in September triggering milestone payments. Tenthoff has a buy rating and $37 target on the stock, recently trading around $10.70.
BTIG’s Mukherjee recommends Faeth Therapeutics, which is developing a novel two-drug regimen for breast cancer and other tumors. The regimen could address safety and dosing limitations of a recently approved breast cancer drug and become “a mainstay of the future breast cancer treatment paradigm,” he said. Though clinical-stage with no marketed product, the stock has risen 93% year to date to around $18; Mukherjee’s target is $55.
Kymera Therapeutics also warrants attention. The company is developing an oral version of the blockbuster injectable Dupixent (from Regeneron and Sanofi). Oral agents are often preferred by patients, and Kymera’s drug could capture share while expanding the market to those not on systemic biologics. Kymera says it does not expect a patent fight because its mechanism is distinct. T. Rowe’s Hall also likes Kymera for its potential “to unlock disease targets that have been classically considered un-druggable.” The stock is the second-largest holding in T. Rowe’s Biotech ETF, accounting for 4.2% of the portfolio.