After years of contraction, investors see biotech reentering a growth cycle driven by scientific progress, asset quality and renewed conviction in oncology, obesity and neuroscience innovation.
Now that the sound and fury of the J.P. Morgan Healthcare Conference have subsided, investors are taking a step back to evaluate for 2026 the acquisition and capital environment, the buzzy therapeutic spaces and lingering risk factors.
Biotech is emerging from a multiyear slump into a new cycle driven by fundamental progress and late-stage assets, said Roderick Wong, managing partner and chief investment officer at New York-based RTW Investments.
Although JPM 2026 felt light on headline megadeals, record-setting M&A rumors before the conference around Revolution Medicines (reported to be in talks with Merck and AbbVie) and Abivax (with Eli Lilly speculation takeover) underscored strong demand for high quality, late-stage development assets, Wong said.
Actual announced deals (e.g., Eli Lilly–Ventyx Biosciences, GlaxoSmithKline–RAPT Therapeutics, Boston Scientific–Penumbra) reinforced that asset-centric transactions are with clear blockbuster or strategic potential are the most interesting, Wong said.
From RTW’s vantage point and reinforced by several VC conversations on the sidelines of JPM26, asset-focused companies remain more attractive than pure platform or technology plays in the current environment.
Hot Therapeutic Investment Spaces
Key disease areas of focus include oncology (pancreatic, breast, bladder), where several programs could reset standards of care and address major unmet needs, noted Stephanie Sirota, partner and chief business officer at RTW. Obesity is another major theme, with anticipation around the first true small-molecule pill from Eli Lilly and a next wave of novel mechanisms, Wong said. One of RTW’s portfolio companies, Corxel, announced on January 23 a $287 million Series D fundraising.
Neuroscience/CNS has seen a sharp sentiment shift, with investors leaning back into space after years of limited innovation, Wong and Sirota agreed. Their comments echo those heard on the sidelines of JPM26; that advances in biomarkers, brain mapping and AI, as well as a rapidly aging population, support investment in the space.
Psychedelics exemplify a potential paradigm shift in depression treatment modality, Wong said, with Compass Pathways’ Phase III data and a possible near-term launch supporting nondaily, episodic treatment models. The cultural and medical shift in psychedelic therapeutic is one of the topics explored in the RTW’s latest book “Innovation is the Best Medicine.”
FDA Remains a Risk Factor
The degree of policy risk for the biopharma sector has declined significantly since the start of the Trump administration last year, Wong said. At the time, major uncertainties surrounded tariffs, manufacturing reshoring and Most Favored Nations drug pricing negotiations. What has evolved are reasonable resolutions that have been neutral to modestly negative rather than worstcase scenarios, he added.
There have been many discussions around the chaotic year at the FDA in 2025, including a revolving door of senior staff members. The main remaining structural risk, Wong said, is FDA behavior in “edge cases,” particularly in rare diseases and emerging modalities like gene and cell therapies, using nontraditional trial designs, surrogate endpoints or single arm studies. Last year’s players in this space saw negative feedback or rejection, discussed in greater depth in the RTW book.
RTW is responding by being more conservative around such edge case programs, which it expects will depress capital flows into some rare disease and early modality assets.
Alpha Stacking Model
The firm frames its investment process as “alpha stacking:” starting with rigorous fundamental equity analysis (science underwriting plus commercial forecasting) and layering on multiple, evolving sources of information and assessment, Sirota said.
This includes collecting information on policy, considering transactional and operational models, as well as what is compelling from a buyer perspective. The firm has built deep therapeutic specialization plus functional expertise (e.g., IP, geography such as China) to move beyond headline-driven views of risk and opportunity. RTW has also invested internally in data science, automation and AI to enhance its research process, they agreed.
Ultimately, investment is always evolving, Wong said. He noted that a scientific background at one was the advantage—an alpha— one had when investing, but that’s become understood. Rather, alpha stacking is now about intentionally trying to understand where the advantages lie and staying on top of these evolving factors.
