The typical biotech playbook is straightforward but risky: Raise large amounts of capital with an initial public offering, burn cash while navigating clinical trials, then submit a new drug application to the U.S. Food and Drug Administration.
Throughout that process, cash balances often decline rapidly. If management is lucky, it can raise additional capital through dilution. More often, investors are simply hoping the company survives long enough to reach commercialization or attract a buyout from a larger pharmaceutical firm.
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“Given biotechnology firms have limited revenues, if any, from commercialized products, a lot of their market performance is based on the development of investigational treatments,” says Arelis Agosto, director of product research and strategy at Global X ETFs. “From there, only an estimated 9.6% of drugs that enter phase 1 clinical testing are expected to reach the market.”
What’s less obvious is that risk doesn’t disappear once a biotech reaches the commercial stage. An illustrative example is Moderna Inc. (ticker: MRNA), one of the winners of the COVID-19 pandemic.
Moderna’s stock surged to an all-time high of $449 per share in September 2021 after its mRNA vaccine was rapidly developed, widely distributed and generated massive revenues seemingly overnight. For a brief period, Moderna appeared to have cracked the code on next-generation vaccine development.
As the pandemic faded, however, Moderna’s fortunes reversed just as quickly. Demand for COVID vaccines, which accounted for the majority of the company’s revenue, collapsed. Moreover, Moderna struggled to transition that windfall into a diversified and productive drug pipeline.
Efforts to cut costs, including layoffs, did little to stabilize the business, and Moderna’s outlook deteriorated further when newly appointed Health Secretary Robert F. Kennedy Jr. canceled $766 million in federal contracts tied to bird flu vaccines. Moderna shares closed at $41.99 on Feb. 10, less than one-tenth of their peak value.
Today, Moderna finds itself in survival mode. While the company still holds substantial reserves of $4.5 billion in cash against $734 million in total debt, revenue growth has collapsed, and free cash flow has turned sharply negative, burning $2 billion over the trailing 12-month period.
The episode highlights a hard truth for biotech investors: Risk isn’t confined to clinical-stage companies. Even commercial-stage firms can experience dramatic reversals if they mismanage their pipeline, hit patent cliffs or encounter adverse regulatory decisions.
That reality is why many investors prefer to gain exposure to biotechnology through exchange-traded funds (ETFs) rather than betting on individual companies. Biotech ETFs can help capture long-term growth from medical innovation while reducing the impact of single-company blowups.
Here are seven of the best biotech ETFs to buy in 2026:
| ETF | Expense ratio |
| VanEck Biotech ETF (BBH) | 0.35% |
| iShares Biotechnology ETF (IBB) | 0.44% |
| Invesco Nasdaq Biotechnology ETF (IBBQ) | 0.19% |
| ALPS Medical Breakthroughs ETF (SBIO) | 0.50% |
| SPDR S&P Biotech ETF (XBI) | 0.35% |
| Global X Genomics & Biotechnology ETF (GNOM) | 0.50% |
| ARK Genomic Revolution ETF (ARKG) | 0.75% |
VanEck Biotech ETF (BBH)
“As innovation accelerates across the health care space, biotechnology continues to be one of the most dynamic and impactful sectors,” says Nick Frasse, product manager at VanEck. “BBH provides focused exposure to the biotech industry by tracking the performance of the largest and most liquid U.S.-listed biotechnology companies.” This ETF tracks the MVIS US Listed Biotech 25 Index.
BBH is market-cap weighted, which skews its portfolio toward profitable blue-chip biotechs like Amgen Inc. (AMGN), Gilead Sciences Inc. (GILD), Vertex Pharmaceuticals Inc. (VRTX) and Regeneron Pharmaceuticals Inc. (REGN). “With over a decade of live performance and a disciplined pure-play approach, BBH delivers access to companies at the forefront of medical breakthroughs,” Frasse explains.
iShares Biotechnology ETF (IBB)
“There is a high risk of failure for biotech companies, as innovations must undergo years of clinical trials and a failure can destroy the equity in a company,” says Adam Grossman, global equity chief investment officer at RiverFront Investment Group. “Therefore, returns in the space are widely dispersed, so picking individual biotech companies that will win is very difficult and risky.” IBB can provide a middle ground.
