On the premier platform for biotechnology, revived enthusiasm faces a critical examination

Biotech Industry Sees Renewed Optimism Amid Lingering Uncertainty

At this year's J.P. Morgan Healthcare Conference in San Francisco, Alexis Borisy—a well-known biotech investor and co-founder of Curie.Bio and Revolution Medicines—found himself conducting meetings from a hotel suite, seated on a powder blue couch reminiscent of a giant pill. With a hearty laugh, he acknowledged the fitting symbolism.

Borisy, who has attended the conference since its early days under Hambrecht & Quist, noted a marked shift in sentiment this year. For the first time in several years, attendees seemed genuinely hopeful about the sector's prospects—and with good reason.

After a prolonged slump that began in late 2021, the biotech industry is finally showing signs of recovery. The latter half of last year saw a surge in acquisitions, with at least 28 deals valued at $50 million or more announced.

Investment is also rebounding. According to HSBC’s Innovation Banking, 157 venture capital transactions totaling $7 billion took place in the fourth quarter alone. RBC Capital Markets reported $22 billion in biotech investments during the last three months of 2025, matching the heights of the 2020-2021 boom. The positive momentum has carried into 2026, with Raymond James analysts highlighting $1.2 billion in biotech inflows during the first week of the year.

“We’re in a strong position as a sector right now,” remarked John Maraganore, founding CEO of Alnylam Pharmaceuticals and former chair of the industry’s largest trade association.

However, beneath the optimism lies a sense of caution. Many worry that the recovery could be short-lived if the industry fails to navigate upcoming challenges wisely.

This tension was palpable throughout the conference. The absence of major deals on the opening day frustrated many, with investor-turned-analyst Brad Loncar calling it “the slowest JPM for news in a long time.” The XBI biotech fund ended the event with little change.

Borisy likened the current phase to the early stages of a recovery, cautioning, “We can’t be certain yet. When you’re at the bottom, false starts are possible, and it can take time to truly rebound.”

Shifting Dynamics in Global Biotech

Industry experts agree that the sector is being shaped by a complex interplay of forces. The rapid advancement of China’s biotech industry, for instance, has sparked concerns about the U.S. losing its leadership in life sciences. Yet, some believe this competition could drive American drug developers to become more agile and innovative.

The U.S. Food and Drug Administration (FDA) has just emerged from one of its most turbulent years, but the agency has also demonstrated a willingness to expedite drug approvals. Pharmaceutical companies have adapted well, showing skill in negotiating with the Trump Administration on broader policy matters.

Still, uncertainty remains. Recent leadership changes at the FDA have left many investors uneasy. A recent RBC survey found that more than half of biotech investors view regulatory unpredictability as the sector’s biggest challenge.

“We’re all hoping for greater stability and consistency from the FDA,” Maraganore said. “Delays or inconsistencies would be concerning, but I remain hopeful.”

Public Markets and Funding Trends

Public investors, who had largely overlooked drug startups in recent years, now appear ready to support these companies again. This renewed interest could influence dealmaking, potentially allowing smaller biotechs to rely less on partnerships with large pharmaceutical firms or to advance their research further before seeking collaborators.

“If the IPO market opens up more in 2026, it doesn’t mean partnerships will disappear,” said Adam Keeney, head of corporate development at Biogen. “It just means companies might reach more advanced stages before partnering, which benefits everyone.”

Keeney added, “We’re not at bubble territory yet.”

Lessons from the Last Boom

If the recovery endures, industry stakeholders will need to avoid the pitfalls of the previous hype cycle, when unproven drug startups rushed to go public with little clarity on their business models.

Many of those companies struggled when the market corrected, disappointing investors and prompting many generalist backers to exit the sector. Developers of cell and gene therapies, as well as “platform” companies promising a pipeline of new medicines, were especially hard hit.

“You can’t get swept up in the excitement,” cautioned Andy Plump, head of R&D at Takeda Pharmaceutical. He noted that while platform companies were once highly sought after, “the reality is platforms often fail. The hype just isn’t worth it.”

Recent trends in public markets reflect a more cautious approach. Last year, all but one biotech IPO involved companies with drugs already in Phase 2 trials or later, and most are now trading above their initial offering prices. One such company, Metsera, was recently acquired in a $10 billion deal.

Some interpret this as evidence that emerging drug companies and their investors have become more disciplined and efficient. Maraganore described the recent downturn as a “Darwinian survival of the fittest,” resulting in a stronger crop of private companies.

“The private companies that remain are exceptionally strong,” he said. “I believe the next wave of IPOs could feature some of the best companies we’ve seen in years.”

Risks of Overheating

Given the cyclical nature of biotech, a sustained upswing could eventually lead to another bubble. Momentum investors, drawn by promising clinical results or rising stock prices, may drive valuations even higher. Borisy warned that this could result in overcapitalization and a subsequent downturn.

Some analysts are already raising red flags. RBC’s December report cautioned that the XBI’s strong performance in 2025 had left many companies with valuations reflecting “excessive optimism.” They warned that future growth could be harder to achieve, and any disappointing results might trigger sharp declines in share prices.

Keeney of Biogen emphasized the need for collective discipline: “If we stay focused, more capital can be directed toward the companies with the greatest potential for success.”

Early-stage investors seem to be following this advice. Large fundraising rounds of $100 million or more have become common, as bigger, slower-moving investors concentrate their resources on fewer companies that remain private longer, viewing these investments as safer bets.

While many venture capitalists claim to have learned from past cycles, skepticism remains.

Borisy, for his part, expressed some doubt about whether the industry has truly changed.

“You can note that I rolled my eyes,” he quipped.