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Chicago, IL – December 18, 2025 – Today, Zacks Equity Research Equity areArcutis Biotherapeutics ARQT, Amicus Therapeutics FOLD, ANI Pharmaceuticals ANIP,
Industry: Biotech
Link: https://www.zacks.com/commentary/2805501/5-biotech-stocks-to-watch-for-potential-upside
The volatile biotech industry has put up a strong performance in 2025 despite the uncertain macroeconomic environment. While the tariff saga hit the pharma/biotech industry earlier in the year, the sector held up well, driven by solid momentum from new drug approvals and encouraging pipeline progress. Given the continuous need for innovative medical treatments (regardless of the state of the economy), the dynamic biotech industry will continue to capture investors’ interest going forward.
2025 saw a surge in mergers and acquisitions (M&A) after a lull in 2024, given the changing landscape and the spotlight on AI-driven drug discovery. Large pharmaceutical and biotechnology companies continually expand their product portfolios and pipelines through strategic collaborations and acquisitions to adapt their business models amid rising generic competition for key drugs. As a result, smaller biotechs leveraging breakthrough technologies are increasingly in the spotlight, helping drive momentum across the broader sector.
Biotech companies like Arcutis Biotherapeutics, Amicus Therapeutics, ANI Pharmaceuticals, Tango Therapeutics, Inc. and Pacira Biosciences are poised to outperform the sector.
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 crucial to improving global health, biotech companies strive to utilize innovative technologies to rapidly develop breakthrough treatments. Several companies in this field are developing drugs and vaccines utilizing modern technology. Given the dynamic and evolving nature of technology, the sector seems riskier than the large-cap pharma or drug industry.
Innovation and 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, also known as personalized medicine, is another rapidly 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 key theme in the pharma and biotech industry, as leading companies continually seek to diversify their revenue streams amid declining sales from their flagship drugs. The recent spree of acquisitions signifies a focus on portfolio expansion and constant pipeline innovation, given the changing landscape and spotlight on AI-driven drug discovery.
Simultaneously, bigwigs in the space also enter into licensing deals and collaborations for a promising drug/candidate to strengthen and expand their portfolios/pipelines in their respective core areas or emerging fields. While oncology and immuno-oncology companies have always been at the top of acquisition targets, the lucrative obesity sector and gene-editing space are now being eyed.
Johnson & Johnson is set to acquire clinical-stage biotechnology company, Halda Therapeutics OpCo. The acquisition provides Johnson & Johnson with a highly differentiated clinical-stage treatment for prostate cancer. Swiss pharma bigwig Novartis, too, has been on an acquisition spree. Novartis recently announced that it will acquire Avidity Biosciences, Inc. for $12 billion to strengthen its late-stage neuroscience pipeline. Avidity is developing RNA therapeutics called Antibody Oligonucleotide Conjugates (AOCs) for serious, genetic neuromuscular diseases. Sanofi earlier acquired Blueprint Medicines for $9.5 billion to expand its portfolio in rare immunological diseases.
The recent spotlight on the usage of AI technology for drug discovery should lure further investment in this industry.
New Drug Approvals Boost Prospects: New drug approvals accelerated in 2025 as most companies aim to diversify their portfolios. The FDA has approved more than 40 drugs in 2025 so far.
Pipeline Setbacks & Potential Tariffs Weigh on Outlook: 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.
Many big pharma/biotech companies have sizable production units outside the country and imposition of tariffs will increase their costs, thereby shrinking margins. Moreover, ongoing geopolitical tensions remain a headwind.
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 #89, which places it among the top 37% of more than 243 Zacks industries. The rank reflects a bright outlook for the space, driven by consistent demand for better medical 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.
The Zacks Biomedical and Genetics industry is a 674-stock group within the broader Zacks Medical sector. It has outperformed both the Zacks Medical sector and the S&P 500 composite sector in the last six months.
The stocks in this industry have gained 22.1% in the last six months compared with the Zacks Medical sector’s growth of 12.5% and the S&P 500 composite’s rise of 16.5% in the said time frame.