This ETF tracks a fairly broad basket of 258 firms represented by the NYSE Biotechnology Index. However, this benchmark is still market-cap weighted, so the larger companies like Amgen, Gilead, Vertex and Regeneron dominate IBB’s top holdings. IBB charges a 0.44% expense ratio, which is fairly standard for an industry-focused ETF but is pricier than BBH, which charges a 0.35% expense ratio.
Invesco Nasdaq Biotechnology ETF (IBBQ)
The volatile nature of biotech stocks means that even long-term investors are likely to experience periods of unrealized losses. For that reason, it can be useful to hold pairs of biotech ETFs with similar underlying exposures but different benchmarks. This could allow investors to swap between them for tax-loss harvesting while avoiding the wash sale rule. To complement BBH or IBB, consider IBBQ.
“IBBQ tracks the Nasdaq Biotechnology index and covers all biotechnology and pharmaceuticals stocks listed on the Nasdaq exchange,” explains Rene Reyna, head of thematic and specialty product ETF strategy at Invesco. “This benchmark has a 30-year-plus track record and owns more than 200 names.” The ETF charges a 0.19% expense ratio, making it more affordable than BBH and IBB.
ALPS Medical Breakthroughs ETF (SBIO)
“Unless an investor has a really high risk tolerance and a strong belief that they have an edge in deciding what drugs will make it through trials, we would recommend an investor use the diversification inherent in an ETF to invest in the biotech space,” Grossman says. However, some biotech ETFs deliberately tilt toward earlier-stage companies and can capture more of the upside tied to clinical trial success.
A good example of this higher-octane approach is SBIO, which tracks the S-Network Medical Breakthroughs Index. This ETF owns small- and mid-cap clinical-stage biotechnology companies with one or more drugs in active phase 1 or phase 2 trials. SBIO charges a 0.5% expense ratio and is noticeably more volatile than market-cap weighted biotech ETFs such as BBH or IBB.
SPDR S&P Biotech ETF (XBI)
“If I were to invest specifically in this space using a liquid instrument like an ETF, I would prefer XBI,” says Michael Wagner, co-founder and chief operating officer of Omnia Family Wealth. “It uses a modified equal-weight approach that I think makes sense in this space.” XBI sits between SBIO’s small- and mid-cap clinical-stage focus and IBB’s market-cap-weighted exposure to large, established biotech firms.
XBI’s equal-weighting methodology requires the fund to periodically trim outperformers and add to underperformers, creating a systematic “sell high, buy low” discipline. That structure gives smaller biotech companies more room to contribute to returns, while preventing a handful of mega-cap names from dominating performance. The ETF charges a 0.35% expense ratio, the same as BBH.
Global X Genomics & Biotechnology ETF (GNOM)
“Instead of being beholden to the binary nature of biotech events, investing in a broader pool of biotech firms helps hedge risk for negative events while still having significant exposure to long-term structural shifts in the health care industry,” Agosto says. Global X’s thematic offering for biotech is GNOM, which tracks a basket of 49 companies represented by the Solactive Genomics Index.
“GNOM specifically only includes firms that fall into one of four key segments for genomics biotech, meaning at least 50% of each firm’s existing or expected revenue comes from either gene editing, genomic sequencing, genetic medicines and therapies, or computational genomics and genetic diagnostics,” Agosto says. The ETF charges a 0.5% expense ratio, identical to SBIO.
ARK Genomic Revolution ETF (ARKG)
The previous biotech ETFs are passive funds that track benchmark indices. Investors who are comfortable with higher fees and a more concentrated portfolio may instead prefer an actively managed option like ARKG. Rather than following an index, ARKG’s holdings are driven by the views of Cathie Wood and ARK Invest’s research team. However, this results in a higher 0.75% expense ratio.
ARKG runs a top-heavy portfolio, with many holdings falling in the small- to mid-cap range. A significant portion of the fund is exposed to speculative clinical-stage companies, which amplifies sensitivity to trial results and regulatory decisions. That structure has historically led to pronounced swings in both directions, producing periods of strong outperformance as well as deep drawdowns.
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7 Best Biotech ETFs to Buy Now originally appeared on usnews.com
Update 02/11/26: This story was previously published at an earlier date and has been updated with new information.
