By Aimee Raleigh, Principal at Atlas Enterprise, as a part of the From The Trenches characteristic of LifeSciVC.
I’m not a resolutions individual however I’ve all the time cherished the beginning of the 12 months – there’s something about turning the web page on a brand new chapter that’s refreshing. This 12 months particularly looks like a recent begin, after the bizarre 12 months that was 2025. These previous 12 months are most likely greatest described as a continuing sensation of vertigo… we thought biotech could profit from a “pro-business” administration in January, then “Liberation Day” chaos ensued when it felt just like the broader markets have been headed for a recession, then from late summer season to finish of 12 months we noticed a superb restoration in public biotech shares, pushed by optimistic information flows, exuberant M&A, and improved macro tailwinds (e.g., charge cuts). Whereas some macro threats to the ecosystem (most notably tariffs and onshoring calls for) appear extra benign than in Spring 2025, many others stay to be absolutely pressure-tested in 2026.
So as to add some levity to the beginning of the 12 months, and forward of subsequent week’s JPM convention, I’m sharing my high predictions for 2026. Whereas I’m certain I may opine for days, I restricted these to a fortunate quantity (13…😊). If I see you in SF subsequent week, I welcome debate on what I bought fallacious!
Science & Innovation
- What can’t the incretins do?! GLP1s will present hanging proof in 1-2 indications past the cardiometabolic TA. I’ve written about it earlier than, however the incretin class will possible be some of the impactful medicines of the 21st century. As properly expounded in this latest Nature evaluate, the breadth of indications now or quickly to be addressed by GLP1s is staggering. A few of these indications (knee OA, for instance) are intuitive – if one loses substantial weight, it is smart that mechanical stress on the knees will lower and subsequently ache and performance scores will enhance (and by related logic it’s additionally not stunning that retatrutide, in delivering considerably larger weight reduction in knee OA sufferers vs. semaglutide, delivered bigger enhancements from baseline on these scales). However there are indications of potential relevance on the horizon that aren’t strictly cardiometabolic, and for which the CNS and anti inflammatory impacts of GLP1s has potential to shine via. Taking a look at pipelines affords clues – Lilly’s novel GLP1/GIP agonist brenipatide, for instance, is already in Part 3 research for alcohol use dysfunction (right here, right here) and a Part 2 trial for smoking cessation in addition to Part 2 trials in bipolar dysfunction and bronchial asthma. In contrast to in Alzheimer’s illness (the place oral sema lately did not affect medical dementia ranking scales), there’s robust mechanistic proof for GLP1s and affect on neurocircuitry and irritation which will rationalize future efficacy in these new indications. I consider at the least one in all these novel indications will learn out positively in 2026, suggesting a path to differentiated therapies for these sufferers and business development alternatives for the broader incretin class.
- Massive strides shall be made in advancing therapies for precision kidney concentrating on. 2026 will see a number of key readouts for small molecules in genetically outlined kidney illnesses, spearheaded by Vertex but in addition together with a number of biotechs. In a devastating set of indications broadly known as APOL1-mediated kidney illness (AMKD), Vertex’s inaxaplin (APOL1 inhibitor) is at the moment in an adaptive Part 2/3 research set to learn out an interim evaluation later this 12 months. Maze can also be creating a small molecule APOL1 inhibitor MZE829, with topline information in 1H 2026 from their Part 2 proof-of-concept research. If profitable, these packages might be blockbusters in an necessary phase of kidney illness. In one other genetically outlined kidney illness, autosomal dominant polycystic kidney illness (ADPKD), Vertex is creating a small molecule corrector VX-407 for a subset of sufferers with sure PKD1 variants. Whereas that proof-of-concept research could not learn out till 2027, different progress is being made in direction of creating corrector chemistry for ADPKD, together with from Renasant Bio.
