2025 is shaping up to be the year of a healthcare turnaround. 2026 holds even more promise as the momentum sustains and green shoots start to blossom.
2025: The Year of Healthcare
Total Enterprise Value of Global Publicly Traded Biotech
Source: via Stifel Report 21st November 2025, CapitalIQ, Biotechs are defined as any therapeutics company without an approved product on any global stock exchange.
- Stock returns are breaking out: The S&P Sector Select Biotech Index is up 30% this year, returning to levels last seen in late 20211. The Nasdaq Biotech Index is back to all-time highs – this index has compounded 11% per annum over 32 years, ahead of both the S&P 500 and Nasdaq Composite2.
- Biotech aggregate enterprise value bottomed at $174 billion in April 2025 and today stands at $398bn, decisively breaking out of a three year bear market. 2021 peak was $598bn, so there is lots of room to go3.
- November saw something not seen in a long time: the information technology sector sold off while biotech continued to perform4.
- Innovation continues apace: So far in 2025, the FDA has approved 43 drugs, on pace to beat 2024 approval record.5
- Funding environment improved: The last ten weeks saw a burst of financings, across venture, private debt, and, especially, equity follow-ons. This has pushed the estimated financing volume for 2025 above 2022/2023. Despite a slow start this could be the fourth most active financing year on record6.
- M&A has surged: The market is on pace to the highest level of transactions since 2019. It is annualizing at $237bn6. This is particularly remarkable as there have been no large horizontal (between two large pharma companies) mergers.
Green Shoots Leave Plenty in Store for 2026:
- The FDA continues to show appetite for innovation: A more stable leadership at the FDA should benefit new drug approvals in 2026. New programs, like the rare pediatric disease designation (PRV), show a willingness to reform and boost innovation.
- Policy risk is fading: As we wrote about in our recent article, "End of Healthcare Policy Uncertainty? What the Pfizer-Trump Deal Means", policy risk is starting to reduce, setting up a positive environment for the sector.
- Patent cliffs accelerate need for M&A: $280bn of revenue remains at risk of loss of exclusivity, and need to be replaced. 2028 is a particularly difficult year for patent expiry and is now entering planning horizons7.
- Biopharma IPO volumes still remain depressed: Certain parts of the financing market, like IPOs8, have yet to normalize, adding future potential fuel to the recovery.
- In aggregate, the S&P healthcare sector is trading at a 17% discount to the S&P forward P/E multiple - a compelling starting valuation for long-term investors.
- 2026 will requires investors to be more discerning: The first stages of a recovery often lifts all boats, and we have seen rallies in lower quality parts of the biopharma market from oversold levels. The second stages require more discerning in terms of companies with strong data sets and operating bases.
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