The golden age of biotechnology – and why you should invest

Prices have moved. Flows have not.

After an unprecedented four-year bear market, biotech outperformed in 2025 and has continued to this year. In 2026 to 30 September, the Russell 2000 Biotech Index returned 24.6% and the Nasdaq Biotech Index 25.2%, both ahead of the S&P 500.

Investors have been slow to follow: healthcare funds saw only $2.3bn inflows this year while long-term flows remain negative. Three in ten US biotechs worth under $10bn trade with market caps less than the cash on their balance sheets. There has been a recovery, but valuations remain undemanding. We are in a golden age of medical innovation and investors need to understand the opportunity.

Biotech is growing up

Biotech is the engine of innovation: drugs originating from biotechs account for 60% of novel drug approvals. But it’s no longer just about the science: 40% of companies in the XBI are now commercial-stage, expected to double to 80% next year. The biotech industry is reshaping – it is a true source of innovation translating to real revenues.

Cancer: a shift away from chemotherapy

Biotechs consistently innovate in novel treatments, such as antibody drug conjugates, which deliver a toxic payload directly to cancer cells. A prime example is RevMed’s daraxonrasib which doubled survival in pancreatic cancer patients. Bladder and breast cancer are following, with biotechs such as CG Oncology and Celcuity advancing new treatments. Cancer death rates have fallen about 30% in two decades, largely down to biotech innovation.

Depression: a field due for change

Depression has seen little advancement in four decades. SSRIs such as Prozac are the main treatment but psychedelic therapies are the next groundbreaking innovation. Compass Pathway’s psilocybin treatment has produced positive results in three trials and plans to launch in H1 2027. GH Research is developing an inhaled treatment for which Phase 3 trials will start this year. RTW Bio has positions in both companies. Recently, Eli Lilly paid $2.8bn for AtaiBeckley, whose lead drug uses the same active molecule as GH Research’s.

Why now?

Pharma companies will lose patent protection on $180bn of revenue by 2030, and this is forcing them to buy innovation through biotech acquisitions. By the end of July, biotech M&A had reached about $105bn, close to the $126bn registered through all of 2025.

The IPO market has reopened with 22 new listings year to date against eight in all of 2025. Policy uncertainty is receding too.

Why RTW Bio?

RTW Bio is built for this stage. Founded in 2019, it invests in all sizes of biotech firms from early-stage private through to public. It is managed by RTW Investments, about half of whose investment team hold an advanced medical degree. Most exposure is to public companies with a sizeable allocation to private investments. Large holdings include CG Oncology, argenx and Corxel.

Shareholders also access new companies that RTW creates, such as Kailera, which raised $719m in what was the largest IPO in biotech history. Two of the year's largest takeovers, Boston Scientific's $14.5bn purchase of Penumbra and AbbVie's $10bn purchase of Apogee, were both RTW Bio portfolio companies.

The long-term record supports the approach. Since launch on 30 October 2019, to 30 September, RTW Bio's net asset value (NAV) has compounded at 14.2% per annum. Over the same period the Russell 2000 Biotech Index returned 9.7%, the Nasdaq Biotech Index 12.5% and the AIC Biotechnology & Healthcare sector 3.7%.

Time to buy

RTW Bio’s shares trade at an 11.8% discount, which has halved from the 27.5% a year previously. The company actively repurchases shares, which is value accretive for remaining shareholders. RTW Bio repurchased $13.4m of its shares in the year to 30 September, and has said it intends to consider returning part of any large realised gain, such as from a takeover, through further buybacks. Investors can own a portfolio with a leading track record at an attractive discount to the value of its assets.