US biotech sector poised for 2026 rebound as IPO interest revives

Jan 14 (Reuters) – Investors are eyeing a rebound in the U.S. biotech sector in 2026, as more companies are expected to go public amid a renewed deal-making appetite and a lower interest rate scenario, even as they come to terms with the political and regulatory environment.

Amid President Donald Trump’s policy shifts, the most disruptive scenarios for healthcare now appear less likely, helping restore a degree of confidence after tariff threats, funding cuts and sweeping changes to the U.S. Food and Drug Administration.

“While some uncertainty still exists, the worst case scenarios have largely been taken off the table and that gives investors more comfort in taking steps into the water and making decisions based upon at least some expectation of normalcy,” said Andrew Fein managing director of equity research at H.C. Wainwright.

Initial public offerings in the biotech sector plunged to their lowest level in more than a decade in 2025.

Uncertainty still lingers around drug development timelines, pricing pressure and how U.S. policies interact with non-U.S. markets, but greater clarity on the policy environment has reduced the fear of sudden shocks.

“I think for the most part, it just continues to be a lot of headline risk,” said Kevin Eisele, managing director at William Blair. “But as investors have digested a lot of the news, it feels like the risk has somewhat subsided and investors are again more willing to put positions or put capital to work in the sector.”

Only 10 biotechs went public in 2025, Dealogic data shows, down from 26 companies in 2024 and a record 93 in 2021, with mixed performances after their debuts.

BIOTECH SHARES GAINING MOMENTUM

Biotech stocks are regaining favor among investors, with many expecting 2026 to be a potential turning point, driven by improving market dynamics, more mature trial data and a backlog of companies that delayed going public last year, according to Wall Street analysts and investors.

The SPDR S&P Biotech ETF, which serves as a key gauge of the biotech sector’s health, ended 2025 up 33%, rebounding from early-year pressure.

“Investor sentiment follows price, and the pricing narrative in this space has definitely become more optimistic in the second half of 2025 relative to the first half…So I’d expect some of that momentum would continue into 2026,” said David Wagner, head of equities at Aptus Capital.

LATE-STAGE PIPELINES DRAW INVESTOR ATTENTION

The total U.S. biotech IPO proceeds in 2025 were $1.6 billion, paling in comparison to $16 billion raised in 2021, according to Dealogic data.

At least four industry experts said investors will seek out biotechs which have drugs in mid-to-late-stage development.

“Once you’ve already developed some proof of concept and help reduce some of the early risk, that’s where I think most investors continue to be interested,” said Eisele.

Companies with drugs in areas such as cancer, obesity, precision medicine and respiratory diseases will be in focus, experts added.

“I don’t think we’re going to get to an IPO-for-all market like we were in 2020 or 2021, but I think we will have a much more robust market than we’ve had over the past couple of years,” said Seth Rubin, head of global equity capital markets at Stifel.

Capital inflows and lower interest rates could also provide a boost to the sector and pave the way for stronger public market debuts.

Although interest rates seem unlikely to revert to 2020 levels anytime soon, the lower rates have already opened the gates for a flurry of secondary offerings in the later half of 2025, RBC Capital Markets analysts said.

(Reporting by Christy Santhosh and Sriparna Roy in Bengaluru; Editing by Krishna Chandra Eluri)