5 Small Drug Stocks to Buy as Industry Recovery Picks Up

Industry Overview - The drug and biotech sector has shown recovery after a sluggish first half, supported by drug pricing agreements with the Trump administration and renewed M&A activity [1][4] - Innovation in areas such as obesity treatments, gene therapy, inflammation, and neuroscience continues to drive growth, despite challenges like pipeline setbacks and regulatory uncertainty [2][3] Market Performance - The Zacks Medical-Drugs industry has underperformed compared to the Zacks Medical sector and the S&P 500 over the past year, with a collective rise of 1.2% compared to 3.4% and 18.9% respectively [13] - The industry currently holds a Zacks Industry Rank of 90, placing it in the top 37% of 244 Zacks industries, indicating potential for outperformance [12] Valuation Metrics - The industry is trading at a trailing 12-month price-to-sales (P/S) ratio of 2.25, lower than the S&P 500's 6.03 and the Zacks Medical sector's 2.61 [16] Key Companies and Their Prospects - Ironwood Pharmaceuticals: Developing apraglutide for short bowel syndrome, with a significant rise in stock price by 178.9% in the past three months and a consensus estimate for 2026 earnings increasing from $0.40 to $0.47 [20][22] - Rigel Pharmaceuticals: Sales of Tavalisse rose by approximately 54% in the first nine months of 2025, with a stock increase of 46.7% and a consensus estimate for 2026 earnings rising from $3.70 to $4.30 [24][27] - Soleno Therapeutics: Launched Vykat XR for Prader-Willi syndrome, generating around $99 million in sales since April, with a stock decline of 25.7% but a rising consensus estimate for 2026 earnings from $3.10 to $3.59 [29][30] - Marker Therapeutics: Focused on next-generation T cell therapies, with a stock increase of 75.5% and a narrowing consensus estimate for 2026 loss per share from $4.92 to $1.86 [33][34] - Nektar Therapeutics: Developing rezpegaldesleukin for atopic dermatitis and alopecia areata, with a stock decline of 26.0% but a narrowing consensus estimate for 2026 loss per share from $12.17 to $10.81 [36][38]