4 Biotech Stocks to Watch for Potential Upside in 2026

Industry Overview - The biotech industry has shown strong performance in 2026, driven by robust fourth-quarter results, new drug approvals, and progress in drug pipelines despite regulatory challenges and pricing pressures [1][12] - The sector is expected to continue attracting investor interest due to the ongoing demand for innovative medical treatments [1] Mergers and Acquisitions - A recent increase in M&A activity is supporting sector momentum, with large pharmaceutical and biotech companies expanding their portfolios through strategic collaborations and acquisitions [2][8] - Notable acquisitions include Johnson & Johnson's purchase of Halda Therapeutics for prostate cancer treatment and Novartis's acquisition of Avidity Biosciences for $12 billion to enhance its neuroscience pipeline [10][11] Company Performance - Biotech companies such as Terns Pharmaceuticals, ADMA Biologics, ANI Pharmaceuticals, and Liquidia Corporation are positioned to outperform the sector [3] - Liquidia Corporation's Yutrepia generated sales of $148.3 million in 2025, with a strong growth trajectory expected [24][25] - ANI Pharmaceuticals reported a 75.6% increase in sales of its ACTH-based injection Cortrophin Gel, reaching $347.8 million in 2025 [27][28] - ADMA Biologics is experiencing strong growth driven by Asceniv, with expectations for revenue acceleration in 2026 [31][32] - Terns Pharmaceuticals is advancing its lead candidate TERN-701, with promising data presented at a recent meeting [34][35] Industry Trends - The focus on innovation and execution is critical, with significant investments in drug development and the use of AI technology in drug discovery [5][12] - Successful commercialization remains a challenge for smaller biotech firms, often leading to collaborations with larger companies [6][7] Market Performance - The Zacks Biomedical and Genetics industry has outperformed both the Zacks Medical sector and the S&P 500, gaining 18.8% over the last six months compared to 5.6% and 3.3% respectively [18] - The industry is currently trading at a trailing 12-month price-to-sales ratio of 2.40X, lower than the S&P 500's 5.63X [21]