Hot Picks: Biotech stocks rally as M&A activity accelerates further

Biotech stocks have outperformed the broader market this year as investors rotate back toward growth-oriented sectors and acquisition activity accelerates across the industry, supporting a recovery in small- and mid-cap therapeutic companies.

BNN Bloomberg spoke with Sahak Manuelian, managing director of global equity healthcare sales and trading at Wedbush, who discussed the sector’s rebound and highlighted companies with commercial growth opportunities, clinical catalysts and potential takeover appeal.

Key Takeaways

• Biotech has benefited from a rotation out of value stocks and into growth and momentum names, helping drive strong gains across small- and mid-cap companies.
• Increased merger and acquisition activity suggests large pharmaceutical and biotech companies remain focused on replenishing pipelines through external deals.
• Lower valuations following a prolonged downturn created attractive opportunities for investors and helped set the stage for the sector’s recovery.
• Commercial-stage companies with growing revenue bases and promising next-generation therapies continue to attract investor interest.
• Regulatory decisions and late-stage clinical trial results remain key catalysts for biotech stocks over the next 12 months.

Read the full transcript below:

LINDSAY: It’s time now for Hot Picks, and today we are zeroing in on three plays in the biotech sector. For more on his top picks and thoughts on the sector, I’m joined now by Sahak Manuelian, managing director of global equity healthcare sales and trading at Wedbush. Good morning. Thanks for joining us.

SAHAK: Good morning, and thanks for having me on today.

LINDSAY: So, before we dive into your Hot Picks, let’s just take a broader look at the sector. How would you characterize the current state of the biotech sector?

SAHAK: Yeah, thank you. It’s good to talk about biotech this morning. Coming in, we saw a deal, an M&A deal, AbbVie for Apogee. So, we’ve had a pretty strong M&A tape this year for the small-cap biotech complex. We’ve seen a lot of market rotation really out of value stocks and into growth and momentum stocks, and this has certainly been a very nice tailwind for the small-cap biotech and therapeutics area.

In earnest, this rally really kicked off, I would say, or suggest, in the summer of last year, so the summer of 2025, as things started to get extremely cheap. Positioning was extremely low in the complex. There was just a lot of hate for these small-cap stocks, and we’ve seen a nice rebound in small caps. Biotech has certainly been a beneficiary of that trade.

It’s good to see the amount of M&A that we’ve had year to date and, like I said, another one this morning for Apogee. This was almost an $11-billion deal value here, really suggesting that both large-cap biotech and pharma companies are still out looking for under-the-radar-type therapeutics companies that can help them with their pipelines.

LINDSAY: Okay, so let’s get to your picks then to see where you see growth the most. I’m not sure if I’m pronouncing this first one right. It’s Kiniksa Pharmaceuticals. Tell me why you like this one.

SAHAK: Yeah, that’s correct. Kiniksa Pharmaceuticals. This is a commercial-stage biopharma company, meaning they’ve got an approved drug. That approved drug is rilonacept, Arcalyst, licensed from Regeneron. It’s approved for RP, or recurrent pericarditis. We’re talking about auto-inflammatory cardiovascular disease here.

They just recently reported, late last month, a good quarter. Revenues were just north of $214 million, and so that showed quarter-over-quarter upside of about six per cent and year-over-year upside of about 56 per cent. They also raised full-year guidance from where they were, so that helped.

We see a pretty decent path towards these guys getting to $1 billion in annual sales, so good uptake with their drug. What we’re really bulled up on here is within their pipeline. They’ve got this drug, KPL-387, which is really advancing through Phase 2/3 of this RP trial, and we expect data sometime in the second half of 2026.

This would be designed for once-a-month dosing versus Arcalyst, which is currently every-week dosing. Even more importantly, in our opinion, if this does get approved, they have 100 per cent of the revenues because there’s no sharing agreement with Regeneron, as there is with rilonacept as it currently stands.

So we’re pretty bulled up for Kiniksa here with the second half of the year, seeing the data from their Phase 2/3 trial.

LINDSAY: Next up is Monte Rosa. Where are you seeing opportunities here?

SAHAK: Yeah, so Monte Rosa is certainly a small cap. We think it’s probably an under-the-radar name that really deserves some attention.

Here we’re talking about areas of therapeutics in oncology, namely prostate cancer, inflammatory diseases like cardiovascular disease and then also immune diseases like rheumatoid arthritis or ulcerative colitis.

These guys have really shown some pretty promising data thus far. We do look for their Phase 2 prostate cancer update coming pretty soon here, in the third quarter of this year.

For their inflammatory program, which is MRT-8102, they’re really broadening this out to include some Phase 2 work in gout flares, which they plan to initiate later this year. Fourth-quarter 2026 is the guidance there. Then within HS, which is a pretty nasty skin disease, they’re planning to initiate in the first quarter of 2027.

They’ve got several therapeutic areas that we’re pretty fired up about, and considering what we’ve seen thus far, we do expect to see more good news from this company in the fairly near term.

LINDSAY: And this next one looks like it’s going to be showcasing some research portfolios this week at a meeting. It’s Scholar Rock. Tell us more about this company, what it does and why you see opportunities here.

SAHAK: Sure, thank you. Scholar Rock. We’re talking about spinal muscular atrophy, or SMA, and this story is going to get even more interesting very soon.

They’ve got their lead candidate in FDA review, with a PDUFA date set for Sept. 30. This will either get approved or not approved come Sept. 30. That’s the date set forth.

We certainly are in the camp that this likely gets approved by the FDA based on the positive Phase 3 data that we’ve seen, which really demonstrated meaningful improvements in motor function and a very good safety profile.

We’ve got revenue estimates out there for about $163 million in 2027. We think this could do about $450 million in 2028.

Aside from it being a standalone company, we think M&A interest will probably centre on their lead drug in SMA as more and more large-cap biotech and pharma companies look to augment some of their pipelines.

So we’re pretty bulled up on the Scholar Rock story here, and we think this really comes together with this PDUFA date later in September.

LINDSAY: All right, we’re going to have to leave it there. Sahak Manuelian, managing director at Wedbush. Really appreciate your time today. Thanks so much.

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This BNN Bloomberg summary and transcript of the June 22, 2026 interview with Sahak Maneulian are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.