Since most companies in the biotech sector do not have approved drugs, valuing these 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 2.47X compared with the S&P 500’s 5.96X and the Zacks Medical sector's 2.66X.
Over the past five years, the industry has traded as high as 4.31X, as low as 1.86X and at a median of 2.65X.
Amicus Therapeutics has put up a stellar performance. Lead marketed drug, Galafold, has shown solid uptake and is witnessing continued demand. Galafold is approved for treating Fabry disease. Amicus’ efforts to expand Galafold's label should propel sales further. The recent settlement of the Galafold patent litigation with Teva wards off generic competition in the near term. The FDA approval of Pombiliti + Opfolda for treating Pompe disease is a significant boost to the portfolio.
FOLD currently carries a Zacks Rank #1 (Strong Buy). Shares of FOLD have soared 90.2% in the past six months. The Zacks Consensus Estimate for 2025 EPS has increased five cents to $0.36 in the past 90 days.
ANI Pharmaceuticals is a diversified biopharmaceutical company with two focal areas – rare diseases and generics. The company’s rare disease franchise has emerged as a major growth catalyst in 2025 on the back of strong performance of ACTH-based injection Cortrophin Gel, whose sales surged 70% year over year to $236 million in the first nine months of 2025.
The acquisition of Alimera Sciences, Inc., in 2024 added a growing and durable franchise, Iluvien for (diabetic macular edema) and Yutiq (for the treatment of non-infectious uveitis affecting the posterior segment of the eye) to its portfolio.
The company has a presence in the generics market as well.
ANIP’s shares have gained 50.3% in a year. Earnings estimates for 2025 have increased 27 cents to $7.56 in the past 60 days. ANIP currently carries a Zacks Rank #1.
Arcutis Biotherapeutics, a commercial stage company, has a growing portfolio of advanced targeted topicals approved to treat three major inflammatory skin diseases — plaque psoriasis, seborrheic dermatitis and atopic dermatitis. The company’s lead product Zoryve (roflumilast) cream 0.3% for the treatment of plaque psoriasis has been performing well. Consistent label expansion of Zoryve has boosted sales. Zoryve topical foam 0.3% is approved for the treatment of seborrheic dermatitis while Zoryve cream 0.15% is approved for the treatment of mild to moderate atopic dermatitis.
ARQT currently carries a Zacks Rank #2 (Buy). Estimates for 2025 loss per share have narrowed to $0.24 from $0.44 in the past 60 days. Shares have skyrocketed 108.7% in the past six months.
Tango Therapeutics is a clinical-stage biotechnology company focused on developing precision medicine for oncology. The company is currently developing two MTAP-deleted selective PRMT5 inhibitors — vopimetostat (TNG462) for non- central nervous system (CNS) cancers, including pancreatic and lung cancer, and TNG456, a next-generation, brain-penetrant PRMT5 inhibitor, for CNS cancers, including glioblastoma (GBM).
The pipeline progress has been encouraging. In October 2025, the company reported positive data from the ongoing phase I/II study of vopimetostat in patients with MTAP-deleted selective cancers, demonstrating clinical activity across multiple cancer types with a favorable safety and tolerability profile to date.
Shares of this Zacks Rank #2 company have surged 86.7% in the past six months. Estimates for 2025 loss per share have narrowed 16 cents to $0.89 in the past 60 days.
Pacira BioSciences’ lead drug, Exparel, maintains momentum for the company. PCRX is also looking to further expand Exparel’s label. The drug has also been included in a specialized reimbursement scheme, which has increased patient access and compliance, boosting sales. The settlement of the Exparel patent litigation with several generic players is also a win, as it protects its exclusivity in the United States at least until 2030. The ongoing phase II study on PCRX-201 for OA knee pain is encouraging.
This Zacks Rank #2 company has gained 36.4% in a year. Earnings estimates for 2025 have increased 5 cents to $2.90 per share in the past 90 days.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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This article originally published on Zacks Investment Research (zacks.com).
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