Moreover, whereas earlier-stage, strides are being made in precision supply of therapeutic payloads to the kidney. Whereas some oligo therapeutics like farabursen (RGLS-8429) have traditionally relied on chemistry for preferential kidney supply, for a lot of payloads there’s profit in focused supply. Two corporations particularly are pioneering novel kidney-selective supply approaches – Judo Bio and Borealis Bio. Whereas medical readouts on these focused oligo supply methods are unlikely as early as 2026, we are going to undoubtedly see progress made in direction of potent and selective kidney supply this 12 months.
Regulatory & Business
- 2026 will see the primary (accelerated) approval of a blood-brain barrier (BBB) shuttle know-how by the FDA. Denali’s DNL310 (tividenofusp alfa) leverages a transferrin receptor (TfR1) binding arm to move an enzyme (iduronate 2-sulfatase) throughout the BBB and into the CNS for Hunter Syndrome. The PDUFA goal motion date for potential accelerated approval is April 2026, and I’m optimistic about an approval even with all of the noise popping out of *sure FDA management* on open-label research. The Part 1/2 information was lately printed in NEJM, and whereas many of the information usually are not new, collectively it solidifies the spectacular leads to an underserved affected person inhabitants. The efficiency, in comparison with marketed Elaprase, at this level is uncontested. Whereas sure facets of the TPP (frequent and lengthy infusions, excessive ranges of infusion reactions, some anemia, and so forth.) could also be lower than good, this system represents an enormous step ahead in therapy for Hunter Syndrome in addition to for CNS supply of huge molecules. Whether or not or not DNL310 is profitable in AA approval this Spring, there are a bunch of further TfR1-based BBB crossing applied sciences within the pipeline, most notably further packages from Denali, Roche’s trontinemab, and AbbVie’s ABBV-1758 (by way of Aliada acquisition).
- If you happen to construct it, will they arrive? We’ll see vital late-stage improvement traction round 2 further indications beforehand written off by (most) Pharma and traders. As an business, predicting future blockbuster markets will not be our robust swimsuit. Only a few anticipated the Rezdiffra gross sales trajectory in MASH regardless of being the primary efficient drug permitted in 4 many years within the indication. Earlier than Madrigal began commercializing Rezdiffra, frequent bear refrains included “enchancment in MASH decision is modest somewhat than transformational,” the GLP1s will make MASH out of date,” “payers would require biopsies – it is going to be a sluggish gross sales ramp,” “how will a biotech commercialize in MASH?”). And but a 12 months after launch it’s on observe for almost $1B in gross sales, with excessive development forecasted via 2031. 2025 noticed a banner 12 months in MASH acquisitions too, with 3 offers for FGF21 packages totaling >$10B in complete deal worth. So, clearly MASH is a compelling blockbuster indication, it simply took an unbelievable gross sales ramp for a powerful product in Rezdiffra to show it.
As one other instance, till the latest enthusiasm for OX2R agonists in hypersomnias, the house was seen as difficult (“it’s a 10-year affected person odyssey to get recognized – the addressable inhabitants is just too small to matter,” “oxybates and stimulants are generic – switching hurdles are excessive.”). Even in a sign as “apparent” as we speak as weight problems, earlier than 2021 it was broadly frowned upon to be an investor within the indication, given frequent (however misplaced) refrains of restricted and fragmented market, problem related to main care suppliers as a key callpoint, stigma in opposition to sufferers, and the like.
Is the (usually ill-conceived) pushback a symptom of groupthink? Is it a cumulative lack of creativity? A worry of being non-consensus and fallacious? Now we have all been crowding into the identical small set of 30-40 “secure” indications with clear comparables and well-understood, precedented gross sales ramps. Future development (particularly of the size required to offset LOE cliffs – extra on that beneath) might want to come from new, massive TAM indications the place exponential development is possible.
Capital Markets
- 25-30 biotech corporations will IPO this 12 months. In comparison with <10 IPOs in 2025, I count on there to be a considerable improve in corporations going public, particularly within the first 6 months of the 12 months. The quantity will nonetheless be measured in comparison with the highs of 2020-2021 (when there have been 75-85 biotech IPOs yearly), however will replicate a extra favorable market dynamic.
