The current macro environment appears grim, given the uncertainty around the global trade war, along with ongoing geopolitical tension. While 2025 started on an encouraging note and strong quarterly results buoyed investor optimism, a likely overall slowdown does not bode well. Nonetheless, given the continuous need for innovative medical treatments, irrespective of the state of the economy, the dynamic biotech industry will continue to grab investors’ interest despite the inherent volatility and uncertain macroeconomic environment.
M&A activity is likely to accelerate in 2025 under the Trump administration and expected deregulation. Pharma and biotech industry leaders consistently seek to expand their product portfolios and pipelines through strategic collaborations and acquisitions. While oncology and immuno-oncology companies have always been at the top of acquisition targets, the lucrative obesity sector and gene-editing space are in spotlight as of now.
Biotech companies like Gilead Sciences, Inc. GILD, BioMarin Pharmaceutical BMRN, Krystal Biotech KRYS, ADMA Biologics ADMA and Amicus Therapeutics FOLD are poised to outperform the sector in this volatile market environment.
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 paramount to improving global health, biotech companies aim to utilize innovative technology to develop breakthrough treatments rapidly. Quite a few companies in this space are developing drugs and vaccines using 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, 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 recent spotlight on the usage of AI technology for drug discovery will propel further investment in this industry. Precision medicine, or personalized medicine, is another evolving field in the industry.
On the other hand, successful commercialization is crucial for higher drug uptake, as 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 central focus in the biotech industry. This is because leading pharma/biotech companies constantly look to diversify their revenue base in the face of dwindling sales of their high-profile drugs. Acquisitions also make sense as developing a drug/technology from scratch is costly and risky. After a lull of almost two years, the pace of M&A has picked up from last year and is likely to accelerate in 2025.
Pharma giant Johnson & Johnson recently acquired Intra-Cellular Therapies for approximately $14.6 billion. While oncology and immuno-oncology are the key focus areas, treatments for obesity, rare diseases and gene-editing companies have gained traction in recent times, making them lucrative investment areas.
An attractive pipeline candidate is the key lure for these companies. Cost synergies in research and development are added benefits, as many smaller biotech companies are utilizing innovative technologies to develop drugs and treatments.
New Drug Approvals Boost Prospects: New drug approvals are expected to accelerate in 2025, driven by a continued rise in R&D spending, as most companies aim to diversify their portfolios.
Pipeline Setbacks & Competition Hurt: 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.
Zacks Industry Rank Indicates Promising 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 #78, which places it among the top 32% of more than 245 Zacks industries. The rank reflects a promising outlook for the space, driven by consistent demand for improved medical drugs and treatments despite 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 710-stock group within the broader Zacks Medical sector. It has outperformed the S&P 500 composite but underperformed the Zacks Medical sector year to date.
The stocks in this industry have declined 5.2% year to date compared with the Zacks Medical sector’s loss of 4.3%. The S&P 500 composite has declined 13.7% in the said time frame.
YTD Price Performance
Industry's Current Valuation
Since most companies in the biotech sector do not have approved drugs, valuing these companies 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 1.96X compared with the S&P 500’s 4.71 and the Zacks Medical sector's 2.74.
Over the past five years, the industry has traded as high as 4.29X, as low as 1.96X and at a median of 2.66X, as depicted in the chart below.
5 Biotech Stocks Worth Buying
Amicus Therapeutics’ lead drug Galafold has shown strong uptake since its launch. The company’s efforts to expand Galafold's label should fuel further demand for the drug. Approval of Galafold for Fabry disease in additional geographies is likely to boost sales. The FDA’s approval of Pombiliti + Opfolda for the treatment of Pompe disease has also boosted the portfolio. Amicus is also moving forward with the launch Pombiliti + Opfolda in Europe.
The company currently sports a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for 2025 earnings per share (EPS) has increased 10 cents to 52 cents in the past 60 days. The consensus mark for 2026 EPS has risen 10 cents to 80 cents in this timeframe.
Price and Consensus: FOLD
Gilead Sciences’ market-leading portfolio of HIV drugs is driving growth for the company. Flagship HIV therapy, Biktarvy, continues to maintain its strong growth, fueling the top line. Descovy continues to drive growth as a prevention option for HIV. The company’s efforts to develop better HIV treatments are commendable. Recent data validate lenacapavir’s potential to prevent HIV. A potential approval of lenacapavir should be a significant boost for the HIV franchise, given its advantages over existing treatments. Gilead's efforts to bolster its oncology and virology franchises through internal pipeline development and collaborations are impressive.
Gilead currently carries a Zacks Rank #2 (Buy). Shares of the company have gained 17% year to date.
The Zacks Consensus Estimate for 2025 EPS has increased to $7.87 from $7.55 in the past 60 days. The consensus mark for 2026 has increased to $8.31 from $7.82 in this timeframe.
Price and Consensus: GILD
BioMarin Pharmaceutical’s key drugs, especially dwarfism drug Voxzogo, are witnessing strong demand, which is fueling sales. The label expansion of the drug in the United States and Europe for use in infants with achondroplasia is likely to boost sales further. BioMarin is planning to evaluate the drug in other indications as well. BioMarin has an attractive early-stage pipeline with a focus on multiple diseases.
BMRN carries sports a Zacks Rank of 2. The Zacks Consensus Estimate for 2025 EPS has increased to $4.30 from $4.01 in the past 60 days. The consensus mark for 2026 has risen 15 cents to $5.35 in this timeframe.
Price and Consensus: BMRN
Krystal Biotech received a significant boost with the FDA approval of Vyjuvek, the first-ever revocable gene therapy for treating patients, aged six months or older, with dystrophic epidermolysis bullosa. The initial uptake of this therapy is encouraging and approval in additional geographies will boost sales. Krystal is also advancing a robust pipeline of investigational genetic medicines in the fields of respiratory, oncology, dermatology, ophthalmology and aesthetics. The successful development of any of these pipeline candidates will diversify the company’s revenue stream.
Shares of this Zacks Rank #2 company have risen 9.4% year to date. The Zacks Consensus Estimate for 2025 EPS has increased to $7 from $5,40 in the past 60 days. The consensus mark for 2026 has risen to $10.84 from $9.15 in this timeframe. Shares of the company have gained 9.4% year to date.
Price and Consensus: KRYS
ADMA Biologics markets plasma-derived biologics for the treatment of immune deficiencies and the prevention of certain infectious diseases. Asceniv, its lead product, is a plasma-derived IVIG that contains naturally occurring polyclonal antibodies. Demand for the drug was strong in 2024, with further growth and market penetration expected in 2025. As demand grows and long-term high-titer plasma supply contracts ramp up, ADMA anticipates accelerating new patient starts for Asceniv in 2025, as well as increasing penetration in existing institutions.
ADMA currently carries a Zacks Rank #2. Shares of the company have surged 189.6% in the past year.
Price and Consensus: ADMA
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