Biotechnology stocks and the related ETFs bounced back in significant fashion last year. There’s been some cooling of that trend to start 2026, but that could be just the opportunity some investors have been waiting for to get involved with ETFs such as the ALPS Medical Breakthroughs ETF (SBIO).

SBIO, which holds nearly 90 stocks, is saddled with a modest year-to-date loss, but that might not last long. Not with the biotech investment thesis buoyed by an array of positive factors. Obviously, there’s always the possibility of FDA approvals. That’s a theme to which SBIO is leveraged because it only features shares of companies with drugs or therapeutics in Phase II or III clinical trials.

Fortunately for investors considering biotech equities and ETFs such as SBIO, there’s more to the story than goings on at the FDA.

SBIO: An Alluring 2026 Idea

Investors examining SBIO may want to consider what Bank of America Research recently said regarding the broader biotech ETF space.

“We provide a favorable view on biotechnology,” according to the bank. “Fundamental analysts in the space are bullish based on the strong M&A momentum at the end of 2025, and the prospect of a potential patent cliff could sustain deal activity into 2026. Positioning is light, and valuations are acceptable, offering room for upside if sentiment improves.”

Should recent history repeat, SBIO is ideally positioned to benefit because, as Bank of America points, smaller and mid-sized biotech names – the very stocks held by this ETF – were market leaders last year, even beating the S&P 500.

That concept is all the more relevant given that the broader biotech industry, which was once known for consistently trading at multiples above the broader market, currently sports a price-to-earnings (P/E) ratio slightly below that of the S&P 500. The potential good news for SBIO doesn’t end there.

“Patent cliff could lead to strong deal demand, with 23 drugs losing exclusivity by 2030, representing $144B in 2025E sales,” adds Bank of America. “Despite strong returns, biotech ETFs have only seen about a 6% increase in net flows over the past year.”

SBIO, which tracks the S-Network Medical Breakthroughs Index, turned 11 on Dec. 30 and charges an annual fee of 0.50%, or $50 on a $10,000 investment.

For more news, information, and analysis, visit the ETF Building Blocks Content Hub.