- 2 biotech shares could have +300% single-day inventory swings following optimistic information. By my (and ChatGPT’s) rely, only some shares had 300%+ single-day inventory swings following optimistic information[1]: Abivax, ProKidney, and Capricor. Typically there are dozens of shares that commerce exceedingly effectively upon optimistic trial readouts, growing by 50-100%+ following a readout. However for big swings, traders have to be non-consensus and proper. Whereas +300% could also be the next bar in 2026 with markets general in a more healthy place than they have been for a lot of 2025, I do assume we are going to see at the least a pair huge upswings.
M&A
- 2026 will proceed the M&A streak, with >25 offers over $1B in worth. 2025 was a banner 12 months for M&A, particularly bigger offers – 32 acquisitions topped $1B in complete worth, and eight of those topped $5B. Drivers of this elevated exercise included decrease perceived FTC threat beneath the brand new administration in addition to strain to fill future income gaps pushed by lack of exclusivity (LOE). However when are pipelines satiated? For the way lengthy will patent cliffs proceed to drive inorganic development? To get a way for simply how a lot 2025 M&A chipped away at threatened income because of LOE, I evaluated M&A spend (targeted on acquisitions of >$100M and never together with different BD like licensing offers) in comparison with projected Pharma income loss over the 5-year time interval 2026-2030. As proven in Determine 1 connected on the backside, some Pharma with imminent and substantial income loss are spending aggressively to fill pipelines. Merck, for instance, focused each business merchandise (by way of Verona) in addition to late-stage pipelines (by way of Cidara) to fill the hole largely pushed by upcoming Keytruda biosimilar entry. Others (like Pfizer) targeted on aggressive acquisitions of potential blockbusters in massive scorching classes (e.g., Metsera). A number of Pharma spent materially, not essentially to fill near-term income gaps however somewhat these anticipated within the 2030s (e.g., JNJ, Sanofi, Novartis). Lastly, some Pharmas with imminent LOE threats didn’t spend a lot in 2025, possible each a perform of money (and debt) capability in addition to lack of true pipeline synergies in potential acquisition targets. Maybe a few of these Pharma change into extra aggressive consumers in 2026?
- We’ll see one other 2 bidding wars this 12 months. The Pfizer / Novo bidding battle for Metsera after which subsequent Alkermes / Lundbeck bidding battle for Avadel at their greatest might be described as rationally aggressive and at their worst, unhinged. In each circumstances the primary bidder finally received the deal, albeit at the next value (to the advantage of goal’s shareholders). As Pharmas purchase to quickly compete in rising scorching areas (see above re: new market business builds), we’re more likely to see at the least a pair extra bidding wars. I’ll seize the popcorn…
Macro
- China will quickly transition into an innovation financial system. Many of the competitors popping out of China in 2025 was of the me-better selection, however we’re beginning to see extra revolutionary first-in-class approaches. I’ve been stunned by the protectionist sentiment in response to China’s rise – it appears to me the one method to guarantee China’s dominance is to change into isolationist right here within the U.S. and try to limit world collaboration. I hope the case research of China – a country-wide give attention to implementing huge step-changes in effectivity throughout scientific, manufacturing, and regulatory verticals – might be an inspiration to different nations somewhat than one thing we worry. Collectively, my want is that 2026 brings much less unproductive grand-standing and quibbling over abroad competitors and extra collaborative motion to enhance our personal innovation ecosystems domestically.
