Biotech Is Heating Up-These 2 Red-Hot Stocks Stand Out

Biotech companies provide the medical innovations and technological breakthroughs that improve healthcare and can achieve tremendous financial results in the process. However, these names also tend to be highly volatile as a result of the difficult and complex process associated with drug and medical device development as well as the hard-to-navigate regulatory environment. Still, investors look to companies with strong pipelines or exciting projects in progress for a hint about which biotech names may stand out in the months or quarters to come.

Two biotech names in particular—Axsome Therapeutics Inc. (NASDAQ: AXSM) and Innoviva Inc. (NASDAQ: INVA)—may draw particular attention from investors at the start of 2026. Each of these companies has potentially transformational products in various stages of development. Although nothing is guaranteed, these standouts might be worth watching this year.

2 Major FDA Updates Boost Axsome's Standing in the New Year

Axsome develops small-molecule drugs for central nervous system disorders including fibromyalgia, migraine, and more. The company is a popular biotech name at the start of 2026 thanks in large part to key regulatory updates announced at the very end of 2025. The FDA accepted for filing in December a supplemental New Drug Application for Axsome's oral investigational therapy AXS-05 for the treatment of agitation associated with Alzheimer's. The drug is already approved for the treatment of major depressive disorder.

Given that about three-quarters of Alzheimer's patients experience agitation, the potential market for this application of AXS-05 is significant. However, it's not Axsome's only positive development heading into the new year. The FDA also signaled support for a New Drug Application filing for the company's AXS-12 for narcolepsy applications based on prior data.

Axsome's late-stage pipeline is thus very strong, and expanding indications across these and other drugs would open up significant new revenue streams. The company's product revenue is already strong, having climbed 63% year-over-year (YOY) in the latest quarter and helping to narrow net losses. However, cash-flow positivity is still elusive, and margin pressures are lingering, so investors should be aware of these risks.

Wall Street is exceedingly bullish when it comes to Axsome shares, as 19 out of 20 analysts have rated the stock a Buy. A flurry of reiterated ratings started the year, including from Needham & Co., Guggenheim, Oppenheimer, and Cowen. Collectively, analysts see shares rising more than 8% to over $188 each.

Approval of Nuzolvence May Be Transformational for Innoviva

Innoviva's approach is somewhat different from traditional biopharma names in that it primarily acquires and monetizes royalty interests in drugs, rather than develop them in-house. The company's particular focus has been on inhaled respiratory therapies.

In December, the FDA approved Innoviva's Nuzolvence, a first-in-class, single-dose oral antibiotic to treat gonorrhea. The drug is the first approved alternative to an injectable treatment which was the only available option previously. Gonorrhea is one of the most prevalent sexually transmitted infections, with close to 1 million cases annually in the United States and 82 million around the world. As a result, Innoviva's new treatment option has a massive potential market and little by way of competition. It also stands out as gonorrhea has developed resistance to many existing antibiotics.

The success of Nuzolvence highlights a win for Innoviva Specialty Therapeutics, a unit of the broader company that develops and commercializes its own therapies. This could point the company toward continued internal development of new drug candidates rather than a primary focus on royalties of externally developed treatments.

Innoviva's financials have already been strong in multiple respects, even prior to the FDA's approval and the impending launch of Nuzolvence this year. The company beat on both earnings per share (EPS) and revenue estimates in the latest quarterly report, with total revenue climbing by 20% YOY to nearly $108 million on strong product sales on products like Giapreza and Xacduro. Zevtera, a specialized antibiotic for certain types of bloodstream infections and bacterial pneumonia, was launched in July 2025 and is likely to continue ramping up sales heading into the first quarter of this year.

A majority of analysts view INVA shares optimistically, and the company's consensus price target is $38.80, nearly double where it is trading at the start of the year. With sales expected to increase as Nuzolvence launches and Zevtera takes off, this target may well be within reach.

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