William Blair Forecasts Strong Biotech Recovery to Persist Through 2026

2025-12-13 economy

Chicago, Friday, 12 December 2025.
After a nearly 75% index surge since April, analysts project the biotech sector will outperform recent bear markets in 2026, contingent on favorable clinical data and regulatory stability.

Cautious Optimism for 2026

Investment firm William Blair has issued a favorable outlook for the biotechnology sector in 2026, forecasting that the industry is well-positioned to eclipse the performance of the bear markets experienced between 2021 and 2024 [1]. In a research note released on December 10, 2025, analysts emphasized that the sector’s current momentum is likely to persist into the new year, provided that the market continues to incentivize strong clinical data and that pharmaceutical companies can navigate commercial launches without encountering significant government intervention on pricing [1]. This projection follows a year of extreme volatility, where investor sentiment was initially battered by political headwinds before rebounding significantly in the latter half of 2025 [1].

A Volatile Year: From Tariffs to Recovery

The road to this optimistic forecast has been uneven. The XBI, a key performance benchmark for U.S. biotech companies, suffered a severe contraction in early 2025, dropping 20% to hit a nadir of $66 on April 4, 2025 [1]. This decline was precipitated by the announcement of President Trump’s “Liberation Day Tariffs” on April 2, 2025, which rattled markets and exacerbated existing anxieties regarding regulatory stability [1]. Earlier in the first quarter, the sector had already retreated significantly from its November 2024 highs as recession fears loomed and the industry navigated disruptions at the FDA and the Department of Health and Human Services [3].

M&A Activity Fuels Recovery

A primary driver of this renewed confidence is a resurgence in mergers and acquisitions. 2025 recorded the highest deal volume for the biotech sector in a decade, with just under 70 transactions valued at $20 million or more reported by mid-December [1]. William Blair analysts suggest this flurry of activity has been critical in boosting investor sentiment, signaling that major pharmaceutical companies are aggressively engaging in dealmaking to fortify their pipelines against looming patent cliffs [1].

Recent Analyst Moves Signal Confidence

Reflecting this broader sector optimism, William Blair has been active in initiating coverage on specific clinical-stage companies in the final month of 2025. On December 12, 2025, the firm initiated coverage on Aardvark Therapeutics (AARD) with an “Outperform” rating, citing its work on the oral small-molecule agonist ARD-101 [6]. This follows similar bullish ratings earlier in the month, including an “Outperform” initiation for Evommune (EVMN) on December 1 and Viridian Therapeutics (VRDN) on December 3 [5]. These individual stock picks align with the firm’s broader thesis that the market is ready to reward innovation and strong clinical results despite the lingering macro-political uncertainties [1][5].

Sources

Biotechnology Market Outlook