MW Why biotech and drug stocks are on the mend even though the rest of the market is hurting

By Jaimy Lee

Drugmakers are making notable deals, biotech is coming back, and much of the worry about tariffs and interest rates has faded away

Eli Lilly's weight-loss drug Zepbound is on track to be the world's top-selling drug, and Lilly is inching closer to a $1 trillion market cap.

Biopharma is back, and it's smarter, slimmer and more strategic than before.

The industry is outperforming the broader market, with the long-suffering State Street SPDR S&P Biotech exchange-traded fund XBI up 26% for the year and the State Street SPDR S&P Pharmaceuticals ETF XPH gaining 22%.

In comparison, the S&P 500 SPX has dropped more than 3% over a four-day losing streak amid growing concerns that a deeper pullback may be developing. The index is up less than 13% so far this year, after being up as much as 17.2% year to date just three weeks ago.

There's not a specific reason for biopharma's rebound, but a handful of actions in recent months have demonstrated the sector's resilience and pointed to its future.

Eli Lilly $(LLY)$, the veteran American drugmaker that's now the industry leader, is within close range of a $1 trillion valuation, driven by growing excitement over its portfolio of experimental weight-loss pills and its deft handling of the complex U.S. obesity market. Its stock has gained 33% so far this year.

Like many of the drugmakers making strides right now, Lilly inked a deal with the Trump administration that offers concessions on price in exchange for the ability to sell its weight-loss drug Zepbound to Medicare beneficiaries for the first time and for three years of tariff relief. Novo Nordisk (NVO), Pfizer $(PFE)$, AstraZeneca $(AZN)$ and others have also made drug-pricing deals with the U.S. government.

In fact, Pfizer was the first to do so, catching many in the industry by surprise. The embattled drugmaker had a rough start to the year, with an activist investor pushing for change, a falling stock price and a postpandemic restructuring on its hands. Yet given the strategic prowess that Pfizer has been known for under CEO Albert Bourla, the company secured the TrumpRx deal and an up to $10 billion acquisition of obesity-drug developer Metsera against Novo's unsolicited bid.

That's one of several deals of note this month. Others include Merck's $(MRK)$ $9.2 billion acquisition of a flu biotech called Cidara Therapeutics on Friday and Johnson & Johnson's $(JNJ)$ bid for cancer-drug developer Halda Therapeutics for $3 billion on Monday. J&J's shares are up 40% in 2025, while Merck's stock is down about 3%.

The average biopharma deal in 2025 has been 90% larger than last year, though there have been fewer deals than in years past, according to Ernst & Young.

"The headwinds are there, right?" said Subin Baral, EY-Parthenon's global life sciences deals leader.

The deals fit the "new normal" of the biotech ecosystem, meaning venture-capital firms are investing in the right startups that are developing the right assets and getting them to the late-stage trials that are of immediate interest to asset-hungry drugmakers. The sector has worked hard to shake off the ups and downs of the pandemic and get rid of less promising drugs, companies and therapeutic targets. Pair those changes with the Federal Reserve's September interest-rate cut and some solid clinical-trial readouts, and it's no surprise the XBI is in good shape.

Case in point: Shares of Olema Pharmaceuticals $(OLMA)$ soared more than 150% on Tuesday after Genentech, part of the Roche Group (RHHBY) (CH:ROG), shared more positive Phase 3 data for its experimental drug to treat early stage breast cancer. Olema is developing a similar drug.

Though healthcare stocks have been much more measured this year, there are bright spots there as well. The medical-device maker Medtronic $(MDT)$ is set to close at its highest price since May 25, 2022, after citing "robust" procedure volumes in the second quarter and raising its guidance for 2026.

The Health Care Select Sector SPDR ETF XLV is up 11% this year, but over the past three months it has rallied more than 12% to be the leading gainer among the SPDR ETFs tracking the S&P 500's 11 sectors over that time.

-Jaimy Lee

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November 18, 2025 16:21 ET (21:21 GMT)

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