Biotech investors are reassessing the sector's outlook following the J.P. Morgan Healthcare Conference in 2026, with a focus on acquisition trends, key therapeutic areas, and ongoing risk factors.
Roderick Wong, managing partner and chief investment officer at RTW Investments, said biotech is moving out of a period of slow growth into a new phase led by fundamental advances and late-stage assets. He noted that while there were few major deals announced during JPM 2026, significant merger and acquisition rumors—such as talks involving Revolution Medicines with Merck and AbbVie, and speculation about Abivax being acquired by Eli Lilly—highlight continued demand for strong late-stage development assets.
Wong added that actual deals announced during the conference, including Eli Lilly’s acquisition of Ventyx Biosciences, GlaxoSmithKline’s purchase of RAPT Therapeutics, and Boston Scientific’s deal with Penumbra, show that transactions centered on specific assets with clear blockbuster or strategic potential remain the most attractive to investors. He explained that “asset-focused companies remain more attractive than pure platform or technology plays in the current environment.”
Stephanie Sirota, partner and chief business officer at RTW, identified oncology—including pancreatic, breast, and bladder cancers—as a primary area where new programs could change standards of care and address unmet needs. Obesity treatments are also drawing attention; Wong pointed to anticipation around Eli Lilly’s development of a small-molecule pill for obesity as well as other innovative approaches. On January 23, one of RTW’s portfolio companies, Corxel, completed a $287 million Series D funding round.
The neuroscience sector has experienced renewed investor interest after years of limited progress. Both Wong and Sirota said improvements in biomarkers, brain mapping technology, artificial intelligence applications, and an aging population are encouraging further investment in this field.
Psychedelics represent another area where treatment models may be changing. “Psychedelics exemplify a potential paradigm shift in depression treatment modality,” Wong said. He referenced Compass Pathways’ Phase III data supporting nondaily treatment approaches for depression as part of broader cultural and medical changes explored in RTW’s book “Innovation is the Best Medicine.”
According to Wong, policy risks facing biopharma have lessened since last year when uncertainties related to tariffs and drug pricing were prominent under the Trump administration. These issues have largely been resolved with outcomes described as neutral to modestly negative rather than severe.
However, concerns persist regarding regulatory unpredictability at the U.S. Food and Drug Administration (FDA), particularly following staff turnover during 2025. “The main remaining structural risk…is FDA behavior in ‘edge cases,’ particularly in rare diseases and emerging modalities like gene and cell therapies,” Wong said. He cited negative responses or rejections from regulators for programs using unconventional trial designs last year—a topic covered more extensively in RTW’s recent publication.
As a result of these risks, RTW is taking a more cautious approach toward investments involving rare diseases or early-stage modalities.
Sirota described RTW’s investment strategy as “alpha stacking:” beginning with detailed equity analysis—including scientific evaluation and commercial forecasting—and then adding layers such as policy insights and operational considerations. She emphasized that this approach leverages deep expertise across therapy areas along with internal investments in data science and artificial intelligence to refine research processes.
“Ultimately, investment is always evolving,” Wong said. He observed that while scientific expertise was once considered an edge for investors—referred to as “alpha”—the advantage now lies in understanding where opportunities exist amid shifting factors.
In a recent episode of Denatured hosted by Jennifer C. Smith-Parker, both Wong and Sirota discussed how deal timing at JPM can mask underlying M&A activity potential; why fields like oncology, obesity treatments, psychedelics research, and neuroscience are attracting new capital; and how their alpha stacking model shapes investment decisions during periods of uncertainty.