- We can meaningfully quantify FDA dysfunction in 2026 – we are going to begin to see extra systemic delays in drug approvals and trial initiations. “Nothing modifications instantaneously: in a progressively heating bathtub you’d be boiled to loss of life earlier than you knew it.” – Margaret Atwood
I hate to say it, however I predict we begin to see cracks within the regulatory system in 2026, together with extra frequent and impactful delays in PDUFA dates and IND suggestions (latter of which shall be tougher to trace), in addition to extra cases of senior leaders over-riding their groups on vital choices. What’s occurring on the FDA proper now could be extraordinarily regarding – 90% of senior leaders in place a 12 months in the past are now not on the company (supply), and it’s possible that 25-35% of the company’s rank and file has turned over (each voluntary and involuntary). I commend these nonetheless on the FDA who’re getting work finished and sustaining vital evaluate timelines. However I’ve to ask – how lengthy can we count on high performers to final in what seems to be an more and more poisonous office that doesn’t appear to position common worth on scientific evidence-based decision-making? I definitely hope my fears are over-stated, however I don’t assume we are able to proceed to imagine the established order will maintain. What occurs if we lose a vital quantity of competent group members and it takes 2-5 years to rebuild? Can we afford that type of hit to our drug improvement productiveness?
What can we do as an business? (1) Proceed to be vigilant – observe delays and U-turn choices by the company. (2) Name your representatives – it might not really feel like a lot of an affect nevertheless it issues, particularly with midterms arising. (3) Applaud company actions the place they’re science-based and revolutionary (e.g., people who promote elevated transparency in decision-making or people who provide potential to rationally streamline path to approval for vital medicines). There may be excessive potential for a productive path ahead, however we as an business want to talk up when choices are more likely to trigger undue hurt to sufferers and our biotech financial system.
- A broader recession may threaten the biotech restoration. 2025 witnessed exuberant markets even regardless of broader macro tailwinds. I received’t try to take a stance on whether or not or not we’re in an AI-driven tech bubble, nevertheless it’s arduous to think about we are going to go for much longer with out some kind of reset (and never only a short-lived March 2020 or April 2025 taste of reset). Whereas I’m definitely not rooting for a broader recession, if / when one does happen, it should possible affect markets broadly. We at the moment are simply beginning to see generalists tiptoe again into the sector – maybe biotech shall be seen as a haven if tech hits a bumpy patch. Extra possible although, we might even see one other interval of leaner instances together with each firm and investor attrition. Whereas not apparent within the second, each cycle (bull or bear) has an finish, and there are all the time alternatives even within the downward slope.
Early-stage biotech VC and firm creation
How does all of the above translate to the small however mighty portion of the VC universe that’s early-stage biotech (and particularly firm creation VC)?
- The highest 25% of personal, early-stage offers shall be aggressive and finance at valuation premiums. Choose high-quality, high-conviction offers are scorching once more, even at earlier stage (late preclinical to early, pre-PoC medical). Traders shouldn’t assume they will grasp across the hoop and anticipate a spherical to return collectively. For the highest tier of offers in 2026, syndication is more likely to be aggressive and fast.
- Seed and Collection A corporations fashioned in 2025-2026 will keep stealthy for for much longer. Given macro pressures (particularly the velocity at which “quick follower” approaches are rising), I count on as much as ~35% of latest corporations fashioned in 2025-2026 to stay in stealth for for much longer than was traditionally frequent (3-12 mos.). Some corporations could by no means formally publicly “launch” if exited by way of acquisition over the subsequent few years. Don’t let the veneer of a quiet information stream from early-stage biotech VCs section you – many corporations have been terribly lively lately, however usually are not publicizing newcos so as to keep aggressive benefit for non-obvious theses.
Closing Ideas
If 2025 taught us something, it’s that the highs are exuberantly excessive and the lows are devastatingly low, however both sentiment is transient. Turbulence all the time results in pockets of alternative, and a number of the most profitable biotechs have been constructed within the difficult of instances. It’s troublesome when within the second (of a bubble or a meltdown) to maintain a degree head, however I’m hoping for extra measured decision-making within the new 12 months. The one prediction I do know to be true is that I shall be fallacious extra usually than proper – stay up for checking in on the finish of 2026 to replicate on simply how badly I misinterpret the vibes for 2026 😊
Footnote [1]: Solely contains biotechs that have been up ≥300% at shut (vs. intra-day) and people with market cap >$100M at time of reports launch
