Biotech Rebound: Is it for real?

If you’d asked most biotech investors in early April how 2025 would end, the answers would have ranged from “survive” to “please just make it stop.”

And yet… here we are.

The most telling stat from the year is also the simplest: the XBI was down ~22% for the year in early April, and finished 2025 up ~37%. That’s not a gentle recovery. That’s sentiment whiplash.

But the bigger question (and the point of this newsletter) is whether this was a temporary relief rally… or the beginning of a healthier cycle for biotech.

Below is how I’m thinking about 2025 and what I’m watching as we head into 2026.

2025 was a tale of two cities.
First half: depressed, exhausted, and watching the S&P outperform biotech (again).
Second half (especially post Labor Day): momentum that actually held, not the fake-out “summer bounce” we’ve all learned to fear.

A few forces came up repeatedly in the conversations I listened to:

One of the more encouraging notes: this was not a market where everything went up together. It’s been a stock-picker environment, where mediocre data got punished and clean wins got rewarded. That matters. Froth is when bad companies get dragged upward by correlation. 2025 felt more discerning.

Follow-ons were the real story in public financing. A couple of numbers that stuck with me:

That said, the market also showed fatigue into year-end: good news, quick pop, then a follow-on, then a selloff. The “first-week performance” of deals started to matter again in a very short-term way, which is both normal and a little annoying.

On IPOs: multiple folks expect the follow-on market to strengthen first, then IPOs follow. Given the 4–5 month IPO process, the post Labor Day turn likely sets up January/February 2026 as the moment we see S-1s flip public and the window tested. The main risk is not quantity, it’s quality. If the first cohort of IPOs is a recycle bin of weaker 2024–early 2025 candidates, we could poison the well quickly.

This was one of the most interesting psychological shifts of 2025: investors started to shrug at DC chaos.

Two themes:

The FDA may be a dumpster fire, but investors are pushing that worry down the road… until missed deadlines and inconsistent frameworks become impossible to ignore.

By year-end, the FDA approved ~50 novel therapies, which is a good year, but not necessarily a year of obvious, universally-agreed blockbuster breakthrough of the decade approvals.

Still, a few themes stood out:

If there was a single drug class that defined biotech’s center of gravity in 2025, it was still GLP-1s. What changed this year was not enthusiasm, but scope. These drugs expanded their reach beyond weight loss into broader metabolic and systemic disease. Novo Nordisk’s Wegovy picked up an expanded approval in MASH, while Ozempic moved into chronic kidney disease, reinforcing the idea that GLP-1 biology is not a single-indication story, but a platform with multiple clinical endpoints still to unlock.

At the same time, investor attention shifted to what comes next: oral GLP-1s. One oral program is widely expected to use a priority review voucher, setting up a potential fast FDA decision as early as Q1 2026. And hovering over all of this was the cultural moment that crystallized the trend: Eli Lilly crossing a $1 trillion market cap, becoming the first healthcare company to ever do so, a valuation driven largely by its GLP-1 franchise. By year-end, GLP-1s were no longer just a hot category; they were the economic engine of the sector.

Another quiet but important shift in 2025 was the emergence of cell therapy as a credible approach in autoimmune disease, not just oncology. The clearest example came from Kyverna, whose CD19-targeted autologous cell therapy produced what multiple commentators described as a “clean win” in stiff person’s disease.

The dataset was small, roughly 25 patients, and relied on a single-arm, baseline-compared design. But the signal was hard to ignore. Patients showed consistent functional improvements, including gains in walking ability, in a disease with profound unmet need and limited therapeutic options. If this program continues to advance, it could become one of the first cell therapies approved for an autoimmune indication, opening the door to broader expansion into related diseases like myositis or myasthenia gravis. More broadly, it hinted that the CAR-T and cell therapy playbook may finally be extensible beyond cancer.

Pain was not the loudest story of 2025, but it was one of the more encouraging ones. After years of scientific false starts and commercial disappointment, the field finally saw tangible progress in non-opioid pain therapies. A notable example was Vertex Pharmaceuticals’ NaV1.8 inhibitor Journavx (VX-548), which reinforced that there are tractable, peripherally targeted mechanisms capable of delivering real analgesia without opioid biology. None of these advances rewrote standards of care overnight, but they did something just as important: they showed that innovation in pain is still possible, and that regulators remain open to approving alternatives that could meaningfully reduce opioid dependence.

The unresolved question, however, is not scientific validity but commercial reality. Real-world uptake, payer reimbursement, and positioning against cheap, entrenched generics will determine whether drugs like these remain niche tools or evolve into scalable franchises. In pain, proving you work is only the first hurdle; proving you can change prescribing behavior is the real test.

