PARTNER CONTENT
By Lilly Nordhal, Co-Portfolio Manager, Great Point Partners
Small- and mid-cap biotechnology have rebounded sharply after three years of sustained contraction. Following the COVID-era bubble, biotech stocks experienced a peak-to-trough drawdown of roughly 60%. In 2025, after an initial decline of over 20 per cent, the sector is now up over 35% year to date, supported by a confluence of improving fundamentals and a more constructive macro and policy backdrop.
Positive clinical data, successful commercial launches, and increased M&A activity have reinforced company-specific value creation, while lower interest rates, easing FDA-related regulatory concerns, and diminished perception of threat from China-based competition have improved risk appetite and valuation support. Unsurprisingly, this has contributed to the re-emergence of generalist investor interest and capital inflows, which should further support recovery. We are encouraged by this recent momentum and expect these tailwinds to endure.
While valuations have partially recalibrated, many companies in our view remain materially discounted relative to their long-term potential and should be sensitive to catalyst-driven re-rating.
We focus on the 12-to-24-month catalyst window, where valuations tend to inflect around clinical, regulatory and commercial milestones.
We also highlight pharma’s looming patent cliff, which will drive over $180bn in exclusivity losses through 2029 and should continue to fuel M&A activity. In 2025 alone, over 30 biopharma transactions have taken place. Acquirers remain focused on late-stage therapies with multi-billion[1]dollar peak sales potential. High-growth therapeutic areas such as metabolic disease, neurology, immunology and oncology should continue to remain key priorities.
A fundamental, value-oriented strategy like ours has historically preserved capital during downturns, through disciplined stock selection in an idiosyncratic sector with tremendous dispersion. This same process should position the strategy to benefit during the current period of recovery. Ultimately, biotech remains a stock picker’s market, where deep scientific insight is the ultimate driver of success.
Lilly Nordhal, Co-Portfolio Manager, Great Point Partners
