The golden age of biotechnology - and why you should invest

Biotechnology is moving at a remarkable pace. Cancer treatment has improved sharply, and depression therapies may be next. Pharmaceutical companies are betting on that progress by acquiring biotech firms. RTW Bio gives investors access to these three advances while trading at a discount to the value of its underlying portfolio.

Prices have moved. Flows have not.

Biotech finally broke out after an unprecedented four-year bear market, gaining ground in 2025 and carrying that momentum into this year. Through 30 September 2026, the Russell 2000 Biotech Index had returned 24.6%, while the Nasdaq Biotech Index was up 25.2% - both ahead of the S&P 500.

Investors have yet to catch up. Healthcare funds attracted just £2.3bn this year, while long-term flows are still negative. Among US biotechs valued below £10bn, three in ten now have market capitalizations below the cash they hold. The sector has recovered, but valuations remain modest. Medical innovation is entering a golden age, and investors need to recognize the opportunity.

Biotech is growing up

Biotech now drives much of drug innovation, with biotech-originated medicines making up 60% of novel drug approvals. Science remains central, but the business has moved beyond the lab: 40% of XBI companies have reached the commercial stage, and that figure is expected to double to 80% next year. The industry is changing - and its innovations are beginning to generate real revenue.

Cancer: a shift away from chemotherapy

Biotech companies continue to develop newer treatments, including antibody-drug conjugates that carry toxic drugs straight to cancer cells. RevMed's daraxonrasib is one example; it doubled survival among patients with pancreatic cancer. Researchers are also making progress against bladder and breast cancer, with CG Oncology and Celcuity advancing their own treatments. Over the past two decades, cancer death rates have dropped by about 30%, largely because of biotech innovation.

RTW Biotech Opportunities

Depression: a field due for change

Depression treatment has changed very little in the past four decades. SSRIs such as Prozac still dominate care, but psychedelic therapies may bring the next major advance. Compass Pathways' psilocybin treatment has delivered positive results across three trials, with a launch planned for H1 2027. GH Research is working on an inhaled treatment and expects to begin Phase 3 trials this year. RTW Bio holds positions in both companies. Eli Lilly recently paid £2.8bn for AtaiBeckley, whose lead drug uses the same active molecule as GH Researchs.

Why now?

By 2030, pharmaceutical companies will lose patent protection on £180bn in revenue. That looming hit is pushing them toward biotech acquisitions as a way to buy new sources of innovation. Biotech M&A had already reached about £105bn by the end of July, nearly matching the £126bn recorded across all of 2025.

The IPO market is open again: 22 companies have listed so far this year, compared with just eight during all of 2025. Policy uncertainty is also easing.

Why RTW Bio?

RTW Bio was created for this point in the biotech cycle. Founded in 2019, it backs companies across the sector, from early-stage private firms to publicly traded businesses. RTW Investments manages the fund, and about half of its investment team hold an advanced medical degree. The portfolio leans toward public companies, while still committing a sizeable share to private investments. Its larger holdings include CG Oncology, argenx and Corxel.

RTW also creates new companies for shareholders, including Kailera, whose £719m raise marked the largest IPO in biotech history. Two of the year's biggest acquisitions involved RTW Bio portfolio companies: Boston Scientific bought Penumbra for £14.5bn, while AbbVie paid £10bn for Apogee.

The long-term figures support that view. From its launch on 30 October 2019 through 30 September, RTW Bio's net asset value (NAV) grew at a compound annual rate of 14.2%. Over the same period, the Russell 2000 Biotech Index returned 9.7%, compared with 12.5% for the Nasdaq Biotech Index and 3.7% for the AIC Biotechnology & Healthcare sector.

Time to buy

RTW Bios shares now trade 11.8% below their asset value, down from a 27.5% discount a year earlier. The company also buys back its own stock, increasing the value of the shares that remain. In the year to 30 September, RTW Bio repurchased £13.4m of shares. It has said that a large realised gain - perhaps from a takeover - could lead to further buybacks. Investors therefore get access to a portfolio with a strong track record at a discount to the value of its assets.

Disclaimer This information is current as of its publication date unless stated otherwise. The information and opinions in this advertorial may be incomplete, inaccurate, or unfair, and should not be relied upon for any purpose. Nothing here amounts to a recommendation to buy, sell, or hold any security. Past performance does not predict future results.