Here’s my 2026 checklist, directly shaped by how 2025 actually played out.

A healthy IPO window in biotech is not about volume. It’s about credibility.

The risk is not just chaos at the top. It’s institutional capacity:

If missed deadlines and inconsistent meeting access become the norm, that changes how investors value timelines across the whole sector.

Most Favored Nation pricing remains one of those issues that investors don’t panic about — until they do. The optimistic interpretation is that MFN pain is concentrated in legacy pharma portfolios with low ex-U.S. reference prices, while new drug launches could eventually settle into a more rational, GDP-adjusted global pricing regime. The darker scenario is that frameworks negotiated by large pharmaceutical companies get applied broadly to smaller biotechs with very different economics and far less negotiating power. Either way, drug pricing is unlikely to dominate headlines day to day in 2026, but it will remain a background tremor that investors monitor closely.

If 2025 demonstrated anything clearly, it’s that patent cliffs don’t wait for sentiment to improve. As large pharma companies face looming revenue gaps and sit on cash-heavy balance sheets, the strategic logic for acquisitions remains intact regardless of short-term market moves. When specialist funds get paid on M&A and recycle capital back into biotech, it creates a self-reinforcing flywheel that supports both private and public companies. If deal-making momentum carries into 2026, it will continue to act as a stabilizing force for the sector, even during periods of volatility.

This is my favorite “if it’s real” indicator. If 2026 becomes a correlated everything-rips market, I’ll get nervous. If it stays a fundamentals market (good data rewarded, weak biology punished), I’ll be more confident this rebound has legs.

What I am into (Sports Edition):

Normally, I close these letters with pieces of content I have been into. Since this is the last issue of the year, I’m breaking that rule. As a sports junkie, I’m ending 2025 the only way that feels right: by ranking my top five sports moments of the year … entirely subjective, no apologies.

5) Kershaw’s last pitch as a Dodger
When Clayton Kershaw came in with everything on the line, Dodger Stadium went tense in that uniquely complicated way reserved for legends. The fans love him, but the playoff baggage is real, and for a split second it felt like the whole place was thinking, please not like this. He got out of it — and the exhale was as loud as any celebration. Knowing now that it was his last pitch as a Dodger makes the moment hit even harder.

4) Alcaraz vs. Sinner at the French Open
I grew up on Federer–Nadal, so the French Open final between Carlos Alcaraz and Jannik Sinner hit differently. For five and a half hours on the clay of Roland-Garros, inevitability turned into suspense and then into something unforgettable. Down three championship points, Alcaraz did not flinch. He stayed with the point in front of him and pulled off a comeback that felt almost unreal. It was not just one of the greatest finals I have ever watched. It was the moment you could feel the next great tennis rivalry lock into place.

3) Egypt qualifying for the World Cup
This one is personal. Seeing Egypt qualify for the World Cup, only the second time in my lifetime, hit differently. Even better, they will be playing matches in Seattle and Vancouver, and I cannot wait to root for them in person. The best part was how it happened. No chaos, no last-minute heartbreak, just a straightforward qualification that felt earned.

2) Seeing Real Madrid live, finally
It did not dominate headlines, but it meant everything to me. This summer I got to watch Real Madrid play an official match in person for the first time in my life at MetLife Stadium. A dramatic 3–2 win over Borussia Dortmund, capped by a last-minute save from Thibaut Courtois. Singing the Real Madrid anthem out loud in the stands was one of those moments you never forget.

1) Miguel Rojas saves the Dodgers, twice
I could have made all five moments about the Dodgers, but this one earned the top spot. Game 7 was something out of this world, and what Miguel Rojas did still doesn’t feel real. In the top of the ninth, with the season on the line and none of the obvious stars delivering the moment, Rojas delivered the most important swing in Dodgers franchise history, tying the game. Then, in the bottom of the ninth, he turned around and made a season-saving defensive play at the plate, with the entire World Series hinging on a replay call.

It was baseball at its purest and cruelest, where the unlikeliest player becomes immortal for one inning. And when it was finally over, Los Angeles Dodgers walked off as repeat champions, punctuated perfectly by Joe Davis’s call: “To beat the champs, you’ve gotta knock them out.”

Happy New Year. Wishing you all the best in the year ahead. I’m excited to see what 2026 brings for biotech, healthcare, sports and everything in between. Thank you for coming along with me on this journey of writing this newsletter. As always, I’d love to hear your thoughts. You can reach me at [email protected]

Yours truly,
Gad