The biotech M&A market is heating up as pharmaceutical companies confront a looming patent cliff that will strip $200 billion to $250 billion in branded medicine sales by 2032, according to an ING report published in January.
The ALPS Medical Breakthroughs ETF (SBIO) is trading close to its 52-week high of $51.87 after surging 10.51% in November, powered by a wave of positive clinical trial data and renewed merger activity in small- and midcap biotech companies, according to research from SS&C ALPS Advisors. The biotech ETF outpaced the Nasdaq Biotechnology Index's 8.
Regarding the healthcare sector again disappointing investors in 2025 — the largest ETF addressing the group is up just 11.39% — there are pockets of strength. Those include biotech stocks and the related ETFs.
The tech ETF space offers plenty of important questions for investors.
Biotech stocks and related ETFs are in the midst of a lengthy period of underperformance. For the three years ending July 9, the largest ETF in the category returned just 11%.
It's understandable investors are frustrated with broader measures of small-cap equities. They've been hearing about the possibility of smaller stocks outperforming larger counterparts for a while.
With tech earnings arriving, many investors are still likely fearing a downturn for key information technology stocks. The so-called Magnificent Seven stocks delivered significant performance for investors last year.
It's been a long road of disappointment for healthcare stocks. And biotechnology names have been among the worst offenders.
ALPS Medical Breakthroughs ETF is rated Hold due to high fees, low yield, and mixed performance compared to other healthcare ETFs. The SBIO ETF focuses on small and mid-cap biotech companies with drugs in Phase II or III FDA trials, offering targeted exposure to medical breakthroughs. Despite an aging population driving healthcare demand, sector headwinds and government budget pressures make healthcare stocks less attractive for generating Alpha.
Could now be the time to diversify into important tech subsectors? Rate cuts may already be benefiting tech sectors by easing borrowing costs, with more cuts potentially in the offing.
Yet another rate cut has come and gone, and even with somewhat steady inflation reads, further cuts may be in the pipeline. Debt-heavy areas like tech stand to benefit, but for those already heavily exposed to big tech names, looking elsewhere may appeal.
Biotech stocks and ETFs are among the assets that responded positively to last week's presidential election results. As just one example, the ALPS Medical Breakthroughs ETF (SBIO) is up 10% for the week ending November 11.