The biotech industry has navigated the uncertain macroeconomic environment effectively so far this year. Upbeat first-quarter results, new drug approvals and positive clinical and pipeline developments have continued to drive momentum despite ongoing pricing pressures and regulatory headwinds. With demand for innovative therapies remaining resilient regardless of economic conditions, the biotechnology industry is well-positioned to sustain investor interest and growth opportunities in the future.
The recent pickup in mergers and acquisitions (M&A) activity after a period of slowdown, driven by an evolving industry landscape and increasing focus on AI-driven drug discovery, has supported sector momentum. Large pharmaceutical and biotechnology companies are continually expanding their product portfolios and pipelines through strategic collaborations and acquisitions to adapt their business models amid growing generic competition for key drugs. Consequently, smaller biotech firms leveraging breakthrough technologies are increasingly drawing attention, helping fuel momentum across the broader sector.
Biotech companies like Liquidia Corporation LQDA, Immunome, Inc. IMNM, Stoke Therapeutics STOK and Immunocore IMCR are poised to outperform the sector.
Industry Description
The Zacks Biomedical and Genetics industry comprises biopharmaceutical and biotechnology companies that develop high-profile drugs utilizing groundbreaking technology. These biologically processed drugs, which address virology, neuroscience, metabolism and rare diseases, are manufactured using live organisms.
As technology becomes increasingly crucial to improving global health, biotech companies strive to utilize innovative technologies to rapidly develop breakthrough treatments. Several companies in this field are developing drugs and vaccines utilizing modern technology. Given the dynamic and evolving nature of technology, the sector seems riskier than the large-cap pharma or drug industry.
4 Trends Shaping the Future of the Biotech Industry
Innovation and Execution Hold the Key: The primary focus in the biotech industry is on the performance of high-profile drugs and innovative pipeline development, as only a handful of companies in this industry have approved drugs in their portfolios. Most companies spend millions and billions of dollars to create a drug with path-breaking technology, resulting in significant research and development expenditures. The growing focus on using AI technology in drug discovery is driving additional investment into the industry. Precision medicine, also known as personalized medicine, is another rapidly evolving field in the industry.
On the other hand, successful commercialization is crucial for a drug to become a revenue generator for the company. Smaller biotechs often lack the necessary funds and expertise to reach the target population. This prompts collaboration deals with either pharma or biotech bigwigs, wherein sales are shared or royalties are received.
Sometimes, approved treatments come with side effects that emerge over time, and the uptake may fail to meet expectations. Hence, it takes several years before a biotech company turns profitable. Moreover, it may take quite a few years for any newly approved drug to contribute to its company’s top line.
M&A in the Spotlight: Consolidation has long been a key theme in the pharma and biotech industry, as leading companies continually seek to diversify their revenue streams amid declining sales from their flagship drugs. The recent spree of acquisitions signifies a focus on portfolio expansion and constant pipeline innovation, given the changing landscape and spotlight on AI-driven drug discovery.
Simultaneously, bigwigs in the space also enter into licensing deals and collaborations for a promising drug/candidate to strengthen and expand their portfolios/pipelines in their respective core areas or emerging fields. While oncology and immuno-oncology companies have always been at the top of acquisition targets, the lucrative obesity sector and gene-editing space are now being eyed.
Key M&A deals in recent times include Merck’s acquisition of Terns Pharmaceuticals and Novartis acquisition of Avidity Biosciences. Pharma giant Eli Lilly has been on an acquisition spree. The company is strengthening its hematology portfolio through the recently announced acquisitions of Ajax Therapeutics and Kelonia Therapeutics, Inc.
Gilead Sciences has recently expanded its oncology footprint through the acquisitions of Arcellx and Tubulis. The company also partnered with Lakefront Biotherapeutics to acquire Ouro Medicines, a move aimed at advancing the development of T-cell engager therapies for autoimmune diseases.
The recent spotlight on the usage of AI technology for drug discovery should lure further investment in this industry.
New Drug Approvals Boost Prospects: New drug approvals accelerated in 2026 as pharmaceutical and biotech companies strive to diversify their product portfolios.
Pipeline Setbacks & Potential Tariffs Weigh on Outlook: Pipeline setbacks are key deterrents for biotech companies, given the exorbitant cost of developing drugs using expensive technology. Most drugs/therapies take years to gain a regulatory nod. An unfavorable outcome from a crucial trial on a promising candidate is a huge setback, particularly for smaller biotechs, which are mostly one-trick ponies. The leading biotechs face other headwinds, including declining sales of high-profile drugs due to intensifying competition. Moreover, ongoing geopolitical tensions remain a headwind.
Zacks Industry Rank Indicates Grim Prospects
The group’s Zacks Industry Rank is basically the average of the Zacks Rank of all the member stocks.
The Zacks Biomedical and Genetics industry currently carries a Zacks Industry Rank #148, which places it among the bottom 40% of more than 246 Zacks industries. The rank reflects a grim outlook for the space as of now, mostly due to the challenging macroenvironment. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few biotech stocks that are well-positioned to beat the industry based on a strong portfolio/pipeline, let’s take a look at the industry’s stock market performance and current valuation.
