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Biotech Is Finally Rallying. Why Mizuho’s Jared Holz Is Optimistic This Time.

Oct 17, 2025 14:02:00 -0400 by Josh Nathan-Kazis | #Biotech and Pharma #Q&A

Jared Holz, healthcare equity strategist at Mizuho. (Photograph by Lila Barth)

Key Points

After years of disappointments, biotech stocks are on an unaccustomed run. The SPDR S&P Biotech ETF, which trades under the ticker XBI, is up around 20% since the start of September, and is outperforming the S&P 500 on the year.

That has added up to an uncertain moment for investors. Biotech has had a couple of earlier, short-lived spikes since the sector collapsed in February of 2021. The question now is, is the current biotech resurgence for real, or just another false start?

When Mizuho healthcare equity strategist Jared Holz spoke to Barron’s for our annual healthcare roundtable last month, the XBI was still lagging the S&P 500 on the year, and President Donald Trump’s tariff threats and efforts on drug pricing were weighing heavily on the industry.

Since then, Pfizer and AstraZeneca have signed drug price and tariff deals with the Trump administration that appear to have inflicted little pain on either company, wiping away investor policy worries and setting off a biotech and pharma rally.

Barron’s called Holz back on Friday to ask about what’s happened to the biotech sector since our roundtable, and where it is going from here.

Barron’s: We spoke for the Barron’s healthcare roundtable just a few weeks ago, and at that point it felt like biotech was in a holding pattern until we got clarity on drug pricing and tariffs. And then in the past few weeks, the biotech stocks are up in a way that they haven’t been in years. So what’s changed? What’s going on here?

Jared Holz: The run-up in biotech really started in June, July. I think what we’ve seen over the past month is a continuation of that trend, and a little bit of thawing out of the pharmaceutical ecosystem on the back of some of the policy headlines. Company-specific news flow in biotech has also been, on balance, a bit better as of late, with respect to clinical updates, licensing deals, M&A.

There have been a couple of periods since the 2021 biotech implosion when things have looked okay for a while. What’s your sense as to whether this is a sustainable rally?

It feels a little bit more legitimate this time around. Here’s why: The element of biotech has really led me to be fairly bearish over the past few years is the size of the denominator, especially on the public side.

You mean the number of companies?

Right. And what we’re seeing is a fairly meaningful compression of that denominator by way of small cap mergers, companies dissolving and giving cash back to shareholders, or more traditional M&A. You’re dealing with an equity vertical that had over 900 names in it a couple of years ago, and that number is down by anywhere between 10 and 20 percent. That alone makes it easier for investors to analyze what’s remaining. That to me is the biggest difference. And that’s been consistent.

There’s been a spate of biotech deals these past few weeks. Is the timing of these deals relevant?

It’s been a pretty strong M&A year prior to the past couple of months. Yes, there’s been a little bit more activity lately, but even before we got into the post-Labor-Day environment, there were more than 12 acquisitions in biotech, just in publicly traded names, north of $500 million. So we were already running in excess of historical averages.

When large-cap pharma is facing $200 billion of revenue degradation over the next five to seven years, the M&A theme is going to continue to be pretty pervasive.

Revenue degradation due to patent expirations, just to be clear.

That’s right.

So where does it go from here? Do we see a reopening of the IPO window? Is the XBI going back to late 2020, early 2021 numbers? Or do we see a return to the general trend line that was happening like pre-2020?

I’m more optimistic than I’ve been in terms of the XBI or the [iShares Biotechnology ETF] continuing to move up. It may not be as linear as it’s been over the past four to five months. This is the most elongated upward trend for biotech in over a decade. I’m not suggesting that it continues along this path and you get a linear move to the upside.

The one thing that I think that the Street needs to be cognizant of, is if the IPO window opens up in some really meaningful way, the last time that happened, several years later, the sector imploded. It goes back to the denominator situation. If you’re long biotech, you hope that the IPO window opens to a degree. But too much of a good thing obviously wound up being incredibly detrimental last time.

Thanks, Jared.