The biotechnology industry has long been driven by clinical events. The outcome of a Phase III trial not only affects the stock prices of the companies involved but can also shape market expectations for entire therapeutic categories. When novel therapies clear pivotal late-stage trials, the perceived risk across similar development pipelines tends to decline significantly. Personalized neoantigen therapies based on mRNA technology are currently a hot focus in oncology R&D.
Last Wednesday, Moderna (MRNA) and Merck & Co. (MRK) announced that their personalized mRNA neoantigen therapy, intismeran autogene, in combination with Keytruda, met its primary endpoint in the Phase III INTerpath-001 trial for melanoma. Following the announcement, Moderna’s shares surged nearly 177%, while Merck rose over 12%. The SPDR S&P Biotech ETF (XBI) also jumped nearly 6%, reaching its highest level since February 2021. Boosted by sector sentiment, gene-editing companies including Prime Medicine (PRME), Intellia (NTLA), CRISPR Therapeutics (CRSP), Editas Medicine (EDIT), and Beam Therapeutics (BEAM) all moved higher. The iShares Genomics Immunology and Healthcare ETF (IDNA) gained 13.53% in a single day, with trading volume reaching 2.8 times its average.
According to data from the Bank of America Research Investment Committee, the biotech sector has delivered returns of approximately 10% or higher since June. The committee views biotech as one of the directions for diversifying concentration risk in technology stocks, alongside insurance companies and regional banks.
For investors bullish on this theme, biotech ETFs offer the most direct exposure. The SPDR S&P Biotech ETF and the iShares Biotechnology Index ETF (IBB) cover the broader industry; the iShares Genomics Immunology and Healthcare ETF is more focused on genomics and precision medicine; and the Invesco Biotechnology & Genome ETF (PBE) includes biotech and genome-related companies. At the individual stock level, in addition to Moderna and Merck, companies that have recently gained attention amid improving sector sentiment include the aforementioned gene-editing firms, as well as AI drug discovery players Absci (ABSI), Recursion Pharmaceuticals (RXRX), and Twist Bioscience (TWST).
Following the trial results, analysts have turned notably more positive on biotech ETFs. Bullish arguments include reasonable valuations, strengthening technicals, and M&A potential. On valuation, Financial Serenity estimates that if IDNA’s forward valuation multiple converges toward XBI’s (currently 14.90x and 19.29x, respectively), a valuation re-rating alone could drive IDNA up by approximately 29.5%. On the M&A front, with industry transition risks diminishing, analysts believe merger and acquisition activity could heat up.