Industry Versus S&P 500 & Sector
The Zacks Biomedical and Genetics industry is a 665-stock group within the broader Zacks Medical sector. The stocks in this industry have lost 3.5% year to date compared with the Zacks Medical sector’s decline of 7.4%. The S&P 500 composite has gained 10.2% in the same period.
YTD Price Performance
Industry’s Current Valuation
Since most companies in the biotech sector do not have approved drugs, valuing these becomes a complex process. On the basis of the trailing 12-month price-to-sales ratio (P/S TTM), which is commonly used for valuing biotech companies with approved portfolios of drugs, the industry is currently trading at 2.26X compared with the S&P 500’s 6.11X and the Zacks Medical sector’s 2.37X.
Over the past five years, the industry has traded as high as 3.66X, as low as 1.81X and at a median of 2.42X, as depicted in the chart below.
4 Biotech Stocks Worth Buying
Liquidia Corporation is primarily focused on developing drugs for serious respiratory and vascular diseases through precise and innovative therapies built on its proprietary PRINT Technology. This technology enabled the development of Yutrepia (treprostinil) inhalation powder for the treatment of pulmonary arterial hypertension (PAH) and pulmonary hypertension associated with interstitial lung disease (PH-ILD). Yutrepia continues to gain traction and sales totaled $129.9 million in the first quarter of 2026. Since its launch in June 2025 through April 30, 2026, the therapy has received more than 4,500 unique patient prescriptions and has been used to treat approximately 3,750 patients.
The company is also advancing L606, an investigational extended-release formulation of treprostinil designed for twice-daily administration using a next-generation nebulizer. Liquidia currently markets generic treprostinil injection for the treatment of PAH.
LQDA currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of LQDA have soared 81.3% year to date. The Zacks Consensus Estimate for 2026 earnings per share (EPS) has almost doubled to $2.97 in the past 30 days.
Price and Consensus: LQDA
Immunocore Holdings is a commercial-stage biotech company focused on developing a novel class of TCR bispecific immunotherapies, called ImmTAX, targeting a broad range of diseases, including cancer, autoimmune and infectious diseases. Kimmtrak, the sole-marketed drug in the company’s portfolio, is the first FDA-approved immunotherapy for metastatic uveal (ocular) melanoma, a rare form of cancer. The drug is performing well.
IMCR is working to expand Kimmtrak’s label into second line advanced cutaneous melanoma and adjuvant uveal melanoma. The company is currently studying brenetafusp in combination with nivolumab in the phase III registrational PRISM-MEL-301 trial for patients with previously untreated advanced cutaneous melanoma. In addition, brenetafusp is being evaluated in a phase I/II clinical program both as a standalone therapy and in combination regimens across several cancer types, including ovarian cancer and non-small cell lung cancer (NSCLC)
With a strong cash position and encouraging pipeline progress, Immunocore is expected to maintain momentum.
The company currently carries a Zacks Rank 1.
Price and Consensus: IMCR
Immunome is a clinical-stage oncology company focused on developing next-generation targeted cancer therapies with the potential to be first- or best-in-class, including antibody-drug conjugates (ADCs). The company is currently advancing a diverse pipeline of oncology candidates. Key programs include varegacestat, an investigational gamma secretase inhibitor for the treatment of adults with desmoid tumors that is currently under FDA review following an NDA submission; IM-1021, a clinical-stage ROR1-targeting antibody-drug conjugate (ADC); IM-3050, an IND-cleared fibroblast activation protein (FAP)-targeted radiotherapy; and IM-1617, an IND-cleared ADC for solid tumors. Immunome also plans to submit a marketing authorization application to the European Medicines Agency for varegacestat by the end of 2026. A potential approval will be a significant boost for the company.
Immunome is also progressing early-stage ADC candidates aimed at undisclosed solid tumor targets. With a sound cash position, the company should be able to advance its pipeline.
IMNM currently carries a Zacks Rank #2 (Buy).
Price and Consensus: IMNM
Stoke Therapeutics is a late-stage clinical biotech focused on treating severe genetic diseases through RNA-based medicines that restore protein expression. Its lead candidate, zorevunersen (STK-001), is being developed as a potential disease-modifying treatment for Dravet syndrome and is currently being evaluated in the global phase III EMPEROR study.
Price and Consensus: STOK
Beyond Dravet syndrome, the company is advancing STK-002 for autosomal dominant optic atrophy (ADOA), a genetic eye disorder with no approved therapies. STK-002 is designed to restore OPA1 protein expression and potentially slow or prevent vision loss. The first patient was dosed in the phase I OSPREY study in February 2026.
Shares of this Rank #2 company have skyrocketed 170% over the past year.
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Liquidia Corporation (LQDA): Free Stock Analysis Report
Stoke Therapeutics, Inc. (STOK): Free Stock Analysis Report
Immunome, Inc. (IMNM): Free Stock Analysis Report
Immunocore Holdings PLC Sponsored ADR (IMCR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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