Big Pharma has a $300 billion problem, and biotech developers with promising drugs are becoming the fix. Major drugmakers are spending at a pace not seen since 2019 to replace medicines that will soon lose patent protection.
Key Takeaways:
- Big Pharma faces $300 billion in expiring drug patents through the decade.
- Total biopharma deal value could top $250 billion in 2026, the busiest year since 2019.
- SBIO’s June rebalance added 37 names ahead of a wave of trial and takeover news.
According to PwC’s midyear deals outlook, more than $300 billion in branded pharmaceutical revenue will lose patent protection by the end of the decade. That loss, known as a loss of exclusivity, is pushing large drugmakers to buy new drug pipelines rather than build them in-house.
ALPS Advisors’ July spotlight shows the ALPS Medical Breakthroughs ETF (SBIO ) holds mid-size biotech developers in that same targeted stage. That focus put the fund in the middle of June’s biggest headline. AbbVie Inc. (ABBV) agreed to pay $10.9 billion in cash for Apogee Therapeutics, Inc. (APGE), then SBIO’s largest holding.
See more: Biotech Gives SBIO Its Best Month Since 2023
PwC’s report also found large pharmaceutical companies are avoiding blockbuster mergers that draw heavy regulatory scrutiny. Midcap biotech bolt-on deals have become the sweet spot for dealmaking this year instead.
That shift is already showing up in the numbers. Total biopharma deal value is on pace to top $250 billion in 2026, according to PitchBook data cited by ALPS Advisors. That would mark the industry’s strongest year since 2019.
Regulatory news added another tailwind. On June 17, the FDA signaled a more flexible approval path for serious and rare diseases, according to ALPS Advisors. Days later, Definium Therapeutics Inc. (DFTX) raised an upsized $700 million in stock to fund its own drug submission. It chose capital over a buyout.
Inside SBIO's Biotech Screening Rules
SBIO tracks an index limited to U.S. biotech companies worth between $200 million and $5 billion, according to ALPS Advisors. Each company must have a drug in Phase II or Phase III FDA trials. Each must also hold enough cash to fund about two years of operations.
Broader benchmarks such as the NASDAQ Biotechnology Index lean toward the large-cap companies writing acquisition checks, according to ALPS Advisors. SBIO’s index sits on the other side of those deals, holding the smaller companies, which are usually the ones getting bought.
Twice a year, the fund’s index rebalances to keep pace. Its June 18 update added 37 companies and dropped 15, according to ALPS Advisors. That turnover brought Definium into the fund just four days before its trial results sent shares up more than 90%.
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VettaFi LLC (“VettaFi”) is the index provider for SBIO, for which it receives an index licensing fee. However, SBIO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SBIO.
