MW Biotech is back. Here's why these rallying stocks belong in your portfolio now.

By Michael Brush

The volatile sector is seeing greater stability, and these four stocks can profit

Biotech stocks are emerging from a four-year slump. The SPDR S&P Biotech exchange-traded fund XBI, a proxy for the sector, is up 25% so far this year through Oct. 31, beating the S&P 500 SPX by 9 percentage points.

Biotech's strength is likely to continue - so it's not too late for investors to get in, sector analysts say.

"Biotech will be a comparative outperformer," says Motley Fool biotech analyst Karl Thiel. "There is better sentiment and fund-flow, and that feeds on itself. That can unravel quickly but I still think it has some legs."

Stifel's head of biotech research, Paul Matteis, agrees. "The sector's run has been driven by a number of credible fundamental factors that seem mostly sustainable," he said in a recent interview.

Here are some tailwinds for biotech that are likely to continue, driving this notoriously volatile sector higher from here - plus four stocks these analysts single out.

1. Drug-trial results are driving share prices: For much of the past four years, biotech stocks had the bad habit of selling off even after the release of positive drug-trial data. Now it's different. Companies are getting rewarded for solid data again. "We've been seeing a string of good data readouts, and the stocks are trading well around them," Stifel's Matteis said.

UniQure, for example, $(QURE)$ recently soared more than 350% following positive trial results. Praxis Precision Medicines (PRAX) is another example, popping more than 230%. Rapport Therapeutics $(RAPP)$ and MBX Biosciences (MBX) each gained more than 100% on their respective positive results.

One-day gains like these grab the attention of investors and pull them in - which supports biotech stocks. "During the most bearish times, there was uncertainty about whether you could get paid for taking on data risk in early stage biotech companies. That has somewhat disappeared," Matteis said.

2. Mergers and acquisitions are picking up: So far this year, buyouts have boosted several biotech stocks. Some standouts: Regulus Therapeutics went up 120%; 89bio went up 85%; Chimerix gained 69% and Intra-Cellular Therapies rose 57%. Such quick one-day gains also get investors' attention.

Investors can expect more to come because the factor that is driving these buyouts remains. Big pharmaceutical companies face numerous patent expirations and this will not change, says William Blair biotech analyst Myles Minter. Typically, a surge of M&A activity like the one this year has been a catalyst for ongoing biotech-sector recoveries.

M&A also puts higher valuations on biotech companies in general because investors start considering how much more profitable potential drugs might be in the hands of companies that already have the sales force and manufacturing capacity to handle them, Thiel says.

3. Drug launches are getting traction: Stifel analyst Matteis highlights several biotech companies that have seen their shares rise after new drug launches. For example: Madrigal Pharmaceuticals $(MDGL)$, Neurocrine Biosciences $(NBIX)$ and Alnylam Pharmaceuticals $(ALNY)$. "The successful launches are showing that biotech companies can turn science projects into credible businesses," Matteis says.

4. Interest rates are falling: Lower U.S. interest rates help biotech companies in two ways. First, biotech companies burn a lot of cash. Lower rates reduce the cost of that money, allowing companies to fund more research. Next, lower rates increase the net present value of companies with distant earnings, by reducing the discount rate in valuation models.

"The No. 1 issue cited by generalists was 'I don't want to touch nonearners in a rising-rate environment.' People are becoming more comfortable with nonearners in a lower-rate environment," says Matthew Renna, co-manager of the Harbor Health Care ETF MEDI.

5. Tariff risks are easing: To minimize tariff risks, big pharma companies are setting up manufacturing in the U.S. The brokerage William Blair recently ran a note listing 17 large biopharma companies planning substantial investments in U.S. manufacturing. They included Amgen $(AMGN)$, AbbVie $(ABBV)$, Bristol Myers Squibb $(BMY)$, Eli Lilly $(LLY)$ and Pfizer $(PFE)$. This could ease the tariff threat for the sector.

6. Drug-price control risks are easing: In response to potential U.S. government price controls, several drug companies, including Pfizer and Bristol Myers Squibb, are offering discounts to patients who pay out of pocket. "It gives the [Trump] administration a win," says Minter at William Blair. "They can say, 'Look how much we brought drug prices down.' This is a huge overhang that has been removed from the space."

7. FDA chaos is settling down: When the Trump administration first took charge, policy confusion at the Food and Drug Administration and the Department of Health and Human Services created considerable uncertainty for biotech investors. "There was a lot of fear about what that would mean for product approval," Renna says.

But that's changed. "We are seeing drugs approved on time and early," Renna adds. "We feel very good about the regulatory backdrop."

8. The long biotech winter cleaned up the sector: Many biotech companies that went public too early during the COVID-inspired biotech frenzy got weeded out by the sector's subsequent weakness, Renna says. "That cleansed the space of a lot of weaker companies," he says. This makes it easier for the whole sector to move higher.

Stocks to consider

Biotech investing always involves a lot of research. But these experts offered some favored names.

Renna likes companies in the midst of successful commercial launches. He singles out Ascendis Pharma $(ASND)$, which recently launched Yorvipath, a treatment for hypoparathyroidism. It's expected to win FDA approval for TransCon CNP, a therapy for a rare bone-development disorder called achondroplasia.

Minter at William Blair singles out the immunology company Argenx $(ARGX)$, which is rolling out a therapy called Vyvgart for rare autoimmune disorders and has a strong pipeline of therapies. Stifel's Matteis highlights Alkermes $(ALKS)$, which is developing promising therapies for narcolepsy and other sleep disorders. Thiel at Motley Fool likes BridgeBio Pharma (BBIO), which develops therapies for genetic disorders.

Michael Brush is a columnist for MarketWatch. At the time of publication, he owned PRAX, MBX, RAPP, ETNB, MDGL, ASND, ARGX and ALKS. Brush has suggested PRAX, MBX, ETNB, ITCI, MRUS, AVDL, MDGL, NBIX, ALNY, ABBV, BMY, LLY, PFE, ASND, ARGX and ALKS in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks

More: This biotech's stock soared as investors look for the next buyout target

Also read: These 7 tech stocks have seen heavy insider selling even as prices are rising

-Michael Brush

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

November 03, 2025 09:58 ET (14:58 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.